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ACCY200 FINANCIAL ACCOUNTING IA AUTUMN 2009 WEEK 2 TUTORIAL SOLUTIONS: LEO Chapter 1 Review Questions 2, 3, 10, 11, 12, 13, 14. Special Question REVIEW QUESTIONS 2. Distinguish between a proprietary company and a public company. A public company is one in which there is usually a substantial public interest in that the ownership of the company's share capital is widely spread. Public companies are entitled to raise capital through a share issue by issuing a disclosure document which entitles them to have their shares or debentures etc. listed on a stock exchange, such as the Australian Securities Exchange, to facilitate transferability. Proprietary companies on the other hand have specific limitations in terms of the amount and restrictions on its fundraising activities. Specific features of a proprietary company include the need to have a share capital (unlike a public company which may be limited by guarantee and not merely shares): a requirement to have at least one shareholder and only one director (three directors for a public company) and not more than 50 shareholders (not including employee shareholders) not required to restrict the transfer of its shares (however it may elect to do so) the use of the designation "Pty" or “Proprietary” in its name a requirement not to engage in any fundraising activity which would require it to lodge a disclosure document with ASIC. 3. Distinguish between a large and a small proprietary company. What are the implications of being classified large rather than small? A small proprietary company is defined in Section 45A of Corporations Act 2001 , as amended, as one which meets 2 of the following three criteria: *consolidated annual revenue less than $25 million *consolidated gross assets at the end of the financial year is less than $12.5 million #l the companies and the entites it controls have fewer than 50 employees at the end of the financial year. * These figures must be determined in accordance with accounting standards # Part-time employees measured at appropriate fraction of full-time If these criteria are not met the company will be a large proprietary. Small proprietary companies do not have to prepare formal financial statements or have them audited. However, they must keep sufficient accounting records to allow preparation and audit of accounts if either 5% of their voting shareholders or ASIC request this to be done. Large proprietary companies , must prepare accounts in 1
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accordance with accounting standards, have them audited, send them to shareholders and lodge them with ASIC (Section 292) 10. What are the main reasons for the development of accounting regulations? The history of accounting regulation had its origins in the industrialised European settlement of the late 18 th century. The social, political and economic changes which occurred saw the gradual decline of the importance of family enterprises and the separation of ownership from control as the control of entities was delegated by
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This note was uploaded on 10/26/2010 for the course ACCY ACCY100 taught by Professor A during the Spring '10 term at University of Western States.

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