Limited Company (I)

Sole Proprietorship Partnership Company Incorporated under Companies Ordinance = Corporation Limited Liability Unlimited Liability Limited by gurantee Private Ltd.Co. Public Ltd. Co. Limited by shares * Unlisted * Listed or Unlisted Memorandum of Association

It is a separate legal entity. -can hold properties and investments -can enter into contracts -sue others & be sued…etc It has a unlimited life. - +/- owners does not affect its existence. Transfer of Ownership is easy. -by shares Shareholders’ liability is limited to their shares invested. Advantages of Incorporation:

Means of Funding: Share Capital Preference Shares Ordinary Shares Cumulative Non-Cumulative - fixed % of dividends - priority to recv’d dividends - no voting right - dividends based on returns - recv’d div. after loan int. & P.Shares - with voting right Debentures - long-term loan with fixed % of interest - redeemable / irredeemable - secured / unsecured Reserves Revenue Reserves Capital Reserves - from trading profit - can be distributed - from non-trading profit - not be distributedt

Income statement for the year ended 31 December 1995 … Net Profit 150,000 Vertical Format Directors’ remuneration xx Debenture interest xx … Add: Retained Profit b/f from last year 300,000 (Unappropriated Profit) 428,500Profit available for appropriation Less: Appropriation: Less: Profit Tax Provision 21,500 Transfer to general reserve 10,000 Preliminary expenses written off xx Amortization of Goodwill f xx Dividends : Interim dividends Proposed dividends Retained profit c/f to next year 360,500 - Preference shares 5,000 - Ordinary shares 16,000 68,000- Ordinary shares 32,000 - Preference shares 5,000 Profit after tax 128,050 Auditors’ Fees xx

Balance Sheet Balance Sheet as at 31 December 2005 XXX Fixed assets xx Current assets xx Authorised Capital xx XXX Issued Capital xx Reserves xx Less: Current liabilities xx Intangible assets xx Vertical Format Capital & Reserves xx Less: Long termt liabilities xx