1. Limited Company Financial Statements Mark Fielding-Pritchard mefielding.com1

2. 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.com2

3. Limited Company Financial Statements mefielding.com3 DrCr On issueCash20000Share Capital 5000 Share Premium 15000 Ron Ltd issues new shares to Dave. Dave pays $20000 for 5000 ordinary shares, nominal value $1 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 ownership, so no accounting entries

4. Limited Company Financial Statements  Retained Earnings  Share Premium  General Reserve  Bonus issues mefielding.com4 1:4 Bonus Issue DrCr Bonus issueRetained earnings 250000Share capital250000 Gav Ltd has in issue 1m $1 ordinary shares. He wants to improve liquidity so he has a bonus issue of 1:4 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

5. 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.com5

6. Rights issues mefielding.com6 Brunton plc has in issue 10m ordinary shares with a nominal value of $1 each and market value of $10. They announce a 1:4 rights issue at $8.50 Note, notional value of company after the rights issue is (10m x 10) + (2.5mx 8.50)= $121.5m

7. Other Items  Debt  Provisions (IAS37)  Tax (Provisions)  Changes in policies, estimates & errors mefielding.com7 P302 1Liability py 02 SOFP90000 2Agreed Liability py 0287000 3Liability cy 03 SOFP100000

8. P302 mefielding.com8 TaxDrCr 1 & 2 Payment of tax 02 Tax Liability SOFP 90000Cash87000 Tax Expense P&L 3000 3 Creation of CY 03 liability Tax Expense P&L 100000CL Tax Creditor SOFP 100000 Tax Expense 03 P&L $97000 Op liability + P&L charge – cl liability = cash paid

9. P305  9.1 P&L P305  9.2 Cost of sales, distribution, admin costs  9.3 other income  10 SOFP P307 mefielding.com9