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

 

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 

There are some important differences between the accounts of a limited liability company and those of 

sole traders or partnerships. 

 

In preparing a statement of financial position you must be able to deal with: 

 

– 

Ordinary and preference share capital 

 – Reserves 

 – Loan 

stock 

 

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

equity'. 

 

A company can increase its share capital by means of a bonus issue or a rights issue. 

 

1 

Limited liability means the shareholders are responsible for the company's debts only up to the amount 

paid on the shares. True or false?   

2 

Fill in the blanks. 

 

………. share capital is the par value of shares issued to shareholders. …………. share capital is the 

amount payable to date by the shareholders.  

3 

What are the differences between ordinary shares and preference shares?  

4 

What are the differences between loan stock and share capital?  

5 

A company issues 50,000 $1 shares at a price of $1.25 per share. How much should be posted to the 

share premium account? 

 A 

$50,000 

 B 

$12,500 

 C 

$62,500 

 D 

$60,000 

 

6 

Distinguish between a bonus (capitalisation) issue and a rights issue.  

7 

A company has a balance on share premium account of $50,000 and on retained earnings of $75,000. 

Issued share capital is 400,000 25c shares. The company decides to make a bonus issue of 1 for 1. 

What are the closing balances on share premium and retained earnings? 

 

 

Share premium 

Retained earnings  

 A  $25,000 

Nil 

 B  $10,000 

$15,000 

 C 

Nil 

$25,000 

 D 

Nil 

$(275,000) 

 

 

 

 

 

 

 

 

 

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