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Cameroon GCE A-Level Accounting study materials
Cameroon GCE A-Level Accounting study resources

Cameroon GCE A-Level Accounting: Company Accounts: Share Capital, Debentures and Financial Statements

Cameroon GCE A-Level Accounting · Work through your exam, one topic at a time.

All guide sections

Company Accounts: Share Capital, Debentures and Financial Statements

What the domain tests

You must record share issues, distinguish types of capital and reserves, account for debentures and dividends, and present a company income statement and statement of financial position. Questions often involve share premium, debenture interest and tax.

Core rules

  • Authorised (nominal) capital is the maximum the company may issue; it is disclosed, not shown as a balance sheet figure.
  • Issued capital is the nominal value of shares actually issued. Called-up capital is the amount demanded; paid-up capital is the amount received.
  • Share premium arises when shares are issued above nominal value and is a capital reserve, not profit.
  • Debentures are long-term borrowings. Debenture interest is a finance cost charged before tax, not an appropriation of profit.
  • Dividends are appropriations of distributable profit, not expenses. Preference dividends are usually fixed; ordinary dividends depend on available profits.
  • Reserves include share premium, revaluation surplus and retained earnings.

Worked example

A company issues 100,000 ordinary shares of 1,000 FCFA each at 1,250 FCFA, fully paid. Profit before interest and tax is 40,000,000; 10% debentures are 50,000,000; tax is 30%; an ordinary dividend of 8% is declared; 5,000,000 is transferred to a general reserve.

  • Share issue: Dr Bank 125,000,000; Cr Ordinary share capital 100,000,000; Cr Share premium 25,000,000.
  • Debenture interest = 5,000,000. Profit before tax = 35,000,000. Tax = 10,500,000. Profit after tax = 24,500,000.
  • Dividend = 8% × 100,000,000 = 8,000,000. Transfer = 5,000,000. Retained profit for the year = 11,500,000.

Traps

Debenture interest is never an appropriation; dividends are never an expense. Share premium cannot be used to pay cash dividends. Authorised capital is not the figure in the statement of financial position. Do not ignore tax when calculating distributable profit. Calls in arrears reduce paid-up capital, and a bonus issue converts reserves into share capital without raising cash.