I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

QUESTION 

Share capital

 

Distinguish between authorised, issued, called-up and paid-up capital. 

ANSWER 

Authorised share capital: the maximum amount of share capital that a company is empowered to issue 

Issued share capital: the amount of share capital that has been issued to shareholders 

Called-up share capital: the amount the company has asked shareholders to pay, for the time being, on 

shares issued to them 

Paid-up share capital: the amounts actually paid by shareholders on shares issued to them 

 

 

3

   Reserves 

Share capital and reserves are 'owned' by the shareholders. They are known collectively as 'shareholders' 

equity'. 

Shareholders' equity consists of the following. 

(a) 

The par value of issued capital (minus any amounts not yet called up on issued shares) 

(b) Other 

equity 

The share capital itself might consist of both ordinary shares and preference shares. All reserves, 

however, are owned by the ordinary shareholders, who own the 'equity' in the company. We looked at 

share capital in detail above. 

'Other equity' consists of four elements. 

(a) 

Capital paid-up in excess of par value (share premium) 

(b) Revaluation 

surplus 

(c) Reserves 

(d) Retained 

earnings 

We will look at each in turn. 

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CHAPTER 19  

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  INTRODUCTION TO COMPANY ACCOUNTING