ACCT1511 Lecture Notes - Lecture 5: Venture Capital, Share Capital, Financial Institution
3.1 – Financial Statements
Share Capital: Types of shares traded on share markets
• Ordinary – full voting rights, right to receive dividends
• Preference – received dividend based on fixed percentage, reduced voting right, may
be redeemable (e.g. for cash)
• Share issue procedure: Offer, application, allotment of shares
Contributed Equity:
• Share Capital (share issue) – Dr Cash & Cr Share Capital
• Cash in Return for Shares
Institutional/ Private Placement:
• No need for a costly prospectus
• Less need for costly Investment Banking teams
• Fi too oug to gai aess to puli akets – the etue apitalist
• Dr Cash & Cr Share Capital
Public – IPO:
• Float to gain desired capital structure
• Outgrowing venture capital
• Seeking listing on an exchange
• Take advantage of investors who have money
• Issued by way of prospectus, payable in full on application
• Application money received: Dr Cash Trust & Cr Application
• Allotment/issue date: Dr Cash & Cr Cash Trust + Dr Application & Cr Share Capital
Public – Installment:
• Application money received: Dr Cash Trust & Cr Application
• Allotment/issue date: Dr Cash & Cr Cash Trust + Dr Application & Cr Share Capital
Dr Allotment & Cr Share Capital
• Allotment money received: Dr Cash & Cr Allotment
• Call date: Dr Call & Cr Share Capital
• Call money received: Dr Cash & Cr Call
Undersubscription:
• Too few applicants
• Shares can still be allotted, provided minimum subscription condition is met
If not, 4 months after disclosure document is issued, share issue must be
abandoned
• No accounting complications
• Underwriting – agreement with stockbroker or financial institution in which
underwriters guarantee to purchase any shares that company cannot sell during
issue period
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