legal and accounting considerations There are various types of companies including companies limited by shares, companies limited by guarantee, no-liability companies and definition of a company unlimited companies. types of companies The most popular type of company is a company limited by shares. types of shares These can be private limited companies or public limited companies. debentures and unsecured A company may be formed either by floating a new company or formation and share issue acquiring a company”. provisions The Corporations Act is quite specific in what is required for company reserves registration. dividends All that is paid by shareholders when the shares are first issued is investigation of actual published company kept by the company. However, if shares are subsequently sold, for reports example on the stock exchange, the money is paid to the owners of the shares. The company receives nothing. Income Statement Debentures and unsecured notes are a form of borrowing by the Balance Sheet with emphasis on the company and are therefore liabilities. Debentures are secured shareholders’ equity section borrowings whereas unsecured notes are unsecured borrowings. Cash Flow Statement Reserves belong to the shareholders and as such appear in the applicability of Accounting Standards shareholders’ equity section of the Balance Sheet. They represent analysis and interpretation of published amounts known with more certainty. accounting reports of a company (including The setting aside of reserves does not necessarily mean that cash is additional ratios for companies) available to the value of the reserve. Cash would only be available if money were deliberately deposited in a bank account. Because a company is a separate legal entity, it must pay company tax on its profits. Dividends can be franked or unfranked. Individuals will receive tax benefits if they own shares on which dividends are franked. Companies usually prepare two sets of end-of-year reports: one for internal management which would show full details of all the accounts one for external parties which must conform with the Corporations Act, Accounting Standards and the requirements of the stock exchange. The information contained within the external reports requires a balance between providing the legal minimum disclosure requirements and helpful information to shareholders. The additional ratios used to evaluate companies are: earnings per price earnings ratio dividend Students should be made aware that published company accounting reports are governed by the Corporations Act and Note: the Accounting Standards issued by the Australian Accounting Standards Board. Published reports often contain supplementary reports in the form of bar charts, pie charts, and the like. These reporting techniques aid communication to interested parties. Personal Financing and Investing (ES 13)
legal and accounting considerations definition of a company types of companies types of shares debentures and unsecured formation and share issue provisions reserves dividends investigation of actual published company reports Income Statement Balance Sheet with emphasis on the shareholders’ equity section Cash Flow Statement applicability of Accounting Standards analysis and interpretation of published accounting reports of a company (including additional ratios for companies) There are various types of companies including companies limited by shares, companies limited by guarantee, no-liability companies and unlimited companies. The most popular type of company is a company limited by shares. These can be private limited companies or public limited companies. A company may be formed either by floating a new company or acquiring a company”. The Corporations Act is quite specific in what is required for company registration. All that is paid by shareholders when the shares are first issued is kept by the company. However, if shares are subsequently sold, for example on the stock exchange, the money is paid to the owners of the shares. The company receives nothing. Debentures and unsecured notes are a form of borrowing by the company and are therefore liabilities. Debentures are secured borrowings whereas unsecured notes are unsecured borrowings. Reserves belong to the shareholders and as such appear in the shareholders’ equity section of the Balance Sheet. They represent amounts known with more certainty. The setting aside of reserves does not necessarily mean that cash is available to the value of the reserve. Cash would only be available if money were deliberately deposited in a bank account. Because a company is a separate legal entity, it must pay company tax on its profits. Dividends can be franked or unfranked. Individuals will receive tax benefits if they own shares on which dividends are franked. Companies usually prepare two sets of end-of-year reports: one for internal management which would show full details of all the accounts one for external parties which must conform with the Corporations Act, Accounting Standards and the requirements of the stock exchange. The information contained within the external reports requires a balance between providing the legal minimum disclosure requirements and helpful information to shareholders. The additional ratios used to evaluate companies are: earnings per price earnings ratio dividend Note: Students should be made aware that published company accounting reports are governed by the Corporations Act and the Accounting Standards issued by the Australian Accounting Standards Board. Published reports often contain supplementary reports in the form of bar charts, pie charts, and the like. These reporting techniques aid communication to interested parties. Personal Financing and Investing (ES 13)