Question

Which of the following items would not form part of the shareholders' equity of a company on the statement of financial position?

• A. Ordinary share capital
• B. Trade payables
• C. Share premium
• D. Retained profits

Answer 1

Answer: (B)

Trade payables

Share capital consists of all funds raised by a company in exchange for shares of either common or preferred shares of stock.

Shares which do not enjoy any preferential right in the payment of dividend or repayment of capital, are termed as equity/ordinary shares.

In case shares are issued at a premium, i.e. at an amount more than the nominal or par value of shares is known as share premium,

Profits generated by a company that are not distributed to stockholders are retained earnings, forms the part of shareholder's equity.

whereas Trade payable are the total amount payable by a business for goods purchased or services availed as a part of their business operations. Trade payable comprise of Creditors and Bills Payablewhich creates the part of liabilities in financial statements.