When do you put share capital in the assets in a balance sheet, and when do you include it just in free reserves? In the April 2007 accounts question, share capital is included in free reserves, but in Subject 303 Sept 99 Question 9, it's a separate item... These two questions also treat DAC separately, one as a deduction from the unearned premium on the liabilities sheet, and the other as an asset in the assets sheet. Which is better? Thanks.
Share Capital is part of the fund that belong to shareholders, so it's part of the free reserves, along with share premium account, retained profits etc. The key is not to confuse it with Shareholders Funds, which is just another name for the Free Reserves (most of the time). It's not an asset, like cash, equities or current assets etc. So you can ignore share capital when calculating your free reserves (assets less technical liabilities). If you're given share capital in the question then you could split free reserves up into share capital and "other" if you wanted to (the examiners didn't in Apr 07, but they did when presenting the account in Q9 Sept 99). You can treat DAC either way. Your preference. It's a (notional) positive asset, or a negative liability. Your two examples demonstrate that you should get full marks for either approach.
