Theory question 101
Company AccountsSection A (answer two questions only from this section)
1. Explain the following terms: (a) Debenture; (b) Authorised share capital; (c) Issued share capital; (d) Revenue reserves; (e) Proposed dividend
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(a) Debenture: a long-term loan to a company, evidenced by a certificate (usually under seal), carrying a fixed rate of interest and repayable at a stated date; debenture holders are creditors, not owners.
(b) Authorised share capital: the maximum share capital a company is allowed to issue, as stated in its memorandum (also called registered or nominal capital).
(c) Issued share capital: the part of the authorised capital actually allotted to shareholders; it cannot exceed the authorised capital.
(d) Revenue reserves: profits kept back in the business (e.g. general reserve, retained profit) that are available for paying dividends in future.
(e) Proposed dividend: a dividend recommended by the directors at the year end but not yet paid; it is shown as a current liability.
Give a clear one- or two-sentence meaning for each term.