Class 12 Accounting for Company and Share notes

 Company and Share.... Short & Easy Notes for Board Exam

#1. What do you mean by Company?

=> A company is an artificial person created by law. Having a capital divided into transferable shares.

Following are its features

i. It is Association of person.

ii. Created by law.

iii. It has a separate legal entity.

iv. It has Limited liabilities.

v. It cannot be affected by death by its member.

vi. The share of the company are freely Transferable.

vii. It is managed by vote of director.

#2. Difference between private company and public company.

=> Private company;

i. The minimum number of members is 2 and maximum number is 200.

ii. Cannot invite public to purchase its share and debenture.

iii. Restriction of transfer of share.

iv. It cannot issue prospectus.

v. 'Private Limited' must be used after his name.

vi. It cannot invite public for deposit.

Public company;

i. The minimum number of members is 7 and there is no limit to maximum.

ii. Public invitation is mandatory.

iii. There is no restriction of transfer of share.

iv. It can issue prospectus.

v. Only 'limited' is used after his name.

vi. It can invite public for deposit.

#3. What do you mean by memorandum of association?

=> It is the fundamental document of a company. It defines the relationship of the company with the out sided world. 

It is divided into 6 clause;

1. Name clause.

2. Place clause or situation clause.

3. Object clause.

4. Liability clause.

5. Capital clause.

6. Association clause.

#4. What do you mean by prospectus?

=> Prospectus is the basis of agreement between the company and shareholder. It is a return document issued by the company for the future share-holder. Its main objective is to provide information regarding company.

It contain following information;

1. Name of the company.

2. Name of the director.

3. Name of the auditor.

4. Number of share and debenture.

5. Types of share and debenture.

6. Amount of capital.

7. Estimated amount of profit.

8. Objective of the company. etc.

#5. What do you mean by share?

=> The capital of a company is divided into unit of a small denomination. Each unit is called share. 

There are two types of share;

1. Preference share.

2. Equity share.

#6. What do you mean by one person company (OPC)?

=>One person company is a company which have only one person as a member. It is an incorporated as a private company.

Following are its main features

1. Maximum paid up capital at 50 lakh.

2. At least 1 and maximum 15 director.

3. Only a natural person.

4. Annual turnover should not be exceed 2 crore.

5. All provisions applicable on private company shall be apply.

#7. What do you mean by authorized capital?

=> Authorised capital is the maximum amount of capital mention in memorandum of association. It is also known as registered capital or nominal capital. Authorised capital can be increase or decrease by the prescribed procedure.

#8. Difference between Reserve capital and Capital Reserve?

=> Reserve capital;

1. It is a part of un-called-up capital.

2. It is a portion of capital.

3. It is not shown in the balance sheet.

4. It is used at the time of liquidation.

5. It is not mandatory.

6. it creation required special resolution. 

Capital Reserve;

1. It is the amount which are generated out of Capital Reserve.

2. It is a portion of profit.

3. It is shown in the liability side of the balance sheet.

4. It is used for writing off of capital loss.

5. It is mandatory.

6. It does not require special resolution.

#9. Difference between preference share and equity share.

=> Preference share;

1. It has preferential right to get dividend.

2. The ratio of dividend is fixed.

3. Preference share holder have no voting right.

4. Cannot participate in management.

5. Accrual of dividend are accumulated.

Equity share

1. Dividend are paid in case of profit only.

2. Dividend is not fixed.

3. Equity share-holder has voting right.

4. Can participate in management.

5. Accrual of dividend doesn't arise.

#10. What do you mean by sweat equity share?

=> It is those share which are issued by the company. Its employee or director for their service it is issued at discount. 

Following are the conditions;  

1. It is issued by a special resolution.

2. It is issued not less than one year on the date of commitment.

3. It is issued with the guideline issued by SEBI.

#11. What do you mean by preliminary expenses?

=>It is those expense which are incurred in connection with the formation or information of company, including the following expense;

1. Registration fee and stamp duty.

2. Cost of prospectus.

3. Underwriting Commission.

4. Advertisement expense.

5. Cost of sale and other documents

#12. What do you mean by IPO Initial Public Offer?

=> Inviting the public to purchase the share for the first time is known as IPO. Such issue is also called public issue share. The share may be issued at a par, at a premium, at a discount.

#13. What do you mean by over subscription?

=> When the application money is received for more number of share than the number of share offered to the public by the company, it is called over subscription. When the share over subscribed, the company can't satisfy all the application.

#14. What do you mean by calls in arrears?

=> If any share-holder fail to pay amount due on any call, the amount not so receive is called calls in arrears. The amount of calls in areas is detected on the liability side of the balance sheet. Company charge interest @ 10% per annum on calls in arrears.

#15. What do you mean by calls in advance?

=> Calls in advance paid by the shareholder before the amount due. Calls in advance is liabilities, a company shown on the liabilities side of the balance sheet. Company allowed 12% interest on calls in advance.

#16. What do you mean by share or security premium according to objective Section 52? Its utility?

=> Whenever shares issued at a price which above its face value is known as share issued at a premium, the amount of excess on share premium. It is shown in the liabilities side of the balance sheet. It is capital receipt.

It can be following purpose;

1. To issue bonus share.

2. Writing and discount.

3. To writing off preliminary expenses.

4. To purchase on share.

5. To redemption of preference share at premium.

#17. What do you mean by share issued at a discount?

=> According to objective section 53, when share are issued at a price less than face value it is called share issued at a discount.

Only sweat equity share can be issued by company at a discount. Discount on issued share capital loss it is shown in liability side of the balance sheet and all native item.

#18. What do you mean by employee stock option plant?

=> It is a plant issued by company for the director official and the employees of the company to get the right to purchase security of the company at lower price than the market price.

#19. What do you mean by Forfeited shares?

=> forfeited of share means, compulsory termination membership when share of shareholder are forfeited and share capital account is debited.

Company forfeited his share when shareholder are not ready to pay the due amount after a certain period. Resolution forfeited share must be pay the board of director. Forfeited share resold at a discount to the extent of amount forfeited.

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