Limited Company Accounts

A limited company is a separate legal entity owned by shareholders with limited liability (they can only lose what they invested). Its equity section replaces a sole trader's capital.

Share capital and reserves

Ordinary shares — voting shares; dividends vary with profit.
Preference shares — a fixed dividend, paid first; usually no vote.
Share premium — amount received above the nominal value of shares.
Retained earnings — accumulated profit kept in the business.
General reserve — profit set aside for future use.

$$\text{Equity} = \text{share capital} + \text{reserves}$$