Week 4 - Bank Loans, Shares and Retained Earnings Flashcards
What are the three ways a business can be financed?
- take out a loan
- investment from shareholders by issuing shares
- profits from business
What does share premium only apply to?
New issues of shares
What is the difference between share capital and share premium?
Share capital is entered as the nominal value of a share (usually £1). If the shares are then later sold for £7, share premium is the difference between the new figure and the nominal value e.g £6
What should the share capital and share premium add up to?
The equivalent on the other side of the double-entry
Where is the ‘brought forward’ value from in the retained earnings calculation?
The figure in the trial balance
Where is the ‘profit for the year’ value from in the retained earnings calculation?
The Statement of Profit or Loss
The brought forward value + the profit for the year gives us what?
The closing balance
Where do we enter the figure for the closing balance?
Into the Statement of Financial Position
