16.1 Share capital transactions

• 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.