Accounting – 5.3 Limited companies | e-Consult
5.3 Limited companies (1 questions)
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Relationship: Issued share capital is the total number of shares a company has made available for sale. Called-up share capital is the portion of the issued share capital that the company has requested shareholders to pay. Paid-up share capital is the actual amount of money received from shareholders in exchange for their shares – it's the called-up capital that has been fully paid.
Importance of Accurate Recording:
- Solvency: Accurate records of share capital provide an indication of a company's financial strength and solvency. A higher paid-up capital generally suggests a stronger financial position.
- Legal Requirements: Companies are legally required to maintain accurate records of their share capital. This is essential for compliance with company law.
- Investor Confidence: Accurate and transparent share capital information builds confidence among investors, lenders, and other stakeholders. It demonstrates financial stability and accountability.
- Decision Making: Share capital figures are crucial for various business decisions, such as dividend payments, share dilutions, and raising further capital.
- Balance Sheet: Share capital is a key component of the company's balance sheet, reflecting the owners' investment in the business.