Accounts and financial statements of public companies
In a company, the capital is divided into shares. (We do ordinary shares)
When a company is formed, the incorporators will decide on the capital which with be required,
through deciding:
1. The initial values
. Prompted by the type of shareholder a company wishes to attract.
2. The number of shares = Authorized share capital
. It is necessary for the authorized share capital to be stipulated in advance of the initial public
. offering, because it will give an idea to potential shareholders of their percentage stake in a
. business.
3. Issue price
Note: shares are usually sold in lots of 100
It is not necessary for a company to issue the entire number of authorized shares immediately.
There is there for a difference between authorized share capital and issued share capital.
A shareholder decides on the amount he can afford to invest in a company.
A prenumbered share certificate, which is now an email, is issued to each shareholder.
The certificate is the legal evidence of the shareholding by the shareholder and usually contains
the following information:
- The kind of share
- The number of shares
- The serial numbers of the shares
This certificate is a negotiable instrument and may be passed on to another person in the event
of the sale of the shares.
A company must keep a record of each shareholder in a share register, in which all changes in
shareholdings must be recorded.
The securities exchange provides the means for facilitating transactions between shareholders.
The price of a share which is quoted on the securities exchange, the market price, very
seldomly bears any resemblance to the issue price of the share.
The market price is dependent on supply and demand.
,Example of issuing shares and not paying dividends:
02/01 : The company is registered with an authorised share capital of 250 000 ordinary shares.
The company decides to only issue 150 000 shares immediately at R10 each.
01/04 : The bank and brokers have determined an allotment of the shares to shareholders an
the company receive check of R1 500 000.
+ Bank -
1/4 Ordinary Share Capital CRJ 1 500 000
- Ordinary Share Capital +
1/4 Bank CRJ 1 500 000
31/08 : After taxation, the company decided to not pay any dividends to its shareholders. Profits
of R200 000 are retained by the company.
+ Appropriation -
31/8 Retained Income GJ 200 000
- Retained Income +
Share Capital
31/8 Appropriation GJ 200 000
01/03 : The company decides to issue a further 50 000 shared, at an increased issue price of
R13.
+ Bank -
1/4 Ordinary Share Capital CRJ 1 500 000
1/3 Ordinary Share Capital CRJ 1 650 000
- Ordinary Share Capital +
1/4 Bank CRJ 1 500 000
1/3 Bank CRJ 1 650 000
31/08 : The company retains a further profit of R250 000.
, + Appropriation -
31/8 Retained Income GJ 200 000
31/8 Retained Income GJ 250 000
- Retained Income +
Share Capital
31/8 Appropriation GJ 200 000
31/8 Appropriation GJ 250 000
The Balance Sheet:
Shareholder’s Equity and liabilities Note
Shareholder’s equity 2 600 000
Ordinary share capital 7 2 150 000
Retained income 8 450 000
Liabilities
Noncurrent liabilities XXX
Loan Xxx
Current liabilities XXX
Trade and other payables xxx
Note 7: Ordinary Share capital
Authorised:
250 000 ordinary shared
Issued:
150 000 ordinary shares at beginning of year 1 500 000
50 000 ordinary shares issued at R13 during year 650 000
200 000 ordinary shares at end of year 2 150 000
Note 8: Retained Income
Retained income at beginning of year 200 000
Net profits after tax 250 000
Dividends on ordinary shares: (0)
Paid 0
Declared 0
Retained income at end of year 450 000
In a company, the capital is divided into shares. (We do ordinary shares)
When a company is formed, the incorporators will decide on the capital which with be required,
through deciding:
1. The initial values
. Prompted by the type of shareholder a company wishes to attract.
2. The number of shares = Authorized share capital
. It is necessary for the authorized share capital to be stipulated in advance of the initial public
. offering, because it will give an idea to potential shareholders of their percentage stake in a
. business.
3. Issue price
Note: shares are usually sold in lots of 100
It is not necessary for a company to issue the entire number of authorized shares immediately.
There is there for a difference between authorized share capital and issued share capital.
A shareholder decides on the amount he can afford to invest in a company.
A prenumbered share certificate, which is now an email, is issued to each shareholder.
The certificate is the legal evidence of the shareholding by the shareholder and usually contains
the following information:
- The kind of share
- The number of shares
- The serial numbers of the shares
This certificate is a negotiable instrument and may be passed on to another person in the event
of the sale of the shares.
A company must keep a record of each shareholder in a share register, in which all changes in
shareholdings must be recorded.
The securities exchange provides the means for facilitating transactions between shareholders.
The price of a share which is quoted on the securities exchange, the market price, very
seldomly bears any resemblance to the issue price of the share.
The market price is dependent on supply and demand.
,Example of issuing shares and not paying dividends:
02/01 : The company is registered with an authorised share capital of 250 000 ordinary shares.
The company decides to only issue 150 000 shares immediately at R10 each.
01/04 : The bank and brokers have determined an allotment of the shares to shareholders an
the company receive check of R1 500 000.
+ Bank -
1/4 Ordinary Share Capital CRJ 1 500 000
- Ordinary Share Capital +
1/4 Bank CRJ 1 500 000
31/08 : After taxation, the company decided to not pay any dividends to its shareholders. Profits
of R200 000 are retained by the company.
+ Appropriation -
31/8 Retained Income GJ 200 000
- Retained Income +
Share Capital
31/8 Appropriation GJ 200 000
01/03 : The company decides to issue a further 50 000 shared, at an increased issue price of
R13.
+ Bank -
1/4 Ordinary Share Capital CRJ 1 500 000
1/3 Ordinary Share Capital CRJ 1 650 000
- Ordinary Share Capital +
1/4 Bank CRJ 1 500 000
1/3 Bank CRJ 1 650 000
31/08 : The company retains a further profit of R250 000.
, + Appropriation -
31/8 Retained Income GJ 200 000
31/8 Retained Income GJ 250 000
- Retained Income +
Share Capital
31/8 Appropriation GJ 200 000
31/8 Appropriation GJ 250 000
The Balance Sheet:
Shareholder’s Equity and liabilities Note
Shareholder’s equity 2 600 000
Ordinary share capital 7 2 150 000
Retained income 8 450 000
Liabilities
Noncurrent liabilities XXX
Loan Xxx
Current liabilities XXX
Trade and other payables xxx
Note 7: Ordinary Share capital
Authorised:
250 000 ordinary shared
Issued:
150 000 ordinary shares at beginning of year 1 500 000
50 000 ordinary shares issued at R13 during year 650 000
200 000 ordinary shares at end of year 2 150 000
Note 8: Retained Income
Retained income at beginning of year 200 000
Net profits after tax 250 000
Dividends on ordinary shares: (0)
Paid 0
Declared 0
Retained income at end of year 450 000
