Role of Accounting & Finance Flashcards
What are the (3) main characteristics of a Limited Company?
- Seperate legal entity
- Unlimited life
- Limited liability
In the context of limited companies, what does sperate legal entity mean?
- Seperate from the people that own the entity
- Entity has the legal capacity of a person
- Responsible for its own debts
Explain the shareholder liability for a limited liability company?
The liability of shareholders is limited to the amount of money invested
Why are limited companies the prefered form of business organization?
- Benefits of limited liability
- Ability to offer shares to a large number of investors
Asside from limited companies what are the (2) other main types of business structures?
- Sole trader
- Partnership
What are listed companies?
A listed company is listed on an exchange (eg. NZX) where shares of companies are brought and sold using sharebrokers
Explain Market capitalisation
Market capitalisation is the value of each shre of the compny multiplied by the number of shares in the company
What is a share?
- Represents an ownership interest
- A passive form of investment
- Relatively easy for people to buy and sell shares in listed companies
What are dividends?
Companies may make payment to shareholders as part of the profits. Different types of companies have different polices which may change over time.
What are Capital gains?
The potential gain or loss from price movements
Where are the (2) main places companies recieve finance?
- Equity finance
- Debt finance
What is equity finance?
Finance supplied by shareholders. Equity finance comes in two main forms:
- Share capital
- Retained earnings
What is debt finance?
Debt finance is supplied for external lenders to the entity and are commonly known as borrowings or loans
What is Accounting?
In the context of ACCTG101, Accounting represents the collection, analysis and communication of economic reporting.
Accounting follows this process:
- Information identification
- Information recording
- Information analysis
- Information reporting
What is the reporting entity concept?
The reporting entity concept helps us determin what to report in the company’s financial statements