Post on 08-May-2015
transcript
Company Accounts
Mr Arthur
Aims of the Lesson
1. To discuss limited companies
2. Private Limited Companies
3. Public Limited Companies
4. Classes of shares1. Ordinary
2. Preference
Limited Companies
A limited company is an organisation whose capital is contributed by members purchasing shares
These members will have limited liability (if the company fails, they only lose their shares, not all their possessions!!)
Public Limited Companies Private Limited Companies
Public Limited Company The company name ends in plc Minimum of £50,000 share
capital Shares can be sold openly on the
Stock Exchange Accounts of the plc must be
lodged with the Registrar of Public Companies and published
Plc will pay corporation tax Shareholders receive dividends Outsiders can take ownership if
they take 50% of the shares
Private Limited Company Company name ends in the word limited
(Ltd) Ltd companies are often family
businesses with family members being the shareholders
Control of the company cannot be lost to outsiders as shareholders must permit the sale of shares
Minimum number of directors is 1 Fewer regulations governing ltd
companies Shareholders receive dividends Financial info must be filed with the
Registrar of Public – they may not however, have to submit full accounts
Aims of the Lesson
1. Classes of shares1. Ordinary
2. Preference
3. Cumulative
4. Participating Preference
5. Founder
Classifying Shares
Ordinary Shares Most common type of share No fixed rate of dividend Riskiest form of
shareholding Shareholder may lose
investment if company fails Receive dividend after all
other types of shareholders Carry voting rights 200,000 ordinary shares of
£1 each fully paid
Preference Shares Shareholders receive fixed
dividend (7%) Receive dividend before
Ordinary shareholders No voting rights
Classifying Shares
Cumulative Preference If dividend is not received the
arrears will be carried into the next year
Non Cumulative Preference Dividend is not carried into
next year
Participating Preference Shares In addition to a fixed rate of
dividend, a bonus may be paid Bonus is received after
dividend to other shareholders
Deferred or Founder Shares These are shares issued to
founders or managers of the company
Receive a dividend after all other shareholders
Aims of the Lesson
1. Raising Capital1. Debentures
2. Bank Overdraft
3. Trade Creditors
4. Leasing
5. Mortgages
Raising Capital Debentures
A plc can raise capital by offering debentures to the public
Debentures are loans and holders will receive a fixed rate of interest annually
Debentures will be bought back on a certain date
Not risky for the debenture holder as interest will be paid whether company is profitable or not
*Debenture Interest is an expense* Bank Overdraft
Where the bank allows the company to withdraw more than is in the plc’s account
*Current Liability*
Raising Capital
Trade Creditors Where the plc purchases goods and pays for them at a
later date *Current Liability*
Leasing Instead of purchasing fixed assets the company can hire
them over a period of time Mortgage
A long term loan usually used to purchase property Interest rate tends to be lower than a normal loan and may
fluctuate with the bank of England base rate
Aims of the Lesson
1. Hire Purchase
2. Factoring
3. Government Grants
4. Venture Capital
Raising Capital
Hire Purchase Where you buy a fixed asset and pay it up over a
number of months
Government Grants European Union or Government Grants can be
offered if your company is creating employment
Factoring Where you pay another company to collect debts
for you Factors will charge a fee
Raising Capital
Venture Capital If a business is new they may have
trouble finding investors A Venture Capitalist is someone who is
prepared to risk their own capital investing in companies
Business Angel = where you invest cause you think the business has potential
Forming a plc
Memorandum of Association The name of the company with plc
at end A statement that the company is
registered The objectives and range of
activities of the company A statement that member’s liability
is limited The amount of authorised share
capital The association clause ,
declaring that the first members take at least 1 share
Articles of Association This sets out the rules that
governs the internal running of the company
Rules regarding issue and transfer of shares
Rules regarding AGMs and meetings
Rules for keeping and auditing accounts
Rights of shareholders Powers and duties of directors
Solicitors lodge a Memorandum of Association and Articles of Association with the Registrar of Companies
Company Key Terms
Share Premium A share premium is created when shares are sold
for more than their face value Appears as a Capital Reserve in the Finance By
section of the Balance Sheet