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LC AccountingQ

Final Accounting Terms

TermDefinition
Limited Liability Means that liability of the owners is confined to the amount they invested in the company. It is protection against total loss of private assets
Ltd Limited, the reason to have this in your business name is to ensure creditors are aware that the shareholders' liability is limited to their share value. Maximun 99 shareholders.
plc Public Limited Company, shares are bought publicly and sold publicly on the stock exchange eg ISEQ or Dow Jones.
Share Capital Amount invested by the owners of the firm.
Authorised Share Capital Total number of shares a company can sell as set out when the company is formed in the Memorandum of Association. (Also known as nominal share capital)
Issued Share Capital The actual amount of authorised share capital sold/issued.
Share Premium When a company issues shares for the first time above their nominal value.
Dividend The reward the shareholders get for their investment, it is a portion of the profits.
Interim Dividend Dividends paid out during the year
Reserves Reserves of money belong to the ordinary shareholders and are part of shareholders' funds.
Capital Reserves Non-trading profits earned in some other way eg throught share premiumns or revaluations, these reserves cannot be used to pay dividends
Revenue Reserves Profits retained by the company, eg general reseves, P&L reserve, debendture redemption reserve, these reserves can be used to pay dividends.
Shareholders' Funds Amount owed by the company to ordinary shareholders.
Debentures Long term loans carrying a fixed interest rate, the debenture is repaid in one lump sum, and in the meantime interest is paid annually.
Debenture Redemption Reserve Prudent companies transfer a portion of thier annual profit into this reserve, so that when the loan is due to repaid in one lump sum, the funds are available.
Preliminary/Formation Expenses Expenses incurred in the formation of the company, treated as admin expenses.
Auditor's Remuneration Fee paid to the auditor for carrying out the audit of the comapny, treated as admin expense.
Directors' Remuneration The fee, salaries and commission paid by the company to their directors for the accounting period.
Corporation Tax Tax paid on company's profits, deducted from NP.
Intangible fixed asset Items of value but do not have a physical resence, however, they are able to be sold, eg goodwill and patents.
Financial fixed assets Long-term investments made by a business and loans given to other parties eg quoted investments (bought and sold on stock exchange)and unquoted investments.
Operating Profit Profit calculated after taking away all operating expenses and adding other operating income, it is the profit before any interest is deducted.
Profit & Loss Balance The company's retained profit is added to the profit and loss account(reserves) balance from the previous year.
Selling and Distribution Expenses Any expense incurred in selling of goods and sevices eg carraige out
Administration Expenses Any expense incurred in the running of the office and upkeep of permises (excluding any manufacturing expenses in manufacturing businesses)
Interest Financial expense on the debenture loan paid annually.
Amortisation The writing down in value of a intangible fixed asset over a number of years eg Patents and Goodwill
Created by: Banagher13