What is Share Capital Account?
A company, is an artificial person, which cannot create its own capital which has certainly to be composed and collected from several people. These people are called as shareholders and the amount contributed by those shareholders is known as share capital.
Since the number of members is large, a separate capital a/c cannot be opened for each one of members. Therefore, numerous parts of capital contribution amalgamate their integrities in a common capital a/c known as ‘Share Capital Account’.
What is Breaking down Share Capital?
Along with share capital, the particular amount a company accounts on its balance sheet (BS), only accounts for the total amount paid by the members. If those shareholders resell their shares later on the secondary market, any distinction between the subsequent and initial cost prices does not affect the enterprise’s share capital.
How is Share Capital important in Accounting?
The accounting definition of share capital is, the par value of all equity bonds – either preferred or common stock – sold to the members. However, often comprise the cost price of the stock above the par value in the computation of share capital. The par value of stock is normally ₹ 1 or less, so the distinction between the par and sale cost price of stock, known as the share premium, may be noticeable, but it is not incorporated in share capital or clinched by accredited capital limits.
The above mentioned is the concept that is explained in detail about Share Capital of a Company for the class 12 Commerce students. To know more, stay tuned to BYJU’S.