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An enterprise should make full disclosures relating to share capital on the face of balance sheet or in the notes.

For each class of share capital:

• the number of shares authorised
• the number of shares issued and fully paid, and issued but not fully paid
• par value per share, ot that the shares have no par value
• a reconciliation of the number of shares outstanding at the beginning and at the end of the period
• the rights, preferences and restrictions attaching to that class including restrictions on the distribution of dividends and the repayment of capital
• shares in the enterprise held by the enterprise itself or by subsidiaries or associates of the enterprise
• shares reserved for issue under options and sales contracts, including the terms and amounts.

A description of the nature and purpose of each reserve within equity.

The following should be disclosed in the notes:

• the amount of equity dividends declared after the balance sheet date but before the financial statements were authorised for issue, and the related amounts per share
• the amount of any cumulative preference dividends not recognised.

An enterprise without share capital, such as a partnership, should disclose information equivalent to that required above, showing movements during the period in each category of equity interest and the rights, preferences and restrictions attaching to each category of equity interest.

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The difference between ordinary and preference shares has three aspects:

• voting power
• distribution of profit (dividends)
• liquidation of the company.

The following table summarises the difference between ordinary and preference shares:

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The preference shareholders have a prior claim to any company profits available for distribution. They share carrying a fixed rate of dividend, also be called preferred shareholders.

Special categories of preference shares inculde:

• participating preference shares: where shareholders are entitled to participate together to a specified extent in distributable profits and surpluses on liquidation
• redeemable preference shares: the terms of issue specify that they are repayable by the company.

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Ordinary shares are the normal shares issued by a company. The ordinary shareholders can vote at company meetings and receive dividends from profit. Ordinary shares are often referred to as equity shares. The ordinary shareholders are the real owners of the business.

The advantages of ordinary shares are that ordinary shareholders may receive dividends from their company out of its profit. These dividends are often paid twice each year, an interim dividend during an accounting year and a final dividend after the balance sheet date when the company’s profit for thee year is known. Dividends will vary according to the company’s level of profits and its dividend policy. Ordinary dividends are often expressed in terms of cents per share.

No dividend may be paid on the ordinary shares until the dividend on the preference shares has been paid in full. Dividends are not expenses of the company to be deducted in computing profit, but a share of the final profit paid to the owners of the company.

The disadvantages of ordinary shares are that ordinary shareholders will bear the operational risks.