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Company accounts
1.
2. Joint stock company is a voluntary association
of persons formed by law for undertaking a
business. Its capital is divided into a number of
transferable shares.
Lord Justice Lindley defined a company as an “
artificial person created by law with a perpetual
succession and a common seal”
3. Characteristics
Separate legal entity
Limited liability
Separation of ownership and management
Perpetual succession
Capita contributed in the form of shares.
Distribution of profit as dividend.
Common seal is affixed in all forms of the company
Maintenance of books under law.
Annual audit is compulsory.
Free transferability of shares.
4. CHARTERED COMPANIES: It is created through a royal
charter or proclamation by the king or queen. East India
Company is an example. It does not exist in India.
STATUTORY COMPANIES: It is formed under special
statute or act passed by Parliament or State Legislature. They
are specially created by government. RBI, SBI, LIC etc.
REGISTERED COMPANIES: Companies which are
registered under Companies Act 1956 are called registered
companies. It is regulated by the provisions of the Companies
Act.
Types of companies
On the basis of incorporation
5. COMPANIES LIMITED BY SHARES: Here the liability of
members is limited to the face value of shares held by him.
COMPANIES LIMITED BY GUARANTEE: It is formed for
promotion of sports, arts etc. No profit motive. The liability of
members are limited to the amount guaranteed by them.
UNLIMITED COMPANIES: Members of this companies
have unlimited liability when company’s assets are
insufficient to meet the obligation. Such companies are rare
at present.
Types of companies
On the basis of liability
6. PRIVATE COMPANIES : Limits the number of
members to 50. Restricts the right to transfer its
shares. Prohibits an invitation to public to subscribe
its shares. ’Private Limited’ or (P) Ltd.
PUBLIC COMPANIES : It can Have any number of
members, minimum being 7. Its shares are freely
transferable and it can invite public to subscribe its
shares.
Types of companies
On the basis of public interest
7. INDIAN COMPANY/DOMESTIC COMPANY: Companies
registered in India under the provision of the Companies Act.
FOREIGN COMPANY: It is incorporated outside India but
having operations in India.
GOVERNMENT COMPANY: It is a company in which not less
than 51% share capital is held by the central government or
state government.
OTHERTYPES OF COMPANIES
HOLDING COMPANY AND SUBSIDIARY COMPANY: A
holding company is one which holds not less than 51% of the
share capital of other company and that other company is called
subsidiary company..
8. JOINT STOCK COMPANIES
CHARTERED
COMPANY
STATUTORY COMPANY REGISTERED
COMPANY
REGISTERED
ON THE BASIS
OF PUBLIC
INTEREST
REGISTERED ON
THE BASIS OF
LIABILITY
OTHER
COMPANIES
PRIVATE
COMPANY
PUBLIC
COMPANY
COMPANIES
LIMITED BY
SHARES
COMPANIES
LIMITED BY
GUARANTEE
UNLIMITED
COMPANIES
INDIAN COMPANY
FOREIGN COMPANY
GOVT. COMPANY
HOLDING & SUBSIDIARY CO
9. AUTHORISED, REGISTERED OR NOMINAL CAPITAL: It is the
maximum amount of capital which a company is authorized to raise by its
shares. This amount is shown in the capital clause of Memorandum Of
Association of a company.
ISSUED CAPITAL: That part of authorized capital which is offered to
the public for subscription is called issued capital.
SUBSCRIBED CAPITAL: It is that part of issued capital which is
applied for by the public and allotted by the company. Unsubscribed
capital is issued but not applied for by public.
Share capital of a company
10. CALLED UP CAPITAL: The portion of subscribed
capital that the directors require the shareholders to
pay on the shares allotted to them is known as called
up capital. Balance of called up is uncalled capital.
PAID UP CAPITAL: That part of the called up capital
which is actually paid by the shareholders is called
paid up capital. The unpaid portion of the called up
capital is called unpaid capital or calls in arrears.
Share capital of a company
11. UNCALLED CAPITAL: It is the part of subscribed
capital of a company which is not called up by the
company. It includes both unreserved capital and
reserved capital.
UNRESEVED CAPITAL: That part of the uncalled
capital which can be called up at any time by the board
of directors to increase the capital.
Share Capital Of A Company
RESEVED CAPITAL: That part of the uncalled
capital which is not to call up except in the event of
winding up of company.
12.
13. When application money received
Bank a/c Dr
Share application a/c
When application money transferred to share capital
Share application a/c Dr
Share capital a/c
When excess application money refunded
Bank a/c
Share application a/c Dr
When allotment money becomes due
Share capital a/c
Share allotment a/c Dr
14. When excess application money adjusted to allotment money
Share allotment a/c
Share application a/c Dr
When allotment money received
Share allotment a/c
Bank a/c Dr
When call money becomes due
Share capital a/c
Share call a/c Dr
When call money received
Share call a/c
Bank a/c Dr
15. Alternate method
When application money received
Bank a/c Dr
Share application and allotment a/c
When application money transferred to share capital
Share application and allotment a/c Dr
Share capital a/c
Receipt of allotment money
Share application and allotment a/c
Bank a/c Dr
Combines Application and allotment account is maintained
16. Calls In Arrears
Some shareholders may fail to pay
allotment money or call money. That
unpaid amount is called calls in arrears.
Company may open a separate account
called ‘Calls in Arrears Account’. It is not
compulsory to open a separate account.
When separate account is maintained
Calls in arrears a/c Dr
Share allotment a/c or Share call a/c
17. CLASSIFICATION OF ISSUE
OF SHARES
• Issue of shares at par
• Issue of shares at premium
• Issue of shares at discount
18. ISSUE OF SHARES AT PAR
When a company issues shares at a price which
is equal to the face value of the share it is called issue
of shares at par.
19. ISSUE OF SHARES AT
PREMIUM
When a company issues shares at a price
which is more than the face value of the share
it is called issue of shares at premium. The
amount of premium is credited to separate
account called ‘Security Premium Account’. It
is treated as the profit and shown on the
liability side of the balance sheet.
20. ISSUE OF SHARES AT DISCOUNT
When a company issues shares at a price which
is lower than the face value of the share it is called
issue of shares at discount. The amount of discount is
debited to separate account called ‘Discount on Issue
of Shares’. It is shown on the asset side of the balance
sheet. The amount of discount should not exceed 10%
of the face value of shares. A new company cannot
issue shares at discount.
21. FORFEITURE OF SHARES
It means the cancellation of shares when a
shareholder fails to pay allotment money or call
money. The company has the power to cancel
the share after giving a 14 days registered
notice to the shareholder to pay the amount
with interest. Shares once forfeited becomes
the property of the company.