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AQA A-Level Accounting
16. Accounting for limited companies
16.1 Share capital transactions
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Cards (55)
Ordinary shares grant
voting rights
to shareholders.
True
Preference shareholders are typically paid dividends before
ordinary shareholders
.
True
Ordinary shares provide shareholders with voting rights and entitlement to dividends after
preference
Steps in issuing ordinary shares at par
1️⃣ Cash received from shareholders
2️⃣ Increase in Ordinary Share Capital
3️⃣ Record the par value of shares issued
Issuing ordinary shares at par ensures the company's accounts accurately reflect the
share capital
structure.
True
The Share Premium account records the amount exceeding the par value when shares are issued at a premium.
True
The second journal entry for issuing shares at par records the par value in the
Ordinary Share Capital
account.
True
When issuing shares at a premium, the Bank account is debited to record the cash
received
What is share capital in a company?
Money invested by shareholders
Holders of ordinary shares are entitled to dividends after
preference
What are the two main types of share capital?
Ordinary and preference
Preference shares generally lack voting rights but offer preferential dividend rights.
True
When issuing ordinary shares at par, the cash received is debited to the
Bank
When ordinary shares are issued at a premium, the premium is recorded in the
Share
Match the type of share with its voting and dividend rights:
Ordinary Shares ↔️ Voting rights, dividends after preference shareholders
Preference Shares ↔️ No voting rights, preferential dividends
What type of shares entitle shareholders to dividends after preference shareholders?
Ordinary shares
Preference shareholders are paid dividends before
ordinary shareholders
.
True
When issuing ordinary shares at par, the bank account is
debited
Which account is credited when ordinary shares are issued at par?
Ordinary Share Capital
Preference shares typically do not have voting
rights
Preference shareholders are paid dividends before ordinary shareholders.
True
What are the journal entries for issuing ordinary shares at par value?
1️⃣ Debit: Bank
2️⃣ Credit: Ordinary Share Capital
3️⃣ Debit: Ordinary Share Capital
4️⃣ Credit: Ordinary Shares
In the first journal entry for issuing shares at par, what account is debited?
Bank
The first journal entry for issuing shares at par records the cash received in the
Bank
When shares are issued at a premium, what separate account is used to record the excess over par value?
Share Premium
When shares are issued at a discount, what separate account is used to record the reduction from par value?
Share Discount
When issuing shares at a discount, the Bank account is debited to record the cash
received
The Share Discount account is credited when shares are issued at a discount.
False
What account is debited when a company purchases its own shares?
Treasury Shares
When canceling treasury shares, the Retained Earnings account is
credited
Preference shares typically lack voting rights but have priority over ordinary shares in
dividend payments
.
True
The Share Premium account is credited when shares are
issued
at a premium.
True
When a company purchases its own shares, the Bank account is
credited
The Ordinary Share Capital account is debited when repurchased shares are held as
treasury shares
.
True
What happens to the Treasury Shares account when repurchased shares are canceled?
It is debited
Ordinary shares grant voting
rights
When ordinary shares are issued at par, the Bank account is debited, and the
Ordinary Share Capital
account is credited.
True
What are the debit and credit entries when 1,000 ordinary shares with a par value of £10 each are issued?
Debit Bank £10,000, Credit Ordinary Share Capital £10,000
When ordinary shares are issued at a premium, the Share Premium account is used to record the amount exceeding the
par
value.
Share premium is shown as a separate reserve account within the
equity
section.
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