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Summary Financial Accounting - Financial Reporting
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FINANCIAL ACCOUNTING FOR COMPANIES ( FAC2601 )Introduction to company Financial Statements
IFRS - inter. Acc. standards stating how particular types of transactions & other events should be recognized,
measured & reported in AFS.
COMPANIES
Fulfils the following needs: Incorporation forms:
* Acquisition of more capital *Notice of Incorporation
*Ensures the continued existence of the entity *Memorandum of Incorporation (MOI)
*Easy exchange of owners Profit Company
*Limited financial liability of owners *State-owned
Non-profit company *Private company - "(Proprietary) Limited"
*Have a purpose relating to a public benefit or cultural - at least 1 director
or social activities or interests of groups. *Public company - "Limited" - at least 3 directors
*Income & property is not distributable to incorporaters, - can be listed on the JSE.
members or directors. *Personal liability company
Companies Act of 2008
* Acc. to the Act, AFS have to be drawn up in acc. with IFRS or IFRS for SME depending on category of the company.
*AFS are drafted, published & submitted to the AGM of the shareholders.
SHARE TRANSACTIONS
Ordinary Shares Cumulative preference shares
* Represent equity ownership in a company *fixed dividend acc. if it is not paid out annually.
*Full voting rights at AGM & dividends *pay all cumulative preference shares that are in arrears
* Dividends considered only after preference dividends as soon as sufficient funds become available.
Preference shares Redeemable preference shares
*Represent debt (fixed dividends) & equity (capital app.) *Provides for redemption on a specific date or at the
*Paid fixed-rate dividends before dividends are paid to option of the holder.
ordinary shareholders. Is a Financial liability if the issuer has an obligation
*If bankrupt have a right to company assets first. (Not the option of) to transfer financial assets to the
* Have a fixed dividend & no voting rights holder of the share.
Issue of Capitalisation shares Rights issues & options
*no payment is received from shareholders *New shares offered to existing shareholders based
*shares are issued in the same proportion as existing on their existing shareholdings.
*Book entry converting the reserves into share capital. *Issue price set below the current market price
*incr. no. shares held & reduce the value per share. *should shareholders not wish to acquire add. shares
DR: retained earnings with the amount of capitalisation. they may sell these rights to other investors
CR: share capital account *Before rights certificates issue, shares trade cum rights
*Once Rights certificates are issued the cum rights are
divided into a rights (option) value & ex-rights share value
Underwriting of share issues Dividends
Commision = (no. of shares x share R value) x com. % * Portion of the profit of a company that is divided among
If only half etc. is underwriten then multiply by 50% the shareholders.
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