lOMoARcPSD|3753824
lOMoARcPSD|5752962
ACC2011S
Test 1
Company – Week 1
A legal person is natural and juristic persons. This is the make up of a company.
Maximum shareholders can only lose their capital contribution used to purchase their shares –
otherwise known as limited liability.
Not all public companies are listed on to the JSE neither are they all businesses.
Shareholder decisions:
General resolution = 50% plus one more share.
Special resolution = 75% to agreement to change (MOI) memorandum of incorporation.
Auditor’s opinion – positive assurance. Consists of validity, accurate and complete.
Independent review – negative assurance.
A financial year is > = 12 months.
Share Capital of a company
Class A: with voting rights, entitled to distributions (not fixed), and net assets on liquidation
of company.
Class B: no voting rights, entitled to face value on liquidation of company (variable). The
distribution is limited to 10% of a share.
Class C: no voting rights, entitled to distributions (not fixed), and not net assets on
liquidation of company. The distribution not limited to 12% of a share. Shares are
redeemable at option of company.
Application and Allotment = the company has a present obligation to either return the cash or issue
the share.
Oversubscribed shares = more than the offered no of shares are applied for.
Undersubscribed shares = insufficient share applications are received therefore all the cash is
refunded. This is due to the minimum subscription amount need before share issue.
Underwriters commission = a % of the full offer amount. The underwriter takes the burden of the
remaining shares that are not purchased by the public. It only accounts for the original amount (offer
amount).
Share issue costs
1. Underwriter’s commission
2. Other share issue costs.
These costs are not an expense as the transaction is due to the owner.
They should be closed off to the equity account.
, lOMoARcPSD|3753824
lOMoARcPSD|5752962
Dividends
Shareholders declare dividends and are intitled to it. The dividend must be solvent (+equity) & liquid
before declaring a dividend. Dividends are not an expense, as it is due to a transaction with the
owner.
Dividends are closed off to directly to Retained Earnings.
Dividends are calculated in two ways:
1. Variable dividend is the number of cents per share.
2. Fixed dividend is the percentage of the face value.
Class A: Variable Dividend (final)
Class B: Fixed Dividend (time based)
Dividends not paid to us from previous years are called arrears dividends.
‘Cumulative’ means arrear dividends are added to current year’s.
The share price is determined based on transactions between shareholders in the secondary market.
There is no transaction at closing share price. Share price is an indication of the fair value of the
company’s equity. The company’s own share capital is never revalued to fair value.
Dividend tax of one company is exempt from the dividends declared by another company.
Income Tax
Personal tax on income.
Taxation: Dividends tax
Withholding tax = A tax that is deducted from interest or dividends paid to a person resident outside
that country.
No dividend tax is deducted from dividends paid to SA-resident companies.
Reserves = a supply of a commodity not needed for immediate use but available if required. It is set
aside. Share capital is not a reserve. Revaluation surplus and Retained earning are reserves in the
equity account on the SOFP.
Financing decision is used to issue shares.
Investing decision is used to buy shares.
Two types of income:
1. Investment gain
2. Dividend income
PPE – Week 2
Depreciation – systematic allocation of the depreciable amount of an asset over its estimated useful
life.
PPE is recognised when control is obtained. This is based on the asset recognition criteria.
lOMoARcPSD|5752962
ACC2011S
Test 1
Company – Week 1
A legal person is natural and juristic persons. This is the make up of a company.
Maximum shareholders can only lose their capital contribution used to purchase their shares –
otherwise known as limited liability.
Not all public companies are listed on to the JSE neither are they all businesses.
Shareholder decisions:
General resolution = 50% plus one more share.
Special resolution = 75% to agreement to change (MOI) memorandum of incorporation.
Auditor’s opinion – positive assurance. Consists of validity, accurate and complete.
Independent review – negative assurance.
A financial year is > = 12 months.
Share Capital of a company
Class A: with voting rights, entitled to distributions (not fixed), and net assets on liquidation
of company.
Class B: no voting rights, entitled to face value on liquidation of company (variable). The
distribution is limited to 10% of a share.
Class C: no voting rights, entitled to distributions (not fixed), and not net assets on
liquidation of company. The distribution not limited to 12% of a share. Shares are
redeemable at option of company.
Application and Allotment = the company has a present obligation to either return the cash or issue
the share.
Oversubscribed shares = more than the offered no of shares are applied for.
Undersubscribed shares = insufficient share applications are received therefore all the cash is
refunded. This is due to the minimum subscription amount need before share issue.
Underwriters commission = a % of the full offer amount. The underwriter takes the burden of the
remaining shares that are not purchased by the public. It only accounts for the original amount (offer
amount).
Share issue costs
1. Underwriter’s commission
2. Other share issue costs.
These costs are not an expense as the transaction is due to the owner.
They should be closed off to the equity account.
, lOMoARcPSD|3753824
lOMoARcPSD|5752962
Dividends
Shareholders declare dividends and are intitled to it. The dividend must be solvent (+equity) & liquid
before declaring a dividend. Dividends are not an expense, as it is due to a transaction with the
owner.
Dividends are closed off to directly to Retained Earnings.
Dividends are calculated in two ways:
1. Variable dividend is the number of cents per share.
2. Fixed dividend is the percentage of the face value.
Class A: Variable Dividend (final)
Class B: Fixed Dividend (time based)
Dividends not paid to us from previous years are called arrears dividends.
‘Cumulative’ means arrear dividends are added to current year’s.
The share price is determined based on transactions between shareholders in the secondary market.
There is no transaction at closing share price. Share price is an indication of the fair value of the
company’s equity. The company’s own share capital is never revalued to fair value.
Dividend tax of one company is exempt from the dividends declared by another company.
Income Tax
Personal tax on income.
Taxation: Dividends tax
Withholding tax = A tax that is deducted from interest or dividends paid to a person resident outside
that country.
No dividend tax is deducted from dividends paid to SA-resident companies.
Reserves = a supply of a commodity not needed for immediate use but available if required. It is set
aside. Share capital is not a reserve. Revaluation surplus and Retained earning are reserves in the
equity account on the SOFP.
Financing decision is used to issue shares.
Investing decision is used to buy shares.
Two types of income:
1. Investment gain
2. Dividend income
PPE – Week 2
Depreciation – systematic allocation of the depreciable amount of an asset over its estimated useful
life.
PPE is recognised when control is obtained. This is based on the asset recognition criteria.
