0910Lecture_7 - Lecture 7 Accounting for Companies LEARNING...

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Unformatted text preview: Lecture 7 Accounting for Companies LEARNING OUTCOMES You should be able to: Describe the main features of the owners claim in a limited company Discuss the nature of the limited company Explain how the income statement and balance sheet of a limited company differ in detail from that of a sole proprietorship or a partnership business Discuss the framework of rules that surround accounting for limited companies Read Chapter 4 Accounting for limited companies Company situation Several owners ...known as Shareholders Purchase of shares that contributes to the capital of company Shares give ownership Share Capital Account 2 types of shares (ordinary and preference shares) Ordinary share capital Preference share capital Shareholders are entitled to dividends (instead of drawings) Separation of ownership and management Board of Directors run company on behalf of owners Annual General meeting Ordinary shares Gives ordinary shareholders control of business True owners....equity holders Ordinary Share Capital shown in the balance sheet Maximum rewards; maximum risks Control the company and vote on matters during the AGM Dividends per share which are not fixed E.g. Ellis owns 1000 shares in Egham PLc. If dividend of 0.10 per share is declared Preference shares Preference Share Capital Gives preference shareholders fixed dividends E.g. 6 % preference dividends means dividends are 6 pence in 1 of each preference share owned. Preference shareholders must receive dividends before ord. shareholders Preference shareholders attend the AGM but they do not vote on matters. The Company Situation Companies are artificial persons that can be sued in their own right Separate legal entity... Company Law regulates Corporation Tax paid by companies Companies can borrow money as if they are real persons Debts of company are not the debts of the shareholders This is known as Limited Liability Advantages and disadvantages of the Company situation ADVANTAGES DISADVANTAGES Ability to raise money Continuous life Easy to transfer ownership Limited liability Separation of ownership and management Expensive government regulation 7 Perpetual life...
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0910Lecture_7 - Lecture 7 Accounting for Companies LEARNING...

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