Company Accounts

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  • 1. Company Accounts Mr Arthur
  • 2. Aims of the Lesson
    • To discuss limited companies
    • Private Limited Companies
    • Public Limited Companies
    • Classes of shares
      • Ordinary
      • Preference
  • 3. 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
  • 4. 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
  • 5. 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
  • 6. Aims of the Lesson
    • Classes of shares
      • Ordinary
      • Preference
      • Cumulative
      • Participating Preference
      • Founder
  • 7. 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
  • 8. 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
  • 9. Aims of the Lesson
    • Raising Capital
      • Debentures
      • Bank Overdraft
      • Trade Creditors
      • Leasing
      • Mortgages
  • 10. 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*
  • 11. 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
  • 12. Aims of the Lesson
      • Hire Purchase
      • Factoring
      • Government Grants
      • Venture Capital
  • 13. 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
  • 14. 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
  • 15. 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
  • 16. 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