1. Meaning of Company
A company is an incorporated association which is an artificial person created by law, having separate legal entity, with a perpetual succession and a common seal.
2. Features of a Company:
Incorporated Association
Separate Legal Entity
Limited Liability
Perpetual Succession
Common Seal
Transferability of Shares
May Sue or be sued.
Management and Ownership is separate.
3. Kinds of Company:
I. Unlimited Company
II. Company Limited by Guarantee
III. Company Limited by Shares
a) Private Company: According to Section 2 (68) of the
Company Act 2013, it is a company:
i. That restricts rights to transfer shares.
ii. Has a minimum paid up capital as prescribed in
Articles of Association.
iii. Min members 2; Max members 200
iv. Name of Company end with Pvt. Ltd.
b) Public Company: According to Section 2(71) of the
Company Act 2013, it is a company:
i. Which is neither private limited nor a subsidiary of
private limited company.
ii. Has minimum capital as prescribed in Articles of
Association.
iii. Min 7 members
c) One Person Company: As per Section 2(62) of the
Company act 2013, it is a company that has only one
member.
4. Incorporation of Company:
Stage 1: Promotion
Stage 2: Incorporation or Registration
Stage 3: Capital Subscription and Commencement of Business
5. Meaning of Share:
Share is the unit in which capital of company is divided.
6. Classes of Shares:
Preference Shares
Equity Shares
7. Types of Preference Shares:
8.Share Capital
I. Authorised Capital: Authorised Capital refers to capital authorised by Memorandum of Association. It is the maximum capital that a company can raise during its lifetime.
II. Issued Capital: Issued Capital is that part of authorised capital which is offered to public for subscription.
III. Subscribed Capital
(i). Subscribed and Fully Paid-Up: When entire value has been called and paid by the public, is called Subscribed and Fully Paid up.
(ii). Subscribed but not Fully Paid-Up: Shares are said to be Subscribed but not fully paid up when:
(a) When entire nominal value has not been called or
(b) When entire value is called but not paid up.
IV. Called-Up Capital: It is that part of Subscribed Capital that has been called for payment.
V. Paid-Up Capital: It is the amount received against the calls made by company.
VI. Reserve Capital: It is that portion of subscribed capital, which is remaining uncalled, would not be called except in the event of winding up of the company. Reserve Capital is passed through a resolution, these are shown as Subscribed but not fully paid-up shares
9. Issue of Share of Cash
A. At Par: Journal entries: Shares issued at par
On Receipt of Application Money:
Bank A/c Dr
To Share Application A/c
(Application money received on ……. Shares at the rate ₹
……. Each)
On Acceptance of Applications:
Share Application A/c Dr
To Share Capital A/c
(Application money transferred to share capital account)
On Allotment made-due
Share Allotment A/c Dr
To Share Capital A/c
(Share Allotment made due on …. Shares at the rate ₹ ….
Each)
On Receipt of Allotment Money
Bank A/c Dr
To Share Allotment A/c
(Share allotment money received)
On First Call made due
Share First Call A/c Dr
To Share Capital A/c
(Share first call made, due on …. Shares at the rate ₹ ….Each)
On Receipt of First Call Money:
Bank A/c Dr
To Share First and Final Call A/c
(Share first call money received)