Podcast
Questions and Answers
What does the term 'Issued Share Capital' refer to?
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?
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?
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'?
Which of the following statements accurately describes 'Limited Liability'?
What is the most likely reason companies retain income instead of distributing it as dividends?
What is the most likely reason companies retain income instead of distributing it as dividends?
Flashcards
Memorandum of Incorporation
Memorandum of Incorporation
A document that outlines the rights, duties, and responsibilities within a company.
Limited liability
Limited liability
The owners cannot be held personally responsible for the company's debts.
Retired shares
Retired shares
Shares that have been repurchased and cancelled by a company.
Retained income
Retained income
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Issued share capital
Issued share capital
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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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