Revision Bitesize Companies
QuestionsWhat is the definition of the following terms:1) Deferred Taxation Answer 2) Rights Issue Answer 3) Debenture Answer 4) Bonus Shares Answer 5) Share Premium Answer 6) Revenue Reserves Answer 7) Memorandum Of Association Answer 8) Limited Company Answer 9) Pre-incorporation Profit Or Loss Answer 10) Sinking Fund Answer 11) Provision Answer 12) Articles Of Association Answer 13) Capital Reserve Answer 14) Work Certified Answer 15) Capital Redemption Reserve Answer 16) Shares At No Par Value Answer 17) Corporation Tax Answer 18) Share Discount Answer
Revision Bitesize Companies
Answers1) Timing differences arise between the accounting treatment of events and their taxation results. Deferred taxation accounting adjusts the differences so that the accounts are not misleading.
Question 2) An issue of shares to existing shareholders.
Question 3) A bond or document acknowledging a loan to a company, normally under the company's seal and carrying a fixed rate of interest.
Question 4) Shares issued to existing shareholders free of charge. (Also known as scrip issues.)
Question 5) Where a share is issued at a price above its par, or nominal value, the excess is known as a premium.
Question 6) A balance of profits retained available to pay cash dividends including an amount voluntarily transferred from the profit and loss appropriation account by debiting it, reducing the amount of profits left for cash dividend purposes, and crediting a named reserve account, such as a general reserve.
Question 7) The document that discloses the conditions governing a company's relationship with the outside world.
Question 8) A form of organisation established under the Companies Acts as a separate legal entity, and required to comply with the provisions of the Acts. The members of the company, known as shareholders, are liable only to pay the full price of the shares, not for any further amount, i.e. their liability is limited.
Question 9) A profit or loss which arises immediately before a limited company is legally incorporated. Any such profit will be treated as capital profit not for distribution while, for sake of prudence, any such loss will be set against post-incorporation profits.
Question 10) An external fund set up to meet some future liability such as the redemption of debentures. Cash is paid into the fund at regular intervals to accumulate with compound interest to the required future sum.
Question 11) An amount written off or retained by way of providing for depreciation, renewals or diminution in value of assets, or retained by way of providing for any known liability of which the amount cannot be determined with 'substantial accuracy'.
Question 12) The document that arranges the internal relationships, for example, between members of the company, and the duties of directors. The Companies Act 1985 gives a model known as Table A.
Question 13) A reserve which is a balance of profit retained that can never be used for the payment of cash dividends. These are normally created specifically under the provisions of the Companies Acts 1985 and 1989. Examples include a capital redemption reserve and a share premium account.
Question 14) The value of work in progress on a contract as certified by, for example, an architect or an engineer.
Question 15) A 'non-distributable' reserve created when shares are redeemed or purchased other than from the proceeds of a fresh issue of shares.
Question 16) Shares which do not have a fixed par, or nominal value.
Question 17) A form of direct taxation levied on the profits of companies. The rate is determined each year in the Finance Act.
Question 18) Where a share was issued at a price below its par, or nominal value, the shortfall was known as a discount. However, it is no longer legal under the Companies Acts to issue shares at a discount.
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