Limited Company Financial Statements Mark FieldingPritchard mefielding com

Limited Company Financial Statements Mark Fielding-Pritchard mefielding. com 1

Limited Company Financial Statements Separate legal entity Liability of shareholders limited to called up share capital Shares have a nominal value- will be different from market value Shown separately as this the limit of shareholders liability On liquidation shareholders get paid last without exception If share holders pay more than nominal value excess goes to share premium account mefielding. com 2

Limited Company Financial Statements Ron Ltd issues new shares to Dave pays $20000 for 5000 ordinary shares, nominal value $1 Dr On issue Cash 20000 Cr Share Capital 5000 Share Premium 15000 Notice the shares were issued. If Dave subsequently sells the shares to someone else there is no effect on the company- other than change of mefielding. com ownership, so no accounting entries 3

Limited Company Financial Statements Retained Earnings Share Premium General Reserve Bonus issues Gav Ltd has in issue 1 m $1 ordinary shares. He wants to improve liquidity so he has a bonus issue of 1: 4 Bonus Issue Dr Bonus issue Retained earnings 250000 Cr Share capital 250000 mefielding. com 4 Note that no share premium can arise on a bonus issue. In the exam assume that the share premium account is used before retained earnings

Limited Company Financial Statements Rights issues New shares are sold to existing shareholders in the proportion of their existing holdings ie 1: 4 Sold at market value minus a discount Now you would expect a share premium to arise mefielding. com 5

Rights issues Brunton plc has in issue 10 m ordinary shares with a nominal value of $1 each and market value of $10. They announce a 1: 4 rights issue at $8. 50 Rights Issue Dr On issue Cash $21. 25 m Cr Share Capital $2. 5 m Share Premium $18. 75 Note, notional value of company after the rights issue is (10 m x 10) + (2. 5 mx 8. 50)= $121. 5 m mefielding. com 6

Other Items Debt Provisions (IAS 37) Tax (Provisions) Changes in policies, estimates & errors P 302 1 Liability py 02 SOFP 90000 2 Agreed Liability py 02 87000 3 Liability cy 03 SOFP 100000 mefielding. com 7

P 302 Tax Dr 1 & 2 Payment of Tax Liability tax 02 SOFP 90000 3 Creation of CY 03 liability Tax Expense P&L 100000 Cr Cash 87000 Tax Expense P&L 3000 CL Tax Creditor SOFP 100000 Tax Expense 03 P&L $97000 Op liability + P&L charge – cl liability = cash paid mefielding. com 8

P 305 9. 1 P&L P 305 9. 2 Cost of sales, distribution, admin costs 9. 3 other income 10 SOFP P 307 mefielding. com 9