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Accounting For Share Capital
Page 2


Accounting For Share Capital
Meaning and Definition of A Company
?
According to Section 2(20) of the Companies Act 
2013:
“Company” means a company incorporated under the 
Act (of 2013) or under any previous company law.
?
According to Chief Justice Marshal (USA):
“A company is a person artificial, intangible and existing 
only in the eyes of law. Being a creature of law, it 
possesses only those properties which the charter of its 
creation confers on it either expressly or incidental to its 
very existence. It has no physical existence but exists 
only in contemplation of law.”
Page 3


Accounting For Share Capital
Meaning and Definition of A Company
?
According to Section 2(20) of the Companies Act 
2013:
“Company” means a company incorporated under the 
Act (of 2013) or under any previous company law.
?
According to Chief Justice Marshal (USA):
“A company is a person artificial, intangible and existing 
only in the eyes of law. Being a creature of law, it 
possesses only those properties which the charter of its 
creation confers on it either expressly or incidental to its 
very existence. It has no physical existence but exists 
only in contemplation of law.”
Kinds of Companies
?
Company limited by guarantee [Section 2(21)]
?
Company limited by shares [Section 2(21)]
?
Unlimited Company [Section 2(92)]
?
Private Company [Section 2(68)]
?
Public Company [Section 2(71)]
?
Government Company
?
Foreign Company
?
Companies with Charitable objects
?
One person company (OPC)
?
Holding and Subsidiary Company
?
Statutory Companies
Page 4


Accounting For Share Capital
Meaning and Definition of A Company
?
According to Section 2(20) of the Companies Act 
2013:
“Company” means a company incorporated under the 
Act (of 2013) or under any previous company law.
?
According to Chief Justice Marshal (USA):
“A company is a person artificial, intangible and existing 
only in the eyes of law. Being a creature of law, it 
possesses only those properties which the charter of its 
creation confers on it either expressly or incidental to its 
very existence. It has no physical existence but exists 
only in contemplation of law.”
Kinds of Companies
?
Company limited by guarantee [Section 2(21)]
?
Company limited by shares [Section 2(21)]
?
Unlimited Company [Section 2(92)]
?
Private Company [Section 2(68)]
?
Public Company [Section 2(71)]
?
Government Company
?
Foreign Company
?
Companies with Charitable objects
?
One person company (OPC)
?
Holding and Subsidiary Company
?
Statutory Companies
Shares – Meaning and Types
?
What is a share?
?
Capital of a company is divided into units or 
parts of equal amount. Every unit/part is 
called a share. 
?
According to Section 2(84) of the Companies 
Act, a ‘share’ means a share in the share 
capital of a company and includes stock.
?
It is an ownership security.
Page 5


Accounting For Share Capital
Meaning and Definition of A Company
?
According to Section 2(20) of the Companies Act 
2013:
“Company” means a company incorporated under the 
Act (of 2013) or under any previous company law.
?
According to Chief Justice Marshal (USA):
“A company is a person artificial, intangible and existing 
only in the eyes of law. Being a creature of law, it 
possesses only those properties which the charter of its 
creation confers on it either expressly or incidental to its 
very existence. It has no physical existence but exists 
only in contemplation of law.”
Kinds of Companies
?
Company limited by guarantee [Section 2(21)]
?
Company limited by shares [Section 2(21)]
?
Unlimited Company [Section 2(92)]
?
Private Company [Section 2(68)]
?
Public Company [Section 2(71)]
?
Government Company
?
Foreign Company
?
Companies with Charitable objects
?
One person company (OPC)
?
Holding and Subsidiary Company
?
Statutory Companies
Shares – Meaning and Types
?
What is a share?
?
Capital of a company is divided into units or 
parts of equal amount. Every unit/part is 
called a share. 
?
According to Section 2(84) of the Companies 
Act, a ‘share’ means a share in the share 
capital of a company and includes stock.
?
It is an ownership security.
Types of Shares
?
Preference Shares
?
Equity Shares:
a. Equity shares issued by a Company limited by 
shares to public or its members [Section 43]
b. Sweat Equity Shares [Section 2(68)]
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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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