Accounting (AS)·Company accounts · NSSCAS 2.3.1
Limited companies: shares, reserves & debentures
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When a business needs more money than one owner can find, it can become a limited company and sell shares. In this lesson you will learn the language of companies: limited liability, authorised and issued capital, ordinary and preference shares, capital and revenue reserves, and debentures. These terms are tested directly in Paper 1 structured questions, and every company statement you prepare later depends on them.
What you'll learn in this lesson
By the end you should be able to (NSSCAS Accounting (AS) 2.3.1):
- explain the meaning of the terms limited liability and unlimited liability
- explain the difference between authorised and issued share capital
- explain the difference between: the nominal and market value of shares, ordinary shares and preference shares, cumulative and non-cumulative preference shares
- explain the difference between capital reserves (share premium reserve and revaluation reserve) and revenue reserves (general reserve and retained earnings)
- explain the features of debentures
- explain the difference between a share and a debenture
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