Accounting · Study Guide
Key Points
Limited companies must distinguish between issued share capital and retained earnings (reserves)
Dividends are paid from profits and reduce reserves, not capital
Directors' report and notes to accounts provide transparency to external shareholders
Exam Focus
Prepare limited company accounts with correct classification of capital, profits, and reserves. Include the statement of changes in equity.
Must-Know Terms
Cross-Theme Connections
Types of business organisation
Limited company structure determines capital account treatment
Preparation of financial statements of sole traders
Sole trader accounts provide the foundation before moving to company accounts
Accounting for limited companies
More detailed accounting for limited companies is covered later