Components of Shareholders' Equity in a Limited Company

Steps:

• Identify equity as the residual interest in assets after deducting liabilities, per accounting standards.
• Recall that equity includes share capital from shareholders and retained profits.
• Exclude debt instruments like debentures, which are liabilities.
• Match choices to standard balance sheet equity sections: ordinary shares, reserves, and retained earnings.

Why A is correct:

• Equity comprises ordinary share capital (issued shares) plus reserves like retained earnings and general reserve, as defined in the balance sheet equation (Assets = Liabilities + Equity).

Why the others are wrong:

• B: Omits reserves and retained earnings, which accumulate profits for shareholders.
• C: Includes debentures, a long-term liability, not equity.
• D: Identical to A, but question specifies A as correct; no distinction.

Final answer: A