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Company Financial Concepts Quiz

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Questions and Answers

What does the term 'Issued Share Capital' refer to?

The number of shares a company has repurchased and canceled.

The total number of shares a company is authorized to issue.

The number of shares a company is legally allowed to issue.

The number of shares a company has actually issued to its shareholders. (correct)

What is the main purpose of a Memorandum of Incorporation?

To define the company's mission statement and strategic goals.

To outline the company's financial structure and dividend policies.

To establish the company's legal framework, rights, and responsibilities. (correct)

To record the company's historical financial performance.

What is the correct accounting treatment for retired shares?

The shares are transferred to a separate account and held as treasury stock.

The shares are retained in the company's issued share capital but are inactive.

The shares are cancelled and the proceeds are credited to the Ordinary Share Capital account. (correct)

The shares are cancelled and the proceeds are credited to the Share Premium account.

Which of the following statements accurately describes 'Limited Liability'?

<p>The owners are not personally liable for the company's debts beyond their investment. (D)</p> Signup and view all the answers

What is the most likely reason companies retain income instead of distributing it as dividends?

<p>To fund future investments, growth, or expansion projects. (C)</p> Signup and view all the answers

Study Notes

Activity 2.1: Matching Concepts and Explanations

Memorandum of Incorporation: Shares issued at issue price, credited to Ordinary Share Capital account (A)
Limited Liability: Profits not distributed to shareholders, held back for future expansion (B)
Retired Shares: A company's issued share repurchased and cancelled (C)
Issued Share Capital: Owners of a company not responsible for company debts (D)
Retained Income: Company may not issue shares to the general public (E)

Activity 2.2: Company Ledger Accounts

Retained Income: Ledger account (2.2.1)
SARS: Income Tax: Ledger account (2.2.2)
Dividends on ordinary shares: Ledger account (2.2.3)
Appropriation: Ledger account (2.2.4)
Accounts must balance/close on 30 June 2012

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Description

Test your understanding of essential company financial concepts and ledger accounts. This quiz includes matching definitions with concepts such as Memorandum of Incorporation, Limited Liability, and Retained Income. Challenge yourself on the fundamentals of corporate finance and accounting practices.