haya.Learning made clear
Limited companies and the issue of shares sheet
Essay frame

Explain the main features of a limited company and journalise an issue of shares with oversubscription and issue costs.

How to lay out the answer. Follow the frame, then write it in your own words.

  1. 1 · Define a limited company. A separate legal person formed under the Companies Act No. 7 of 2007.
  2. 2 · Explain the features.
    • Separate legal person.
    • Limited liability.
    • Perpetual succession.
    • Separation of ownership (shareholders) and management (directors).
  3. 3 · Private and public companies. Private companies end in '(Private) Limited'; listed companies (Colombo Stock Exchange) end in 'PLC'; other limited companies end in 'Limited'.
  4. 4 · Types of shares. Ordinary vs preference; stated capital, no par value.
  5. 5 · Journalise the issue.
    • Application money: Dr Bank, Cr Share application.
    • Allotment: Dr Share application, Cr Stated capital.
    • Refund: Dr Share application, Cr Bank.
    • Issue costs: Dr Stated capital, Cr Bank.
  6. 6 · State the result. Net stated capital and net cash raised.

Scoring tip: Show the share application account balancing to zero; it proves every rupee is accounted for.