share capital, dividends and retained earnings Flashcards
sole proprietorship capital structure
one owner who contributes the full capital
limited liability partnership capital structure
two or more partners where each partner contributes capital
private limited company capital structure
up to 50 shareholders where each shareholder buys shares and contributes capital
sole proprietorship access to funds
- difficult to get funds from banks and other lenders
- funds limited to personal funds of owner
LLP access to funds
- easier to get funds from banks and other lenders
- may get more partners to join and contribute capital
PLC access to funds
- easier to get funds from banks and other lenders
- may issue more shares to raise funds
sole proprietorship extent of liability
owner is personally liable for all debts and losses incurred by the business
LLP extent of liability
- partners not personally liable for the debts and losses of the business
PLC extent of liability
shareholders not personally liable for debts and losses of business
sole proprietorship level of control
owner has full control over all decisions
LLP level of control
control shared among the partners
PLC level of control
shareholders have no control over running of business. the company hires professionals to manage the business.
sole proprietorship lifespan
exists as long as the owner is alive and desires to continue operations
LLP lifespan
the business exists forever until wound up or struck-off
PLC lifespan
business exists forever until wound up or struck-off
sole proprietorship transfer of ownership
owner can transfer or sell business to others
LLP transfer of ownership
all partners need to agree to addition or withdrawal of partners
PLC transfer of ownership
shareholders can transfer or sell their shares to others
share capital
refers to cash raised by issuing shares to shareholders
retained earnings
refers to the accumulation of profits and losses that has not been distributed to the shareholders yet since operation
dividends
the portion of profits that are distributed to the shareholders
journal entry to record issue of shares/ share capital
dr cash at bank xx
cr share capital xx
journal entry for business makes profit
dr income summary xx
cr retained earnings xx
journal entry for business makes loss
dr retained earnings xx
cr income summary xx