Level: Easy
Easy Worked Examples: Accounting for Companies Limited by Shares
Six graded easy examples for Form 5 Chapter 5, covering share issues in the General Journal, posting to the ledger, computing issued capital, owner's equity components, and cash dividends on cumulative preference and ordinary shares.
One-hour paid trial · Same-day reply · from RM50/hr
Example 1: Issue of Ordinary Shares in the General Journal
Question
Solution plan
Receiving the cheque increases the asset Bank, so Bank is debited. Issuing ordinary shares increases Ordinary Share Capital (equity), so Ordinary Share Capital is credited. Amount = 100,000 units × RM1 = RM100,000.
| Date | Particulars | Debit (RM) | Credit (RM) |
|---|---|---|---|
| 1 Jan 2025 | Bank | 100,000 | |
| Ordinary Share Capital | 100,000 | ||
| (Issue of 100,000 ordinary shares at RM1 each) | |||
| Total | 100,000 | 100,000 |
Answer
Bank is debited RM100,000 and Ordinary Share Capital is credited RM100,000. Total debits equal total credits: RM100,000.
Where marks are usually lost
Example 2: Issue of Preference Shares in the General Journal
Question
Solution plan
Cash inflow increases the asset Bank, so Bank is debited. Issuing preference shares increases Preference Share Capital (equity), so that account is credited. Amount = 60,000 units × RM1 = RM60,000. The 6% rate is used only to calculate dividends, not the capital amount.
| Date | Particulars | Debit (RM) | Credit (RM) |
|---|---|---|---|
| 5 Mar 2025 | Bank | 60,000 | |
| Preference Share Capital | 60,000 | ||
| (Issue of 60,000 units of 6% preference shares at RM1 each) | |||
| Total | 60,000 | 60,000 |
Answer
Bank is debited RM60,000 and Preference Share Capital is credited RM60,000. Total debits equal total credits: RM60,000.
Where marks are usually lost
Example 3: Calculating Issued and Fully Paid Capital
Question
Solution plan
Issued and fully paid capital = number of units issued × price per unit, totalled for both share types. Ordinary: 300,000 × RM1. Preference: 100,000 × RM1. Add the two amounts.
| Type of Share | Number of Units | Price per Unit (RM) | Amount (RM) |
|---|---|---|---|
| Ordinary Shares | 300,000 | 1 | 300,000 |
| 5% Preference Shares | 100,000 | 1 | 100,000 |
| Issued and Fully Paid Capital | 400,000 |
Answer
Ordinary share capital is RM300,000 and preference share capital is RM100,000, so the company's issued and fully paid capital is RM400,000.
Where marks are usually lost
Example 4: Posting the Share Issue to the Ledger
Question
Solution plan
First record the General Journal entry: Debit Bank, Credit Ordinary Share Capital RM200,000 (200,000 × RM1). Then post: in the Bank Account the amount goes on the debit side; in the Ordinary Share Capital Account on the credit side. Balance each account with balance c/d and bring it down as balance b/d.
| Date | Particulars | Debit (RM) | Credit (RM) |
|---|---|---|---|
| 1 Jan 2025 | Bank | 200,000 | |
| Ordinary Share Capital | 200,000 | ||
| (Issue of 200,000 ordinary shares at RM1 each) | |||
| Total | 200,000 | 200,000 |
| Date | Particulars | RM | Date | Particulars | RM |
|---|---|---|---|---|---|
| 1 Jan 2025 | Ordinary Share Capital | 200,000 | 31 Dec 2025 | Balance c/d | 200,000 |
| 200,000 | 200,000 | ||||
| 1 Jan 2026 | Balance b/d | 200,000 |
| Date | Particulars | RM | Date | Particulars | RM |
|---|---|---|---|---|---|
| 31 Dec 2025 | Balance c/d | 200,000 | 1 Jan 2025 | Bank | 200,000 |
| 200,000 | 200,000 | ||||
| 1 Jan 2026 | Balance b/d | 200,000 |
Answer
The Bank Account shows a debit balance of RM200,000 (asset), while the Ordinary Share Capital Account shows a credit balance of RM200,000 (equity). Both accounts balance with balance b/d of RM200,000.
Where marks are usually lost
Example 5: Owner's Equity Components in the Statement of Financial Position
Question
Solution plan
For a company limited by shares, Owner's Equity consists of share capital (ordinary and preference) plus reserves such as Retained Profit. List each component and add them to get Total Owner's Equity: 500,000 + 150,000 + 80,000.
| Particulars | RM |
|---|---|
| Owner's Equity | |
| Ordinary Share Capital | 500,000 |
| 6% Preference Share Capital | 150,000 |
| Retained Profit | 80,000 |
| Total Owner's Equity | 730,000 |
Answer
Total Owner's Equity of Syarikat Damai Sentosa Berhad as at 31 December 2024 is RM730,000, made up of ordinary share capital RM500,000, preference share capital RM150,000 and retained profit RM80,000.
Where marks are usually lost
Example 6: Cash Dividends: Cumulative Preference and Ordinary Shares
Question
Solution plan
Annual preference dividend = 6% × preference capital (100,000 × RM1 = RM100,000) = RM6,000. Because they are cumulative, the 2023 arrears must be paid first, so in 2024 the company pays 2023 + 2024 = RM6,000 + RM6,000 = RM12,000. Ordinary dividend = 5% × ordinary capital (RM200,000) = RM10,000. Total dividend for 2024 = RM12,000 + RM10,000.
| Year | Computation | Dividend (RM) |
|---|---|---|
| 2023 (in arrears) | 6% × RM100,000 | 6,000 |
| 2024 (current) | 6% × RM100,000 | 6,000 |
| Preference dividend paid in 2024 | 12,000 |
| Particulars | Computation | Dividend (RM) |
|---|---|---|
| Preference dividend (2023 + 2024) | RM6,000 + RM6,000 | 12,000 |
| Ordinary dividend 2024 | 5% × RM200,000 | 10,000 |
| Total dividend 2024 | 22,000 |
Answer
Because the preference shares are cumulative, the 2023 arrears (RM6,000) are paid together with the 2024 dividend (RM6,000), totalling RM12,000. The 2024 ordinary dividend is RM10,000. Total dividend paid in 2024 is RM22,000.
Where marks are usually lost
Other sets for this chapter
Back to chapter: Accounting for Companies Limited by Shares →
Need help with Accounting for Companies Limited by Shares?
One-hour paid trial · Same-day reply · from RM50/hr
Book a Trial Class