- November 11, 2015 at 11:00 am #281685samiyam29Member
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I have a few Questions Relation to Company Accounts.
1)Does the number of shareholders increase as the business expands?Or they have a fixed number initially.
2)What is a Supporting Inventory Count?
3)If the par value is $1 why do shareholders pay in premium such as $1.2.Or is it mentioned according to the company or they shareholders are just willing to pay that much?
4)Why do assets which have revalued upwards suffer from a fall in the value next revaluation?
5)Why is Revenue Reserve included in Retained earnings when it is distributive?November 11, 2015 at 4:02 pm #281745John MoffatKeymaster
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1. I think maybe you are confusing number of shares with number of shareholders.
Neither will necessarily increase as the business expands.
The number of shares will increase if the company issues more shares.
The number of shareholders might increase for several reasons – for example one shareholder might sell half his shares to someone else. There is then an extra shareholder even though the total number of shares is the same.
2. ‘Supporting inventory count’ is not a standard term. If the words appear in a question then there will be additional information which will make it clear what is meant. (And anything to do with inventory can apply to all businesses – not just limited companies)
3. This is explained in the free lectures. Usually when a company is formed the shares will be issued at par (i.e. nominal value). If more shares are issued later, then they will have the same nominal value, but shareholders might be charged more simply because the company is likely to have grown and be worth more.
4. They don’t necessarily suffer from a fall. If there is a revaluation then all assets of the same type have to be revalued, so some might have a higher value and some a lower value. However there is no requirement to have a revaluation in the first place, and in F3 any revaluations will always be upwards anyway.
5. Retained earnings is the most common example of a Revenue Reserve. It is the profits that have not been distributed as dividend, and is distributable – therefore is a revenue reserve. Again the free lectures explain this.
I do suggest that you watch our free lectures. They are a complete course for Paper F3 and cover everything needed to be able to pass the exam well.
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