19-11-2012, 12:23 PM
Accounts of Limited Liability Company
Accounts of Limited Company-1.pptx (Size: 195.52 KB / Downloads: 25)
Limited liability company
A company can be defined as an artificial person, invisible, intangible created by or under law with a discrete legal entity, perpetual succession and a common seal. It is not affected by the death, insanity or insolvency of an individual member.
A company is called as a Limited-Liability company because the liability of its members is limited to the amount that they have agreed to contribute to the company by way of share capital.
Types of Share Capital
A company can issue two types of share capital: equity share capital and preference share capital.
Equity share capital is otherwise known as owner’s capital. It is the fraction of total owner’s capital. The capital invested by the owners in an organization. Equity share holders are the real owners of the organization.
Preference Share Capital
Preference share holders are having a preferential rights on profit. They have a right to be paid a fixed amount from the profit after paying to the outsiders.
On a winding up or repayment of capital, they have the right to be paid the amount of the capital paid and any fixed premium or premium on any fixed scale, as specified in the memorandum or articles of the company.
Types of Preference Share capital
Cumulative or non-cumulative: In case of Cumulative preference share, if there is no adequate profit in the company for a particular year. In case of non cumulative preference share, the unpaid dividend is not accumulated.
Redeemable preference share and irredeemable preference shares.
Convertible and non-convertible preference stock.
Debentures
Companies borrow from the financial market by issuing debentures. A debenture is a document, which either creates a debt or acknowledges the same under the seal of the company.
Thus debentures holders are creditors of the company. Interest on debentures are the charge against the profit.
The company issues the certificate to the debenture holders which is an acknowledgement of debt.
Shareholders and Debenture holders
A share holder is a member of the company and has a ownership rights, where as a debenture holder is simply a creditor of the company.
A debenture holder is entitled to a fixed rate of interest where as share holders get the dividend.
Debenture holders are paid back within a specified period mentioned but share holders are not paid back.
The interest is paid first to the debenture holders but dividend paid after the interest paid.
Issued, Subscribed and Paid up capital
Issued capital represents the capital that is offered to the public for subscription.
Subscribed capital is that part of the issued capital, which has been subscribed by the public.
Called-up capital is that part of the subscribed capital, which has been called for payment.
Paid up capital is that part of the called up capital, which has been actually paid by the share holders.