Issued Share Capital: This is the total value of shares that a company has offered to the public for sale. In this case, ABC Ltd issued 1000 shares. The total issued capital is therefore 1000 shares x £1/share = £1000.

Called-Up Share Capital: This is the portion of the issued share capital that the company has asked the shareholders to pay. Here, £0.50 per share has been called up, meaning 1000 shares x £0.50/share = £500 has been called up.

Paid-Up Share Capital: This is the amount that shareholders have actually paid to the company in exchange for their shares. Since all called-up shares have been fully paid, the paid-up share capital is equal to the called-up share capital. Therefore, the paid-up share capital is £500.

In this scenario:

• Issued Share Capital: £1000
• Called-Up Share Capital: £500
• Paid-Up Share Capital: £500

Two advantages of incorporating as a limited company, specifically relating to limited liability, are:

• Protection of Personal Assets: As mentioned previously, the most significant advantage is that the owner's personal assets are shielded from business debts. This is a major deterrent to risk.
• Easier to attract Investment: Potential investors are more likely to invest in a limited company because their investment is limited to the amount they invested. This reduces the perceived risk and makes the company more attractive to funders.

Relationship: Issued share capital is the total number of shares a company has made available for sale. Called-up share capital is the portion of the issued share capital that the company has requested shareholders to pay. Paid-up share capital is the actual amount of money received from shareholders in exchange for their shares – it's the called-up capital that has been fully paid.

Importance of Accurate Recording:

• Solvency: Accurate records of share capital provide an indication of a company's financial strength and solvency. A higher paid-up capital generally suggests a stronger financial position.
• Legal Requirements: Companies are legally required to maintain accurate records of their share capital. This is essential for compliance with company law.
• Investor Confidence: Accurate and transparent share capital information builds confidence among investors, lenders, and other stakeholders. It demonstrates financial stability and accountability.
• Decision Making: Share capital figures are crucial for various business decisions, such as dividend payments, share dilutions, and raising further capital.
• Balance Sheet: Share capital is a key component of the company's balance sheet, reflecting the owners' investment in the business.