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introduction

The document provides an overview of company accounts, detailing the structure and types of companies, including public and private limited companies. It explains share capital, types of shares (ordinary and preference), and the differences between shares and debentures. Additionally, it outlines various classes of shares and their characteristics, including rights to dividends and repayment priorities.

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3 views

introduction

The document provides an overview of company accounts, detailing the structure and types of companies, including public and private limited companies. It explains share capital, types of shares (ordinary and preference), and the differences between shares and debentures. Additionally, it outlines various classes of shares and their characteristics, including rights to dividends and repayment priorities.

Uploaded by

hwezvamunyaradzi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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GROUP 2

PRESENTS
COMPANY
ACCOUNTS
COMPANY ACCOUNTS
 A company is a voluntary association formed and
organized to carry on business [accessed at
www.businessdictionary.com..13:43pm]
 It is governed by the companies act 1996.
 Companies are registered by the registrar of
companies.
 Companies are supposed to have the which
mémorandum of association is a legal document
that contains the external affairs of the company.
 More so the companies are mandated to have the
Articles of Association which is a document that
constitutes the internal affairs of the company such
as how the directors powers can be altered any time.
 It is financed from share capital.
 It gives the owners limited liability status.
 It is run by board of directors.
 It is required to pay coporate tax.
 There are two types of companies that is
the public limited companies and private
limited companies.
 For a company to come into existence it
has to be finaced.
 Usually these companies are financed
through issue of shares.
 A share is a unit of capital that a
company is divided into.
 The company will issue several types of
shares that form the company’s capital
structure.
CAPITAL STRUCTURE

 SHARE CAPITAL: This is equivalent to the


fixed capital of a partnership or
soletrader except that once it is
introduced into the company it can not
be repaid except when there is
redemption of shares or when the
company is being wound up.
 Each share capital of a company has a
stated norminal value for example 500
000 ordinary shares of $1 each or 7% 100
000 preference shares of 50c each.
CLASSES OF SHARE
CAPITAL
 The share capital of a company can be
divided into various classes which include :
1) Authorised share capital
 this is the maximum number of norminal
shares that a company is authorised to issue
by the registrar of company.
 In the statement of financial position it is only
disclosed and closed.
 2) Issued share capital
 It is the total amount of capital issued and
called up by the company.
TYPES OF SHARES

 A share is a unit of ownership in a


corporation
 A share certificate is issued to the owner,
showing the number of shares of the
corporation owned by the shareholder

 Ordinary shares
 Preference shares
ORDINARY SHARES
 These type of shares entitle the holder to
participate in any available profits after
appropriations.
 Ordinary share holders are not entitled to
a fixed rate of dividend, thus if they do
not recive a dividend in a particular year
the holder wil not recoup their dividend in
the next trading period.
 Ordinary share holders are paid last after
the preference share holders.
PREFERENCE SHARES
 Are so alled because they entitle the
holder to certain rights that ordinary
shareholders do not enjoy.
 The holders are entiled to a fixed rate of
dividend from the profit after interest and
taxation.
 The rate of dividend is expressed as a
percentage of the normal value in the
desription of shares for insatance 8% 100
000 preference shares.
TYPES OF PREFERENCE SHARES
 1. Cummulative preference shares
These entitle the holder to have arrears of
the dividend, that is if the profits can not
cover all their dividend.
2.Non Cumulative preference scares.
The holder is not entitled to have arreas of
dividend being carried forward to the next
trading period.
But they are entitled to receive their
dividend first before any other shareholder.
 3)Redeemable preference shares
The companies act permits a company to issue redeemable shares
provided it has issued other shares which are not redeemable.
These types of shares can be redeemed at the option of the issuing
corporation at a price stated in the preferance share contract
4)Irredemable preference shares
Only paid up at winding up.

5)Convertable preference shares .


These shares are convertible to equity within a certain period.
They can be converted into ordinary shares at a future date on
agreed terms

6)Non convertable preference shares.


7)PARTICIPATING PREFERENCE
SHARES
 They are entitled to a fixed rate of dividend.
 They are also entitled to share surplus
profit.
 These shares carry the right to participate
in a distribution of additional profits over
and above the fixed rate of dividend after
ordinary shareholders have received an
agreed percentage

8)NON PARTICIPATING PREFERENCE SHARES.


They are not entitled to surplus profit.
SWEAT EQUITY SHARES
 Issued to employees or directors of a
company at a discount rate.
 They are issued for consideration other
than cash.
Equity shares Preference shares
Norminal value is lower Norminal value is higher
Dividend varies Fixed rate of dividend
according to profit
No right of arrears fo Cummulative preference
dividend shres get arrears for
dividend
No priority in dividend Are the first priority in
and repayment of dividend and repayment
capital.
Cannot be redeemed Can be redeemed
unless the company is
being wound up.
More risk Less risk
Control over No control
management
Ready to take risks and Not ready to take risk
get greater dividend. and expect steady
income.
DEBENTURES
 It is a long term loan with a fixed rate of
interest
 It is one of the most common ways in
which Limited Companies obtain finance
Difference between shares and
debentures
SHARES DEBENTURES
 Holders of ordinary  Holders of
shares are owners of debentures are
the business creditors of the
 Dividend of the business
shares can only be  Interest of the
paid when the debentures have to
company has made be paid whether or
profit not the business has
profit
Types o f debentures

 H Randal defines a debenture as a


document given by a comany to someone
who has lent it money.
 It states 1)amount of loan

2)annual rate of interest.


3)the dates on which interest is
to be paid.
 Debentures maybe redeemable or
repayable at a specific date.
 Conversely it may be irredemable.
 People ivesting will be interested in
knowin how safe their investment.
 A certificate called debenture certificate
are issued to the lender.
 Debentures may be redeemable or
irredeemable also known as perpetual
debentures.
 If a date is shown behind a debenture for
example 2005/2012 this means that the
company can redeem it in any form of
the years 2005-2012 inclusive.

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