ABC Ltd issued 10,000 Shares of £10 each at par. Fully subscribed and paid. I. Journalize the issue of the…

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ABC Ltd issued 10,000 Shares of £10 each at par. Fully subscribed and paid. I. Journalize the issue of the Share. II. Prepare the Extract of the Statement of Financial position. III. Differentiate between Authorized and Issued Capital. IV. State two characteristics of a limited Company

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Here's the solution to question 8.a): a) Given: ABC Ltd issued 10,000 shares of Le 10 each at par, fully subscribed and paid. i) Journalize the share issue. Step 1: Calculate the total value of shares issued. Total Value = Number of Shares × Par Value per Share; Total Value = 10,000 shares × Le 10/share = Le 100,000 Step 2: Prepare the journal entry for the share issue and receipt of cash. l r r Date & Debit (Le) & Credit (Le) Bank Account & 100,000 & By Share Capital Account & & 100,000 (To record the issue of 10,000 ordinary shares at Le 10 each, fully subscribed and paid) & & ii) Prepare the extract of the Statement of Financial Position. Step 1: Identify the relevant accounts affected. Share Capital (Equity) and Bank (Current Assets). Step 2: Present the extract. ABC Ltd Extract of Statement of Financial Position as at [Date] l r Equity and Liabilities & Le Share Capital: & 10,000 Ordinary Shares of Le 10 each & 100,000 Assets & Le Current Assets: & Bank & 100,000 iii) Differentiate between authorized and issued capital. Authorized Capital (also known as Nominal or Registered Capital) is the maximum amount of share capital that a company is legally permitted to issue to its shareholders, as stated in its Memorandum of Association. It represents the upper limit of capital a company can raise through shares. Issued Capital is the portion of the authorized capital that the company has actually offered to the public for subscription. It is the capital that has been allotted to shareholders. Issued capital can be less than or equal to authorized capital. iv) State two characteristics of a limited company. 1. Separate Legal Entity: A limited company is a distinct legal entity separate from its owners (shareholders). This means it can enter into contracts, own assets, sue, and be sued in its own name, independent of its members. 2. Limited Liability: The liability of the shareholders in a limited company is restricted to the amount unpaid on their shares. Their personal assets are protected and cannot be used to settle the company's debts.

ABC Ltd issued 10,000 Shares of £10 each at par. Fully subscribed and paid. I. Journalize the issue of the Share. II. Prepare the Extract of the Statement of Financial position. III. Differentiate between Authorized and Issued Capital. IV. State two characteristics of a limited Company

Step-by-step solution

Part a(i)· 2 steps

Calculate the total value of shares issued.

Prepare the journal entry for the share issue and receipt of cash.

Part a(ii)· 2 steps

Identify the relevant accounts affected.

Present the extract.

Part a(iii)

Part a(iv)

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