Capital and the Financing of Companies
Share capital, classes and issues, dividends, capital maintenance, loan capital and security.
How to study ACCA Applied Skills
Build on Applied Knowledge, use the correct UK law and tax versions, practise workplace-style digital responses and keep each independent 50% pass decision visible.
Core concepts
Concept 1
Equity and debt create different control, return, priority and repayment relationships.
Exam cue: Classify the finance as equity or debt before determining rights.
Concept 2
Share issues and distributions are constrained by authority, capital-maintenance rules and distributable-profit requirements.
Exam cue: Check authority and capital-maintenance constraints before approving an issue or distribution.
Concept 3
Charges secure company borrowing and priority can depend on type, creation and registration.
Exam cue: Identify fixed or floating security and registration before ranking creditors.
Risk pitfalls and guardrails
Treating a dividend as payable simply because the company has cash.
Guardrail: Do not reuse a legal rule, tax amount, reporting format, audit phrase or finance formula without checking scope, date, units and evidence.
Confusing nominal share capital with market value.
Guardrail: Do not reuse a legal rule, tax amount, reporting format, audit phrase or finance formula without checking scope, date, units and evidence.
Ignoring registration consequences when analysing company charges.
Guardrail: Do not reuse a legal rule, tax amount, reporting format, audit phrase or finance formula without checking scope, date, units and evidence.
Memory anchors
Ordinary Share
An ordinary share normally carries residual voting, dividend and capital rights.
Preference Share
A preference share usually receives a defined priority for dividend or capital.
Capital Maintenance
Capital-maintenance rules restrict returns that prejudice company creditors.
Debenture
A debenture records or acknowledges company borrowing and may be secured.
Floating Charge
A floating charge covers a changing class of assets until crystallisation.
Checkpoint rule
Do the check-up only after you can summarize each concept in one sentence and identify one dangerous pitfall from memory.
Knowledge Check (after reading)
Short check-up to confirm understanding of this module.
Check-up Questions
What is the main legal distinction between ordinary shares and a company loan?
A profitable company has cash but no distributable profits. Can it lawfully pay an ordinary dividend solely because cash is available?
Answer all questions to submit.
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Continue learning
Move forward only after this module is stable.
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