Week 5- Owner's Equity

Week 5- Owner's Equity - ACCT1002 Week 5 Owners Equity THE...

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ACCT1002 Week 5 Owner’s Equity THE CORPORATE FORM OF ORGANISATION Corporation: Created by law Has most of the rights and privileges of a person Subject to same duties as a person i.e. abide by laws, pay taxes, etc Companies = most common type Classifications: 1) Purpose (profit or not-for-profit) 2) Ownership Characteristics: Separate legal existence Limited Liability of the shareholders Transferable of ownership rights (due to shares) Continuous life as it is a separate legal entity, life of company as a going concern is separate from its owners Ability to acquire capital Company managed through elected board of directors Subject to government regulations Corporations Act Forming a Company - Registered and bound by Corporations Act 2001 (Commonwealth) - Allocated an ABN & ACN - Company may adopt a constitution (set of rules governing the internal management of the company) determines matters e.g. authority to approve dividends, rules for shareholders’ meetings, etc - Constitution not adopted replaceable rules of Corporations Act Organisation Chart of a public company: 1
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ACCT1002 Week 5  Owner’s Equity Shareholder’s rights Company is owned by its shareholders Different classes of shares can carry different rights Ordinary shares: 1) Right to vote 2) To share company profits through receipt of dividends 3) the right to a residual claim in the event of the company being liquidated Preference shares: Have priority over ordinary shares with respect to dividends and/or repayment of capital in the event of the company being wound up, i.e. liquidated and ceasing to exist. ISSUING OF SHARES 2
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ACCT1002 Week 5 Owner’s Equity Company issues shares = in exchange for cash. They need to consider: 1) how many shares 2) how shares should be issued 3) at what price the shares should be issued Share Issue 3 different ways of issuing shares: Private Placement Public Issue Share splits Private Placement - Issue of shares privately to certain potential investors - Advantage: proceeds become immediately available - Recognised as increase in assets and increase in equity Journal entry: Sept 30 Cash 1000 Share Capital 1000 (To record issue of 1000 shares at $1 each) Public Issue - Provision of a prospectus inviting public It contains : Information on company’s: financial positions, performance, plan Reports from independent parties Application form for prospective shareholders
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This note was uploaded on 06/10/2011 for the course ACCT 1002 taught by Professor Angela during the Three '10 term at University of Sydney.

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Week 5- Owner's Equity - ACCT1002 Week 5 Owners Equity THE...

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