This document provides information about company accounts and types of companies. It begins with definitions of a company and its key characteristics such as separate legal entity, perpetual succession, and limited liability. It then discusses various types of companies based on incorporation (chartered, statutory, registered), liability (limited by shares, unlimited), number of members (private, public), ownership and control (government, holding, subsidiary), and nationality (domestic, foreign). The document also describes the three levels of management in a company and different types of shares such as preference shares, equity shares, employee stock options, and their key characteristics.

1. ACCOUNTING
FOR
MANAGEMENT
UNIT-II
Semester: I
Course Code: BA5103
Dr.N.Ramesh Kumar

2. COMPANY ACCOUNTS
Meaning of Company -Maintenance of Books
of Account-Statutory Books- Profit or Loss
Prior to incorporation- Final Accounts of
Company- Alteration of share capital-
Preferential allotment, Employees stock option-
Buyback of securities.

3. Introduction
A company is an artificial person created by
law.
A company means a group of persons
associated together for the attainment of a
common end, social or economic goal.

4. Definition
Section 3(1)(i) of the Companies Act, 1956
defines a company as: “a company formed and
registered under this Act or an existing
Company”.
‘Existing Company’ means a company formed
and registered under any of the earlier Company
Laws.

5. Characteristics of a company
• Separate legal entity: an independent corporate
existence.
• Limited liability: limited by shares or a company
limited by guarantee
• Perpetual succession: The existence of company can be
terminated only by law.
• Common seal: The common seal acts as the official
signature of the company.
• Transferability of shares: These shares are, subject to
certain conditions, freely transferable
• Separate property: As a company is a legal person
distinct from its members

6. • An Association of Persons
• Incorporated Association
• Artificial Legal Person
• Distinct Legal Entity
• Perpetual Succession
• Limited Liability
• Transferability of Shares
• Diffused Ownership
• Separation of ownership
and management
• Common Seal
• Corporate Finance
• Object clause of Business
• Publication of Accounts
Features of Company as per Companies Act, 1956

7. TYPES OF COMPANIES
On the basis of Incorporation
Chartered
Companies
•Incorporated
under a special
royal charter
issued by the
king or head of
the state
•E.g. The East India
Company, Bank of
England, Hudson's Bay
Company
Statutory
Companies
•Established
by a Special
Act of the
Parliament to
State
Legislature
•May not use Ltd.
•E.g. RBI, IFCI, IDBI,
LIC etc.
Registered
Companies
•Formed and
registered under
the Indian
Companies Act,
1956
•E.g. Infosys, Wipro
etc.

8. On the basis of Liability
Limited by
Shares
• Liability of members
(share holders) is
limited to the extent
of face value of
shares held by them
Unlimited
Companies
•Liability of
members is
unlimited. They
have to pay the
liabilities of the
company from their
personal assets
Limited by
Guarantee
•Liability of
members is
limited to a fixed
amount which
they have
guaranteed on
Limited Companies Unlimited Companies
TYPES OF COMPANIES

9. On the basis of No. of Members
Private Companies
•Restricts the rights of the
members to transfer shares
•Limits the number of members to
200 (Act 2013) excluding past or
present employees of the
company
•Prohibits any invitation to the
public to subscribe for its shares,
debentures and public deposits
Public
Companies
•A public company is
one which is not a
private company
•To form a company at
least 7 members and there
is no limit
•Has to use the word
'Limited' at the end of its
name
Introduced in Act
2013
• One-Person-
Company
•Dormant
Company
TYPES OF COMPANIES

10. On the basis of Ownership and Control
Govt.
Companies
•Not less than 51%
of the share capital
of the company
owned by the Govt.
(Central/State/toge
ther)
Holding
Companies
• Owns more than
50% of nominal
value of equity share
capital of another
company or is
controlling the
composition of the
board of directors of
another company
•E.g. Tata Group
Subsidiary
Companies
•Controlled by a
holding company
since it owns less
than 50%
nominal value of
equity share
capital
•E.g. Reebok, Audi, TCS
TYPES OF COMPANIES

11. On the basis of Nationality
Domestic Companies
Is a company that
is incorporated in
the country(India)
Foreign Companies
The company which is
incorporated outside
India but has a place
of business in India
through its branches
or agencies is known
as foreign company
TYPES OF COMPANIES

12. It mainly consists of three levels of management.
They are as follows:
•Top level management
•Middle level management
•Lower level management

13. • Top-level management consists of boards of
directors, presidents, vice-presidents, CEOs, general
managers and senior managers, etc.
• They develop goals, strategic plans, and company
policies and make decisions about the direction of
the business.
• Top managers need to have more conceptual skill
than technical skill. They understand how
competition, world economies, politics, and social
trends affect organizational effectiveness.

14. Middle management is at the center of a
hierarchical organization, subordinate to the senior
management but above the lowest levels of
operational staff.
They are accountable to top management for their
department's function. They provide guidance to
lower-level managers and inspire them to perform
better.
indicators to upper management.

15. • Low-level managers focus on controlling
and directing. They serve as role models
for the employees they supervise.
• Assigning employees tasks.
• Guiding and supervising employees on day-
to-day activities.
• Ensuring the quality and quantity of
production.

16. A share is defined as, “a share in the share capital of the
company and includes stock”
•Share capital of the company is collected by issue of
shares.
•Share is one of the units into which total capital is
divided.
•The person who owns the share is called shareholder.

17.  Preference Shares
1. It offers a fixed rate of dividend.
2. Right to get capital on winding up, before anything is paid to
equity shareholders.
 Equity or Ordinary Share
1. These shares have voting rights.
2. It doesn’t offer a fixed rate of return.
3. They are not entitled to get capital on winding up, before
paying to preference shareholders.

18. 1. Cumulative Preference Shares
1. Fixed rate of dividend is guaranteed.
2. At the time of inadequate profit, they will not
loss anything.
3. Arrear will get in subsequent years.
2. Non-Cumulative Preference Shares
1. Fixed rate of dividend is guaranteed.
2. At the time of inadequate profit, they will not
get anything.

19.  Participating Preference Shares
 Fixed rate of dividend is guaranteed.
 Entitled to share the surplus profit.
 Non-Participating Preference Shares
 Fixed rate of dividend is guaranteed.
 Does not share the surplus profit.
 Shares are repayable only at winding up.

20.  Redeemable Preference Shares
 Shares which a company may repay after
a fixed period of time or earlier.
 Irredeemable Preference Shares
 It do not carry the arrangement for
redemption.

21.  Convertible Preference Shares
 It can be converted into Equity shares
within a certain period.
 Non-Convertible Preference Shares
 It cannot be converted into Equity
shares.

22. It is a share, which is not a preference
share is called equity share.
• The whole of the profit of a company is
entitled to these shareholders, after paying a
fixed dividend to preference shareholders.
• They doesn't get a fixed rate of dividend.
• They will get back their capital only after
paying preference share holders.

23.  It is issued to employees or directors of a company
at discounted rate.
 Issued for consideration other than cash.
It must follow these conditions;
1. Authorised by special resolution in general meeting.
2. Number, price, consideration (if any) and classes should
be specified in the resolution.
3. The company must complete one year.
4. Equity shares of those company must be listed in
recognised stock exchange.

24. Equity Shares Preference Shares
 Nominal value is lower.
 Dividend varies according to
profit.
 No right for arrears of
dividend.
 No priority in dividend and
repayment of capital.
 Cannot be redeemed.
 There is more risk.
 Wider voting right.
 Control over management.
 Highly speculative.
 Ready to take risk and to get
greater dividend prefer this.
 Nominal value is higher.
 Rate dividend is fixed.
 Cumulative preference shares
get arrears.
 Priority in dividend and
repayment of capital.
 Can be redeemed.
 The risk is lower.
 Limited voting right.
 No control over management.
 Less speculative.
 Not ready to take risk and
expect steady income prefer
this.