Q: A company declares a dividend of 50 cents per share on 80,000 issued ordinary shares. What is the total dividend liability created on the date of declaration?

$$80,000 \times 0.50 = R40,000$$

Q: How is the dividend on 10,000 8% preference shares with a face value of R5 each calculated for a full year?

$$10,000 \times R5 \times 8\% = R4,000$$

Question 1

Which of the following best describes the concept of 'limited liability' as it applies to shareholders in a company?

Accepted Answer

Shareholders can only lose the amount they invested in the company, not their personal assets.

Question 2

A company issues 100,000 ordinary no-par value shares at R15 per share. What is the correct journal entry to record the issue of these shares?

Accepted Answer

DR: Bank R1,500,000; CR: Stated Capital R1,500,000

Question 3

Which of the following is NOT a characteristic of a public company (Ltd) under the Companies Act 71 of 2008?

Accepted Answer

It is owned by a municipality.

Question 4

A company declares a dividend of 50 cents per share on 80,000 issued ordinary shares. What is the total dividend liability created on the date of declaration?

Accepted Answer

$$80,000 	imes 0.50 = R40,000$$

Question 5

Which of the following statements about preference shares is TRUE?

Accepted Answer

Preference shares typically have a fixed dividend rate.

Question 6

A company issues 200,000 ordinary shares at R10 each. The company receives applications for 250,000 shares. What is the correct treatment for the oversubscription?

Accepted Answer

Issue 200,000 shares, refund the surplus application money for 50,000 shares.

Question 7

Which of the following is a requirement for a company to declare a dividend under the Companies Act 71 of 2008?

Accepted Answer

The company must pass the solvency and liquidity test.

Question 8

How is the dividend on 10,000 8% preference shares with a face value of R5 each calculated for a full year?

Accepted Answer

$$10,000 	imes R5 	imes 8\% = R4,000$$

Question 9

Which of the following best describes the purpose of the Statement of Changes in Equity?

Accepted Answer

To reconcile the opening and closing balances of each equity account.

Question 10

A company’s profit before tax is R300,000. This includes R50,000 dividend income and R10,000 in fines. What is the taxable income if all other income is taxable and all other expenses are deductible?

Accepted Answer

$$300,000 + 10,000 - 50,000 = R260,000$$

Question 11

Which of the following is TRUE regarding debentures?

Accepted Answer

Debentures are interest-bearing liabilities and not part of equity.

Question 12

Which of the following is NOT a requirement for annual financial statements under Section 29 of the Companies Act, 2008?

Accepted Answer

They must be audited in all cases.

Question 13

Which of the following is a key principle of good corporate governance?

Accepted Answer

Integrating social, environmental, and economic issues for long-term sustainability.

Question 14

Which of the following is NOT a right typically associated with ordinary shareholders?

Accepted Answer

Right to receive a fixed dividend before preference shareholders.

Question 15

A company issues 400,000 shares at R20 each. The share issue is underwritten, and only 300,000 applications are received. The underwriter is paid a 5% commission on the total issue. What is the commission amount?

Accepted Answer

$$400,000 	imes R20 	imes 5\% = R400,000$$

Question 16

Which of the following best describes the 'solvency and liquidity test' required before a dividend is declared?

Accepted Answer

Assets must exceed liabilities and the company must be able to pay debts for 12 months.

Question 17

Which of the following is TRUE regarding the treatment of share issue costs?

Accepted Answer

Share issue costs are closed off directly to equity, not to profit or loss.

Question 18

Which of the following is NOT a type of profit company under the Companies Act 71 of 2008?

Accepted Answer

Non-profit company (NPC)

Question 19

Which of the following is a correct formula for calculating Net Asset Value (NAV) per share?

Accepted Answer

$$	ext{NAV per share} = \frac{	ext{Equity (Assets - Liabilities)}}{	ext{Number of shares issued}}$$

Question 20

Which of the following is NOT a capital identified in the  Framework for integrated reporting?

Accepted Answer

Technological capital

Companies & Share Transactions: Financial Accounting Study Notes

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