Company accounts

2. COMPANY ACCOUNTS
 Meaning:
 The Company Act 1956 defines the word company as
“a company formed and registered under any of the
previous company laws”.
 Definition:
 A company is defined as “an artificial person
recognized by law, having a distinctive name, a common
seal, a common capital comprised of freely transferable
shares, carrying limited liability and having a perpetual
succession”.

3. Salient Features of a Company
Legal Person:
It is created by law. It is considered as a person in the eyes of
law.
Artificial Person:
It has no body and mind of its own. It can act only through
other persons elected for the purpose.
Can buy and sell assets:
A company at its own discretion can buy or sell any assets
COMMON SEAL:
The common seal with the name of the company therefore,
used as substitute for its signature.
FREELY TRANSFERABLE SHARES:
The share holders of a company can freely transfer their
shares to others.

4. FREELY TRANSFERABLE SHARES:
The share holders of a company can freely transfer their
shares to others.
LIMITED LIABILITY OF MEMBERS:
The liability of a member is limited, Every member who
takes shares of company can be called as “Share Holder”. A Share
holder is liable only to pay for his own share in the company.
PERPETUAL SUCCESSION:
Perpetual succession means that the company has a
continuous existence which is not affected by death, insolvency or
retirement of any share holder.

5. Kinds of Companies
 Companies are broadly classified into three types. They
are
 Statutory Companies
 Registered Companies
 Government Companies
Registered Companies are classified into two categories:(as
per companies Act 1956)
 Private Companies
 Public Companies

6. Statutory Companies
 These companies are formed under a special Act of the
parliament or state legislature. For example: RBI, Life
Insurance, Corporation etc.,
 The provisions of the companies Act of 1956 do not
apply to these companies.

7. Registered Companies:
These are incorporate under the companies
Act of 1956. Most of the joint stock companies are
registered companies.
Private Company:(one which by its articles of
association)
i. Restricts the right to transfer its shares.
ii. Limits the maximum number of members to 50
excluding employee member.
iii. Prohibits any invitation to the public to subscribe for
its shares and debentures.

8. Public Company:
It is defined as “one which is not a private
company”. Public company is free from the restrictions
imposed upon a private company as mentioned above.

9.  Government Companies:
Any company in which not
less than 51% of the paid up share capital is held by
i. The Central Government or
ii. By any State Government or
iii. Partly by the Central Government and partly by one
or more State Government.

10. Difference between a public
company and a private company
S.No Basis Private Company Public Company
1 Minimum number
of members
2 persons 7 persons
2 Maximum number
of members
50 persons Unlimited
3 Issue of prospectus Need not issue Must issue prospectus at
the time of issue of share
or debentures to the
public.
4 Certificate to
commence
business
Need not get certificate to
commence business
It can commence business
only after getting
certificate to commence
business
5 Transfer of shares There are many Shares are freely

11. Basis Private Company Public Company
Quorum of meeting Two persons Five persons
Name of a company Name of a private company
must end with the word
private Limited
Name of a company
must end with the word
Limited.
Legal formalities Less legal formalities apply
to a private company
More legal formalities
apply to a public
company.
Listing in a stock exchange Shares cannot be listed in a
stock exchange
Shares can be listed in a
stock exchange.
Managerial remuneration Maximum remuneration is
not limited.
Maximum
remuneration is
restricted to 11% of net
profit.
Statutory meeting No need for conducting Statutory meeting must

12. SHARE CAPITAL
Authorised Capital or Registered Capital or Nominal
Capital:
This is the amount of capital a company registered
with. This is the maximum amount of capital a company
can raise.
Issued Capital:
It is the value of shares issued to the public. It will be
equal to or less than the authorised capital.
Subscribed Capital:
It is the value of shares subscribed by the public.

13. Called up Capital:
It is the amount of capital called up on shares
subscribed.
Paid up Capital:
It is the amount of capital called up and actually
received from members.
Reserve Capital:
It is that portion of uncalled amount of subscribed
shares which is reserved to be called up only at the time of
winding up.

14. Thank You