share capital, dividends and retained earnings Flashcards

1
Q

sole proprietorship capital structure

A

one owner who contributes the full capital

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2
Q

limited liability partnership capital structure

A

two or more partners where each partner contributes capital

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3
Q

private limited company capital structure

A

up to 50 shareholders where each shareholder buys shares and contributes capital

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4
Q

sole proprietorship access to funds

A
  • difficult to get funds from banks and other lenders
  • funds limited to personal funds of owner
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5
Q

LLP access to funds

A
  • easier to get funds from banks and other lenders
  • may get more partners to join and contribute capital
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6
Q

PLC access to funds

A
  • easier to get funds from banks and other lenders
  • may issue more shares to raise funds
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7
Q

sole proprietorship extent of liability

A

owner is personally liable for all debts and losses incurred by the business

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8
Q

LLP extent of liability

A
  • partners not personally liable for the debts and losses of the business
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9
Q

PLC extent of liability

A

shareholders not personally liable for debts and losses of business

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10
Q

sole proprietorship level of control

A

owner has full control over all decisions

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11
Q

LLP level of control

A

control shared among the partners

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12
Q

PLC level of control

A

shareholders have no control over running of business. the company hires professionals to manage the business.

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13
Q

sole proprietorship lifespan

A

exists as long as the owner is alive and desires to continue operations

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14
Q

LLP lifespan

A

the business exists forever until wound up or struck-off

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15
Q

PLC lifespan

A

business exists forever until wound up or struck-off

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16
Q

sole proprietorship transfer of ownership

A

owner can transfer or sell business to others

17
Q

LLP transfer of ownership

A

all partners need to agree to addition or withdrawal of partners

18
Q

PLC transfer of ownership

A

shareholders can transfer or sell their shares to others

19
Q

share capital

A

refers to cash raised by issuing shares to shareholders

20
Q

retained earnings

A

refers to the accumulation of profits and losses that has not been distributed to the shareholders yet since operation

21
Q

dividends

A

the portion of profits that are distributed to the shareholders

22
Q

journal entry to record issue of shares/ share capital

A

dr cash at bank xx
cr share capital xx

23
Q

journal entry for business makes profit

A

dr income summary xx
cr retained earnings xx

24
Q

journal entry for business makes loss

A

dr retained earnings xx
cr income summary xx

25
journal entry to record dividends declared if paid
dr dividends xx cr cash at bank xx
26
journal entry to record dividends declared if not paid
dr dividends xx cr dividends payable xx
27
journal entry to record subsequent payment of dividends payable
dr dividends payable xx cr cash at bank xx
28
journal entry to record transfer of dividends to retained earnings account
dr retained earnings xx cr dividends xx
29
share capital account has a
credit balance
30
share capital account when company issues new shares
credit cash at bank
31
dividends account has a
debit balance
32
dividends account when dividends declared but not paid
dr dividends payable
33
dividends account when dividends declared and paid
dr cash at bank plus date which dividends declared
34
retained earnings account when profit earned
cr income summary
35
retained earnings account when loss made
dr income summary
36
retained earning account when dividends declared (regardless paid or not)
always debit dividends
37
extract of statement of financial position, show equity portion
shareholders' equity share capital, xxx ordinary shares retained earnings (beginning balance+profit-dividends)