Professional Documents
Culture Documents
Non cumulative
2011 2012 2013 2014 2015 2016
$ $ $ $ $ $
Profit for the year 1,200 900 600 1,000 700 1,300
Preference dividend paid (800) (800) (600) (800) (700) (800)
Profit left for ordinary shareholders 400 100 - 200 - 500
Max ordinary dividend payable 2.0% 0.5% 0.0% 1.0% 0.0% 2.5%
Cumulative
2011 2012 2013 2014 2015 2016
$ $ $ $ $ $
Profit for the year 1,200 900 600 1,000 700 1,300
Arrears of dividend brought forward (200) (100)
Preference dividend paid (800) (800) (600) (800) (700) (800)
Profit left for ordinary shareholders 400 100 - - - 400
Max ordinary dividend payable 2.0% 0.5% 0.0% 0.0% 0.0% 2.0%
Type Shares Dividend entitled
10% non cumulative preference shares of $1 60,000 6,000
Ordinary shares of $1 100,000
Non cumulative
2011 2012 2013 2014 2015 2016
$ $ $ $ $ $
Profit for the year 10,000 5,000 7,000 4,000 7,000 12,000
Preference dividend paid (6,000) (5,000) (6,000) (4,000) (6,000) (6,000)
Profit left for ordinary shareholders 4,000 - 1,000 - 1,000 6,000
Max ordinary dividend payable 4.0% 0.0% 1.0% 0.0% 1.0% 6.0%
Cumulative
2011 2012 2013 2014 2015 2016
$ $ $ $ $ $
Profit for the year 10,000 5,000 7,000 4,000 7,000 12,000
Arrears of dividend brought forward (1,000) (2,000) (1,000)
Preference dividend paid (6,000) (5,000) (6,000) (4,000) (5,000) (6,000)
Profit left for ordinary shareholders 4,000 - - - - 5,000
Max ordinary dividend payable 4.0% 0.0% 0.0% 0.0% 0.0% 5.0%
W1 Date Debit $ Credit $ Note Bank
1 1-Jan Bank 60,000 Ordinary shares 60,000 60k x $1 par 78,000
2 1-Jan Bank 18,000 Share premium 18,000 60k x ($1.30 - $1 par) Date Debit $
3 1-Jan Ordinary shares 60,000
4 1-Jan Share premium 18,000
5
6
7
8
9
10
11
12 2-Jan Bal b/d 78,000
13 Ordinary shares
14
15 Date Debit $
16
17
18
19
20
21
22
23
24 1-Jan Bal c/d 60,000
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
Bank CB Share premium GL W2 Date Debit $
18,000 1 1-Jan Bank 100,000
Date Credit $ Date Debit $ Date Credit $ 2 1-Jan Bank 20,000
1-Jan Bank 18,000 3 1-Jan Bank 50,000
4
5
6
7
8
9
10
1-Jan Bal c/d 78,000 1-Jan Bal c/d 18,000 11
2-Jan Bal b/d 18,000 12
ary shares GL 13
60,000 14
Date Credit $ 15
1-Jan Bank 60,000 16
17
18
19
20
21
22
23
24
2-Jan Bal b/d 60,000 25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
Credit $ Note Bank
Ordinary shares 100,000 100k x $1 par 170,000
Share premium 20,000 100k x ($1.20 - $1 par) Date Debit $ Date Credit
6% preference shares 50,000 1-Jan Ordinary shares 100,000
1-Jan Share premium 20,000
1-Jan 6% preference shares 50,000
2-Oct
Ordinar
Date
1-Sep
1-Oct
Bank Share premium
370,000 70,000 35,000
Debit $ Date Credit $ Date Debit $ Date Credit
Ordinary shares 110,000 1-Sep Ordinary shares 35,000 1-Sep Bank 35,000 1-Aug Bank
Share premium 110,000 Share premium 35,000 1-Oct Bank
Ordinary shares 75,000
Share premium 75,000
150,000
19.9 Date Debit $ Credit $ Note Freehold buildings
1 31-Dec Freehold buildings 60,000 Bal b/d
2 31-Dec Bal b/d Acc dpr of fb 18,000 60K-42K Date
3 31-Dec Acc dpr of fb 18,000 Revaluation reserve 18,000 31-Dec
4 31-Dec Freehold buildings 40,000 Revaluation reserve 40,000 100k - 60k 31-Dec
5
6
7
8
9
10
11
12 1-Jan
13 Acc dpr of fb
14
15 Date
16 31-Dec
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
Freehold buildings GL Revaluation reserve
100,000
Debit $ Date Credit $ Date Debit $ Date Credit
Bal b/d 60,000 31-Dec Acc dpr of fb
Revaluation reserve 40,000 31-Dec Freehold buildings
38,000
Exhibit Co. Limited Exhibit Co. Limited
Income statement for year ended This year Income statement for year ended This year
This year Last year $000 $000
$000 $000 Revenue 100,000
Revenue (1) 100,000 80,000
Cost of sales (2) (60,000) (45,000) Cost of sales (60,000)
Opening inventory 20,000
Gross profit 40,000 35,000 Purchases 55,000
Closing inventory (15,000)
Distribution costs (3) (8,000) (7,000)
Administrative expenses (4) (11,000) (10,000) Gross profit 40,000
Other expenses
Loss on sale of nca (1,000)
Finance costs
Bank interest (3,000)
Exhibit Co Ltd
Statement of changes in equity for year ended This year
Share capital Retained Total
and reserves earnings equity
$000 $000 $000
At start of year 50,000 43,000 93,000
Profit for the year 14,000 14,000
Dividends paid (5,000) (5,000)
At end of year 50,000 52,000 102,000
Exhibit Co Ltd Exhibit Co Ltd
Dividends for the year ended This year Statement of changes in equity for year en
(Notes for the published accounts)
This year Last year
$000 $000
Amounts recognised as distributions At start of year
to equity holders during the year Ordinary shares issued
Profit for the year
Final dividend for last year of $0.075 per share 3,000 2,200 Dividends paid
Interim dividend for this year of $0.05 per share 2,000 1,800 Transfer to general reserve
5,000 4,000 At end of year
Proposed final dividend for this year of $0.095 per share 3,800 3,000
Exhibit Co Ltd
of changes in equity for year ended This year
Share Share General Retained Total
capital premium reserve earnings equity
$000 $000 $000 $000 $000
40,000 2,000 8,000 43,000 93,000
10,000 2,000 12,000
14,000 14,000
(5,000) (5,000)
6,000 (6,000) -
50,000 4,000 14,000 46,000 114,000
Name of company 19.12 19.13
Statement of financial position at This year
This year Last year This year Last year
$000 $000 $000 $000
Non current assets Equity
Tangible Share capital 40,000 40,000
Property, plant & equipment 98,000 90,100 Share premium 2,000 2,000
Intangible General reserve 8,000 8,000
Goodwill 7,700 8,000 Retained earnings 52,000 43,000
105,700 98,100 102,000 93,000
Current assets Non current liabilities
Inventories 1,000 800 Bank loan 5,500 5,200
Trade and other receivables 5,000 4,000 5,500 5,200
Cash & cash equivalents 500 300 Current liabilities
6,500 5,100 Trade and other payables 1,200 1,000
Tax payable 3,500 4,000
4,700 5,000
Total equity 1,100,000 Net asset value of 100 ordinary share 155
No of ordinary shares 1,000,000
Net asset value of 1 ordinary share 1.10
1.1 mil / 1 mil
5,000
Accounts Db ($) Cr ($) Note Other pyb
Dpr exp of warehouse 4,000
Dpr exp of offices 12,000
Acc dpr of fp 87,000 71k + 4k + 12k
Dpr exp of dv 15,000 75k x 20%
Acc dpr of dv 45,000 30k + 15k
Dpr exp of om 7,000 35k x 20%
Acc dpr of om 17,000 10k + 7k
Debenture interest 10,000 100k x 10% (5k Nov 15 + 5k May 16) 5,000
Tax 25,000
Tax payable 25,000
General reserve 60,000 40k + 20k
Retained earnings 39,000 13.9k - 20k gr - 4.9k id + 50k pfty
Other payables 5,000 debenture interest May 16
Rawson Limited Part a
continued
Income statement for year ended 30-Apr-16
$ $ $ $
Revenue 756,000 Other income
Other income
Other expenses
Finance costs (10,000)
(116,000)
39,000
35,000
32,000
10,000
17,000
Limited Part c Michel Pillay Limited
for year ended 30-Apr-16 Statement of financial position at
General Retained Total $
reserve earnings equity Non current assets Cost Acc dpr NBV
$ $ $ Warehouse Machinery 70,000 38,000 32,000
25,000 8,000 108,000 Office machinery 42,000 30,000 12,000
17,000 17,000 112,000 68,000 44,000
10,000 (10,000) -
35,000 15,000 125,000 Current assets
Inventory 31,000
Trade receivables 38,000
Cash & cash equivalents 28,000
97,000
Assets 141,000
Equity Equity
Ordinary shares of $1 700,000 Ordinary shares of $1 800,000
Share premium 200,000 Share premium 200,000
General reserve 400,000 Revaluation reserve 600,000
Retained earnings 200,000 General reserve 100,000
1,500,000 Retained earnings 50,000
1,750,000
After bonus shares
Equity After bonus shares
Ordinary shares of $1 1,000,000 700k + 200k premium + 100k gen rsv Equity
Share premium 200k - 200k ordinary shares Ordinary shares of $1 1,400,000
General reserve 300,000 400k - 100k ordinary shares Share premium 200,000
Retained earnings 200,000 Revaluation reserve -
1,500,000 General reserve 100,000
Retained earnings 50,000
1,750,000
Note
ca - cl
600k - 600k
19.19 Date Debit $ Credit $ Note
1 1-Apr Bal b/d Ordinary shares 1,000,000
2 1-Apr Bal b/d Share premium 400,000 Date
3 1-Apr Bal b/d Retained earnings 200,000
4 1-Apr Share premium 400,000 Ordinary shares 400,000 1 mil x 1/2 bonus - 100k
5 1-Apr Retained earnings 100,000 Ordinary shares 100,000 100k bonus
6
7 7-Apr Bank 150,000 Ordinary shares 150,000 150k x $1 rights
8 7-Apr Bank 75,000 Share premium 75,000 150k x ($1.50 - $1) rights
9
10
11 7-Apr
12
13
14
15 Date
16 1-Apr
17
18
19
20
21
22
23
24 7-Apr
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
Ordinary shares GL Retained earnings
1,650,000 100,000
Debit $ Date Credit $ Date Debit $ Date
1-Apr Bal b/d 1,000,000 1-Apr Ordinary shares 100,000 1-Apr
1-Apr Share premium 400,000
1-Apr Retained earnings 100,000
7-Apr Bank 150,000
Equity Equity
Ordinary shares of $1 1,000,000 Ordinary shares of $1
Share premium 400,000 Retained earnings
Retained earnings 200,000
1,600,000
After rights issue
After bonus shares Net assets
Bal b/d 100,000 Equity
Ordinary shares of $1 1,500,000 1 mil + (1 mil x 1/2) bonus Equity
Share premium 400k - 400k bonus Ordinary shares of $1
Retained earnings 100,000 200k - 100k bonus Share premium
1,600,000 Retained earnings
Rights issue 19.20 Date Debit $
$ Note 1 a Bank
2 6% debenture 50,000
1,600,000 assets - liabilities 3
4 b Bank 50,000
5 Loss in issuance of debenture 10,000
1,500,000 6 IS
100,000 7 6% debenture 50,000
1,600,000 8 Debenture premium 10,000
9
10
1,825,000 1.6 mil + 225k bank 11
12
13
1,650,000 1.5 mil + (150k x $1) rights 14
75,000 150k x ($1.50 - $1) rights 15
100,000 16
1,825,000 17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
Credit $ Note
6% debenture 50,000 issued at par
Bank 50,000 redemption at par
Equity
Ordinary shares of $1 1,000,000
Share premium 500,000
Revaluation reserve 300,000
General reserve 120,000
Retained earnings 80,000
2,000,000
Equity
Ordinary shares of $1 1,800,000 1 mil + (1mil x 4/5) bonus
Share premium 120,000
Retained earnings 80,000
2,000,000
Equity
Ordinary shares $1 2,400,000 1.8 mil + (600k x $1)
Share premium 150,000 600k x $0.25
General reserve 120,000
Retained earnings 80,000
2,750,000
No Date Debit $ Credit $
1 31-Mar Cash 3,000 Bal b/d 3,000
2 Bal b/d 203,000 Bank 203,000
3 Bal b/d 1,210,000 Trade payables 1,210,000
4 30-Sep Trade payables 1,996,000 Bank 1,996,000
5 Trade payables 510,000 Bal c/d 510,000
6 PJ total 1,296,000 Trade payables 1,296,000
7 31-Mar Bal b/d Other payables 192,000
8 30-Sep Other payables 823,000 Bank 823,000
9 Other payables 103,000 bal c/d 103,000
10 Expenses 734,000 Other payables 734,000
11 interest on overdraft 20,000 Bank 20,000
12 31-Mar Trade receivables 820,000 Bal b/d
13 Bank 2,731,000 Trade receivables
14 Bank 53,000 Sale of building 53,000
15 Bal c/d 420,000 Trade receivables 420,000
16 Trade receivables 2,331,000 SJ total 2,331,000
17 Wages 25,000 Cash 25,000
18 Loan Bracket 45,000 Cash 45,000
19 Loan Racket 45,000 Cash 45,000
20 Bal c/d 8,000 Cash 8,000
21 Bank 258,000 Bal c/d 258,000
22 Cash 120,000 Sales 120,000
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
Note Cash book
Assets 1,356,000
imited Part b
30-Sep-16
$
Equity
Ordinary shares 25,000
Retained earnings 377,000
402,000
Non current liabilities
Loan Bracket 59,000
Loan Racket 24,000
83,000
Current liabilities
Trade payables 510,000
Other payables 103,000
Bank overdraft 258,000
871,000
90,000
2-Aug Bal b/d 90,000
Part b
An ordinary share entitles the holder to a part ownership of the company. They are paid a
dividend out of the company’s profits, if sufficient, as a reward on their investment.
A debenture is a loan to the company, repayable at some time in the future. The person
or company holding the debenture is not an owner of the company but a long-term creditor.
They will receive interest on the money lent.
This will be payable before any dividends are paid to the ordinary shareholders.
Morecap Limited Part c
Statement of changes in equity for year ended 31-Mar-16
Share Share Retained Total
Capital Premium Earnings Equity
$ $ $ $
At start of the year 400,000 40,000 55,000 495,000
Ordinary shares issued 100,000 50,000 150,000
Profit for the year 180,000 180,000
Interim dividend (50,000) (50,000)
500,000 90,000 185,000 775,000
Accounts Db ($) Cr ($) Note oth pyb
Buildings 2,000,000 1.5 mil + 500k
Acc dpr of buildings 180k - 180k
Revaluation reserve 680,000 2 mil - (1.5 mil + 180k)
Dpr exp of mv 21,000 (246k - 162k) x 25%
Acc dpr of mv 183,000 162k + 21k
Distribution exp 561,000 540k + 21k dpr exp of mv
General reserve 130,000 120k + 10k
Retained earnings 59,000 69k - 10k general reserve
Debenture interest 36,000 360k x 10% (18k + 18k acr exp) 18,000
Other payables 18,000
Pecnut limited Part a
continued
Income statement for year ended 31-Mar-16
$ $ $ $
Revenue 2,683,000 Finance cost
Debenture interest (36,000)
Cost of sales (1,132,000)
Opening inventory 85,000 Pre tax profit 306,000
Purchases 1,152,000
Closing inventory (105,000) Profit for the year 306,000
If this is not the case then the assets will be recorded in the accounts at a value which is as
close as possible to their value if the company is forced to sell them on the open market.
This is likely to be considerably lower than their net book value. Further, provision is made
for the expected costs of closing down the business, such as redundancy payments.
Trial Balance at 30-Apr-16
11,000 6,000
Accounts Db ($) Cr ($) Note Oth pyb Oth rcv
Delivery vehicle exp 40,000 38k + 2k 2,000
Advertising 28,000 34k - 6k 6,000
Office expenses 27,000 24k + 3k 3,000
Premises 1,200,000 1 mil + 200k
Acc dpr of premises 60k-60k
Revaluation reserve 260,000 1.2 mil - (1 mil + 60k)
Dpr exp of dv 13,000 (80k - 28k) x 25%
Acc dpr of dv 41,000 28k + 13k
Dpr exp of om 7,000 70k x 10%
Acc dpr of om 28,000 7k + 21k
Debenture interest 12,000 100k x 12% (6k Jul 16 + 6k Jan 17) 6,000
Tax 16,000
General reserve 100,000 50k + 50k
Retained earnings 43,000 7k - 50k
Other payables 11,000 6k + 3k + 2k
Other receivables 6,000 6k
Square Limited Part a
continued
Income statement for year ended 30-Jun-16
$ $ $ $
Revenue 1,000,000 Finance costs
Debenture interest (12,000)
Cost of sales (638,000)
Opening inventory 46,000 Pre tax profit 120,000
Purchases 630,000 Tax (16,000)
Closing inventory (38,000)
Profit for the year 104,000
Gross profit 362,000
Assets
Square Limited Part c
Statement of financial position at 30-Jun-16
$ $
Cost Acc dpr NBV Equity
1,200,000 - 1,200,000 Ordinary shares of $1 900,000
80,000 41,000 39,000 Revaluation reserve 260,000
70,000 28,000 42,000 General reserve 100,000
1,350,000 69,000 1,281,000 Retained earnings 54,000
1,314,000
Non current liabilities
38,000 12% debenture 2025/27 100,000
82,000 100,000
6,000 Current liabilities
67,000 Trade payables 33,000
193,000 Other payables 11,000
Tax payable 16,000
60,000
Part e
The choice of whether to issue shares or take a debenture to fund the future expansion will
depend on a number of factors. If the directors are happy to take additional loans, then a
debenture can be considered. It will increase the amount of loan interest, which is a fixed
charge on the profit and must be paid before any dividends to ordinary shareholders. But
it does mean that that all profit (in excess of the interest charge) that is generated by the
expansion will fall to the existing shareholders.
At the present time the company is not highly geared and an additional loan of $150 000
may be a good option. The directors may also be able to negotiate a rate of interest
below the 12% currently payable on the existing debenture. The principal advantage of a
debenture is that the current ownership and control of the company is not diminished.
On the other hand, an issue of shares will not increase the gearing. Specifically this means
that the additional funds received are not a liability of the business. There will not be any
need to have to repay either the capital (which they will have to do with a debenture), or
any dividend on the shares, if profits are low in future years. Thus, issuing shares will help
future cash flows.
The 100 000 new shares could be issued to the existing shareholders if they have access to the
funds necessary to buy the shares. Alternatively, some or all of the new shares could be sold
to a third party. It is likely that any large scale investor would expect also to become a director
so that they could share in the decision making that will affect the future value of their shares,
which the present directors may or may not consider advantageous.
The more confident the directors are that their expansion plans will succeed, the more they
should favour taking a loan; the more risky the venture they have in mind, the wiser it would
be to seek to raise the capital by a share issue.