Limited Company and Partnership Accounting

Vocabulary terms and definitions from the lecture notes concerning partnership profits, limited company structures, share capital types, and financial reporting statements.

Residual profit

The profit for the year adjusted for partner's salary, interest on loan, interest on capital, and drawings, which is then shared between the parties in the agreed ratio.

Limited company

A legal entity which has a separate identity from its shareholders, whose liability for the company's debts are limited.

Dividend

A sum of money paid usually annually by a company to its shareholders out of its profits.

Public limited company (PLC)

A company that sells shares to the public for capital, has strict rules on reporting, and is able to raise large amounts of capital.

Private limited company (Ltd)

A company that is usually smaller and doesn't offer shares to the public, relying instead on private investment or loans with less regulation.

Issued share capital

The amount of capital required by a company that is issued to shareholders.

Called-up capital

The part of the company's issued shares that the company has requested shareholders to pay for, representing the amount due from the shareholders.

Paid-up capital

The actual payment received; it is the part of the called-up capital for which the company has received payment from shareholders.

Preference shares

A type of share that receives fixed, regular dividends before ordinary shares and has priority for returns after outside liabilities if the company winds up, but usually lacks voting rights.

Ordinary shares (equity shares)

Shares paid after preference shares with variable dividends that are not guaranteed; they have voting rights and greater earning potential if the business is profitable.

Equity

The total funds provided by the shareholders of the company.

Redeemable preference shares

Preference shares which must be bought back by the company at an agreed date for an agreed price; dividends on these appear under finance costs.

Debenture

A long-term loan with a fixed rate of interest that must be paid whether or not the business makes a profit, having priority over shareholders but no voting rights.

Statement of changes in equity

A statement prepared by limited companies showing how profit for the year is used and summarizing changes in ordinary share capital, non-redeemable preference share capital, retained earnings, and general reserve.

General reserve

A portion of the company's profit set aside and retained.

Retained earnings

Profits accumulated over time for reinvestment instead of being paid out as dividends, appearing in the equity and reserve section of the statement of financial position.

Interim dividend

A dividend payment made during a financial year, recommended by the board of directors.

Non-current liabilities

Short-term debts represented in this context by redeemable preference shares and debentures.