Companies

Match the following :

• Final dividends

• also known as a “Shares Repurchase”, is a company’s buying back its shares from the marketplace. You can think of a buy-back as a company investing in itself, or using its cash to buy its own shares.

• Buy-back of shares

• They are directly appointed by the shareholders

• Shareholders

• Dividends Declared and paid during the financial year

• Interim dividends

• Are the owners of the company

• Directors

• Dividends declared at the end of the financial year but not yet been paid, and will be paid at the beginning of the next of the financial year.

Match the following

• Matching

• All possible losses are recorded in the Income statement but anticipated profits are not reported until they are realized.

• Materiality

• Owned by the shareholders who are members of the general public and trade shares publicly.

• Authorised share capital

• Income earned and expenses incurred must be reported in the same financial period so that the correct net profit is calculated.

• Prudence

• The total number of shares that the company is allowed to issue to the public as stipulated in Memorandum of Incorporation.

• Public company

• Financial statements must disclose items that are important to the users/readers so that correct evaluations and decisions can be made from the information provided

Choose the correct GAAP principal for the following :

Rent has been received for 13 months. Rent for 12 months is shown in the Income Statement

• matching

• materiality

• prudence

• going concern

choose the correct GAAP principal :

The owner of the business wins R2 000 in a competition. This is not shown in the Income Statement of the business.

• going concern

• materiality

• historical cost

• business entity

Choose the correct GAAP principle :

Land and buildings are shown in the Balance Sheet at R500 000, although the market value is estimated at R800 000.

• Going concern

• Historical cost

Choose the correct GAAP principle :

Trading stock is shown in the Balance sheet at R10 000 but the business would only get R7 000 if the stock were to be sold at a flea market the next day.

• going concern

• prudence

Choose the correct GAAP principle:

Cleaning materials bought for R25 are shown as part of Sundry Operating Expenses in the Income Statement.

• prudence

• business entity

• historical cost

• materiality

Give two reasons why will a company buy back its shares ?

Answer explanation

 Fear of losing control of the company

 Company shares are undervalued

 Reduce the equity capital of the company

Briefly explain what is meant by:

Issue price

Answer explanation

It the price at which shares were issued

Explain what is interim dividends and final dividends ?

Answer explanation

Interim dividends

 Dividends declared during the financial year and it is paid within the current year.

Final dividends

 Dividends declared at the end of the financial and is subject to approval by board of directors. √