Accounting For Share Capital

What is Share Capital?

The Share Capital is the total sum of money received by an enterprise after selling its shares to the investors. It comprises of all funds raised by a company in exchange for shares of either preferred or common shares of stock. The amount of share capital or equity financing a firm can differ over time. A company that desires to increase the equity, can acquire authorization to issue and sell additional shares, hereby raising its share capital.

What is a Company?

A company is an artificial entity that is created by the law with the presence that is independent from its owners. To put it in other words, a company is an artificial person created by law, with a different name, a common seal and a constant continuation of members.

A company normally increases its capital in the term of debentures (debt capital) and shares (called share capital).

A firm is a form of establishment is the 3rd level in the development of forms of establishment. Its capital is contributed by a huge number of people known as shareholders who are the actual owners of the firm. Neither it is feasible for them to be a part in the company’s management nor contemplated desirable. Hence, they select a Board of Directors (BoD) as their representative to regulate the matter of business concern of the company.

All the matter of business concern of the company are regulated by the provisions of the Companies Act, 2013. A company is a company integrated or certified under the Companies Act, 2013 or below any other previous Companies Acts. In accordance with the Chief Justice Marshall, ‘A company is a person, artificial, invisible, intangible and existing in the eyes of law. Being a minor creation of law, it has only those properties which the treaty of its creation delibrates upon it, either expressly or as incidental to its very existence’.

The above mentioned is the concept that is explained in detail about Accounting for Share Capital for the class 12 Commerce students. To know more, stay tuned to BYJU’S.