WHAT IS COMPANY ACCOUNTS BASIC CONCEPT (ACCOUNTING FOR SHARE)

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WHAT IS COMPANY ACCOUNTS BASIC CONCEPT (ACCOUNTING FOR SHARE)

If a business is started as a business under such conditions company accounts need to be maintained.

 

What is a company?

Definition :

“A company is an artificial person created by law having separate legal entity with a perpetual succession and common seal.” 

A separate legal entity means it has a separate legal identity that follows certain laws prescribed by the government of India.

Artificial person means non leaving body.

perpetual succession means members can come and can go.

the common seal means decision and sign by its members on the company seal.

it means some person wants to start a business if they don’t want to star as a partnership the second option is to start a business like a company. which can be xyz company.

if A,B,C start a business and invested Rs 100,000 ,Rs 120,000, Rs 200000

hence there liability to the company is the money they invested in the business.

Therefore liability of A, B,C has liability is whatever money they invested in a business which is known as share capital.

Now A,B, C are known as Share holders or members..

 

Features of Company

Incorporation :

Registration of Company

for example in India Company act 1956 should be followed to legally form a company. We also have the company act 2013 also.

Separate Legal Entity

It is known by its name. It means it the company damages something the company is responsible not its shareholders.

 

Perpetual Existence.

It means has nothing to do with the entry or exit of its members or shareholder in the company.it keeps on going and working.

Limited Liability

it means the liabilities of the members are limited to the share capital (money they invested in the company). It means A, B, C’s liability to the company is only to the extend of money they invested in the business.

Whereas in Partnership and Sole partnership the liability of the person is not limited.

Transferability of shares

Shares are documented which contains the company name, seal, and name of the shareholders. They are made to raise share capital and if a person purchased them they have proof of holding shares.

Transferability of shares

if its a public company shares can be transferred but in the case of a private company shares cannot be transferred.

Common seal

The company has a seal where can, Shareholders, Directors, managers can sign and take decisions.

Difference between partnership and company

  • It is not mandatory to register under the partnership act whereas in the case of company registration of the company is mandatory.
  • The liability is of partnership is unlimited whereas the liability of the partner is limited.

Types of company

  • The company is of two types Private limited company and public limited company.
  • The members of a private limited company can be from 2 to 200 only and the share capital required in a private limited company is a minimum of Rs. 100000 whereas the members of a public limited company can trade their share publically. minimum members are 7.

Incorporation of company

  • A group of seven or more people can come together so as to form a public company whereas, only two are needed to form a private company. The following steps are involved in the incorporation of a company.
  • The first step in the incorporation of any company is to choose an appropriate name. A company is identified through the name it registers. The name of the company is stated in the memorandum of association of the company. The company’s name must end with ‘Limited’ if it’s a public company and ‘Private Limited’ if its a private company.
  • Preparation of Memorandum of Association and Articles of Association.
  • Printing, Signing and Stamping, Vetting of Memorandum and Articles

  • Power of Attorney

  • Other Documents to be Filed with the Registrar of Companies.
  • Payment of Registration Fees.
  • Certificate of Incorporation

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