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The proportion of debt and equity in the capital structure can vary over time and between companies. This chapter looks more closely at sources of funds, at the items comprising ‘capital employed’: ordinary shareholders’ funds, creditors due after one year, preference share capital, and provisions for liabilities and charges. Ordinary shares are shares in the ownership of a company, and give ultimate rights of control over its affairs. Called up share capital and reserves together constitute a company's ‘equity’ capital. The share premium account arises when a company issues ordinary shares for more than the nominal amount per share. Retained profits for a period increase the cumulative profit and loss account balance on the balance sheet, which can cover payment of ordinary dividends in future. When a company revalues fixed assets upwards, the balance sheet states the fixed assets at the new higher amount, and adds the surplus to revaluation reserve.
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