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FAQs on PPT - Accounting for Share Capital - Accountancy Class 12 - Commerce

1. What is share capital in accounting?
Ans. Share capital refers to the total value of shares issued by a company to its shareholders. It represents the ownership interest of the shareholders in the company and is recorded as a liability in the company's balance sheet.
2. How is share capital recorded in the accounting books?
Ans. Share capital is recorded in the accounting books by creating a separate account called "Share Capital" or "Shareholders' Equity." The total value of shares issued is credited to this account, and any subsequent transactions related to share capital, such as share issuances or buybacks, are also recorded in this account.
3. What are the types of share capital?
Ans. There are two main types of share capital: equity share capital and preference share capital. Equity share capital represents the ordinary shares issued by a company, which typically grants voting rights to the shareholders. Preference share capital, on the other hand, represents shares that have certain preferential rights, such as fixed dividend payments, but usually do not carry voting rights.
4. How is share capital different from retained earnings?
Ans. Share capital represents the initial investment made by shareholders in a company, whereas retained earnings refer to the accumulated profits of the company that are retained for future use. Share capital is a permanent source of funding for a company, while retained earnings are generated from the company's operations.
5. Can a company increase its share capital?
Ans. Yes, a company can increase its share capital through various methods, such as issuing new shares to existing shareholders or raising additional capital from external investors. This process is known as capital raising or capital infusion and is commonly done to fund expansion plans, repay debts, or strengthen the company's financial position.
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