COMPANY LEDGER ACCOUNTS (LIVE)
08 APRIL 2015
Section A: Summary Notes and Examples
The Companies Act No. 71 of 2008 (applicable from 2011) has introduced several significant changes to
company law in South Africa. Two of the most significant changes in terms of their effect on accounting
entries in the Grade 12 curriculum are:

Shares of no par value: Section 35 (2) states that ‘a share does not have a nominal or par value’.

Buy-back of shares: Section 48 allows companies to repurchase its shares from shareholders
under certain conditions.
The main reason for the dispensing of par value is that this bears no resemblance to the true worth of a
share other than on the first day of a company’s existence and was often confusing to uninformed
investors. All shares are now of ‘no par value’. Shares are issued at an ‘issue price’. This means that:

The full proceeds of the share issue are credited to the Share Capital account.

The Share Premium account no longer applies.

New shares may be issued at a higher or lower price than any previous issue price.
There are six important company ledger accounts that you need to learn – of these, the most important is
the Appropriation account as certain questions in other sections will require you to draw it up.
Owners’ Equity Accounts
ORDINARY SHARE CAPITAL
Bank
CPJ
Balance
b/d
Bank
CRJ
Journal
Debit
Credit
CRJ
Bank
Ordinary
share capital
A
O
L
+2 000 000
+2 000 000
0
Bank is reduced by the repurchase value paid for the shares
Ordinary share capital is reduced by the number of shares
multiplied by the average issue price
Retained income is reduced by the difference (this represents
the income that had previously been retained in respect of the
shares repurchased)
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Average Share Issue Price
1 000 000 Ordinary shares in issue at the beginning of the year
3 000 000
500 000 Ordinary shares issued in January @ R4,5
2 250 000
1 500 000 VALUED AT
5 250 000
AVERAGE PRICE 5 250 000/1 500 000
R3,50 PER
SHARE
RETAINED INCOME
Bank
CPJ
Balance
b/d
Appropriation*
GJ
SARS (INCOME TAX)
Bank
CPJ
Balance*
b/d
Bank
CPJ
Bank
CRJ
Bank
CPJ
Income tax
GJ
Bank
CPJ
SHAREHOLDERS FOR DIVIDENDS
Balance
b/d
Dividends on ordinary
shares
GJ
INCOME TAX
SARS (income tax)
GJ
Appropriation
GJ
ORDINARY SHARE DIVIDENDS
Bank
CPJ
Shareholders for
dividends
GJ
Appropriation
Page 2
GJ
Appropriation of Profits at the End of the Year:
APPROPRIATION F3
Income tax
GJ
Ordinary share
dividends
GJ
Retained income*
GJ
Profit and loss
GJ
The Appropriation account is used to divide the profit for the year. It is a final account (that’s why it is
called F3)
Alternative format of the Appropriation account
Another way of drawing up the Appropriation account is as follows:
APPROPRIATION F3
Income tax
GJ
Profit and loss
GJ
Ordinary share dividends
GJ
Retained income
GJ
Retained income
GJ
Section B: Practice Questions
Question 1
Use the given information of Davie Ltd to draw up the following ledger accounts for the year ended 30
June 2014:





Ordinary Share Capital
Retained Income
SARS (Income Tax)
Ordinary Share Dividends
Appropriation Account
(9)
(6)
(8)
(8)
(9)
Davies Ltd has an authorised share capital of 2 500 000 ordinary shares.
On 1 July 2011 they issued 1 500 000 ordinary shares @ R3 each to shareholders to start the company.
Extracted balances on 1 July 2013



Retained Income
SARS (Income Tax)
Shareholder for Dividends
R650 000
R 8 000 (debit)
R180 000
Transactions for the year:
20 July 2013
Paid the shareholders the amount owing to them for last year’s final declared dividend.
The company will make two equal provisional tax payments on 31 August 2013 & 28 February 2014
totalling R360 000. The first payment on 31 August 2013 must offset the amount due to be refunded by
SARS for last year’s overpayment.
1 October 2013 The Company declared and paid an interim dividend of 14c per share.
Page 3
1 November 2013
The company issued a further 300 000 shares @ 420c each
1 May 2014
The company bought back 50 000 shares @R4,60 each
30 June 2014
The net profit for the year after taxation of 30% amounted to R945 000
A final dividend of 9c per share was declared. The bought back shares were not
entitled to a dividend.
Answer Book
Question 1
ORDINARY SHARE CAPITAL
RETAINED INCOME
SARS (INCOME TAX)
Page 4
ORDINARY SHARE DIVIDENDS
APPROPRIATION ACCOUNT
Section C: Solutions
Question 1
ORDINARY SHARE CAPITAL
Bank
CPJ
160 000
Balance
(50000 x 3.2)
4 500 000
CRJ
1 260 000
(1500000x3)
Bank
Balance
b/d
c/d
5 600 000
(300000x4.20)
5 760 000
5 760 000

Balance
b/d
5 600 000
4 500 000 + 1 260 000 = 5 760 000 / 1 800 000 (1 500 000 + 300 000)
=3.20 – 4.60 = 1.40
RETAINED INCOME
Bank
CPJ
70 000
(50000 x1.4)
Balance
c/d
Balance
b/d
650 000
Appropriation Account
GJ
577 500
1 157 500
1 227 500
1 227 500

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Balance
b/d
1 157 500
SARS (INCOME TAX)
Balance
b/d
8 000
Bank
CPJ
172 000
(360000/2 = 1800008000)
Bank
CPJ
180 000
Balance
c/d
45 000
Income Tax
405 000
405 000
405 000

Balance
b/d
45 000
GJ
367 500
ORDINARY SHARE DIVIDENDS
Bank
CPJ
210 000
GJ
157 500
Appropriation Account
(1500000x0.14)
Shareholders for
Dividends
(1750000x0.09)
367 500
367 500
1 500 000 + 300 000 – 50 000
APPROPRIATION ACCOUNT
Income Tax
GJ
405 000
Profit & Loss
Ordinary Share
Dividends
Retained Income
GJ
367 500
(945000 x100/70)
GJ
577 500
1 350 000
GJ
1 350 000
1 350 000
Page 6