There are two types of company there is the private company and the
public company. A Public Company (PLC) is defined as “ one whose
memorandum states that the company is a public company, and has
registered as such” F, Wood, Business Accounting, Fifth Edition,
P355. It must have a minimum of two members, and there is no limit to
how many can join, and the company must have an authorised capital,
which is normally at least £50,000. A Private Company (Ltd) may be
formed by two or more people, a family or a small group of
shareholders could own it, where the shares of ownership are not sold
to the public. Shares basically limit the company, and this is where
the liability of the members for the debts of the company is limited
to how much they invest into it. The creditors can charge no further
contribution from the shareholders to meet their claims against the
business, and that there liability is limited by guarantee.
Limited Companies are required to have their books and annual final
accounts audited by an independent qualified accountant. The annual
report contains a profit and loss account, a balance sheet, and much
other information. The auditor’s job is to make sure “ The balance
sheet shall give a true and fair view of the state of affairs of the
company as at the end of its financial year; and the profit and loss
account shall a give true and fair view of the profit or loss of the
company for the financial year” (Companies Act 1985 section 228(2)).
R, J, Bull, Accounting In Business, Sixth Edition, P190. A copy of
these published accounts must be then be filed away for public
inspection at the company’s house, and a copy sent to each ordinary
shareholder.