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ACCA Applied Knowledge · Financial Accounting · The context and purpose of financial statements for external reporting

Which statement about a public limited company compared with a private limited company is correct?

A public limited company may offer its shares to the general public, usually with the possibility of a stock exchange listing. Private companies generally cannot do this. Both types give shareholders limited liability, and both must prepare financial statements.

  1. AOnly a public company has limited liability for its shareholders
  2. BA public company may offer its shares to the general publicCorrect
  3. CA private company must always have more shareholders than a public company
  4. DA public company is exempt from preparing financial statements

Explanation

Public companies can offer shares to the public, and may seek a stock exchange listing, whereas private companies generally cannot. Both types give shareholders limited liability. Neither is exempt from preparing financial statements, and there is no rule that private companies need more shareholders.

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