Company Accounting Overview

  • Limited Companies Overview

    • Owned by shareholders; controlled by directors.

    • Must be registered with the registrar to obtain limited liability status.

    • Two main documents needed for incorporation:

    • Memorandum of Association: Establishes company’s purpose and structure.

    • Articles of Association: Internal rules governing company management.

  • Memorandum of Association Components:

    1. Name Clause: Company name ending in PLC or Ltd.

    2. Liability Clause: Indicates limited liability for shareholders.

    3. Capital Clause: Authorized share capital amount.

    4. Address Clause: Registered office address.

    5. Activity Clause: Principal business activities.

  • Articles of Association Components:

    1. Defines shareholders' rights and duties.

    2. Defines directors' rights and duties.

    3. Regulations for calling meetings.

    4. Voting rights rules.

    5. Rules for non-paying members.

    6. Minimum qualifications for directors.

    7. Minimum shareholding for directors' eligibility.

  • Types of Limited Companies:

    • Private Limited Company (Ltd):

    • Family-owned; capital not exceeding $50,000.

    • Cannot publicly trade shares or list on stock exchanges.

    • Public Limited Company (PLC):

    • Can trade shares publicly; authorized capital over $50,000.

    • Regulated under IAS Companies Act 2006 and 1985.

  • Capital Structure Components:

    • Ordinary Share Capital

    • Preference Share Capital

    • Debentures, Convertible Loan Stocks, Reserves

  • Types of Shareholders:

    • Ordinary Shareholders:

    • Primary owners with voting rights; last in line for dividends and claims in insolvency.

    • Preference Shareholders:

    • Preferential treatment for dividends and during insolvency; fixed dividends.

    • Divided into categories: Cumulative, Non-cumulative, Participating, and Non-participating.

  • Debentures:

    • Certificates representing long-term loan agreements with fixed interest.

    • Interests treated as company expenses, not profit distributions.

  • Reserves:

    • Revenue Reserves: Accumulated profits for future use (e.g., General Reserve, Retained Earnings).

    • Capital Reserves: Generated from non-trading activities (e.g., share premium, revaluation reserves).

  • Accounting Terms and Statements:

    • Income Statement: Shows performance over a period (revenues, expenses, profits).

    • Statement of Financial Position: Snapshot of assets, liabilities, and equity.

    • Cash Flow Statement: Reports inflows/outflows categorized by operations, investments, financing activities.

  • Key Accounting Principles:

    • Going Concern, Prudence, Consistency, Accrual Basis, Materiality.

  • Ratios for Financial Performance Analysis:

    • Profitability Ratios, Liquidity Ratios, Efficiency Ratios, Gearing Ratios.

  • Corporate Governance Importance:

    • Ensures accountability, protects stakeholder interests, and fosters trust.