Accounting 9706 · AS & A Level · Preparation of financial statements

Preparation of financial statements — practice question

M Limited has supplied an extract from the statement of financial position dated 31 August 2016.
(a)[6]

Draw up the statement of changes in equity for the year ended 31 August 2017. You do not need a total column.

(b)[2]

State two reasons why capital reserves might be used before revenue reserves to finance a bonus issue of shares for a limited company.

(c(i))[2]

State two advantages to a limited company of carrying out a rights issue.

(c(ii))[1]

State one drawback to a limited company of making a rights issue.

(d)[4]

Explain two advantages to the company of taking out a long-term bank loan to raise extra capital.

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