Basic Corporate Accounting Terms

Understanding Companies: A Comprehensive Guide to Share Capital & Investment

This course delves into the fundamental aspects of companies, providing a clear understanding of their structure, funding, and the world of share ownership. Learn the key elements necessary to navigate the stock market and make informed investment decisions.

What is a Company?
A company is a vital structure in the business world. This course explores its core characteristics and operational framework.

Sources of Funding: Liability & Capital

Companies rely on various sources to finance their operations. This section covers:

• Liability (Debt): Explore Loan Capital – how companies secure funds through borrowing.
• Own Capital: Understand the different forms of ownership and investment.

Share Capital: Ownership & Types

A cornerstone of company finance, share capital represents ownership in a company.

• Meaning of Share: A fundamental unit of ownership in a company.
• Types of Shares:
  • Preference Shares: Shares with specific rights and privileges.
    • Types of Preference Shares:
      • Cumulative Preference Share: Unpaid preference dividends accumulate and are paid out later.
      • Non-Cumulative Preference Share: Unpaid preference dividends are lost if not paid.
      • Participating Preference Share: Entitled to share in profits after other shareholders.
      • Non-Participating Preference Share: Do not participate in company profits beyond the preference dividend.
      • Convertible Preference Share: Can be converted into equity shares.
      • Non-Convertible Preference Share: Cannot be converted into equity shares.
      • Redeemable Preference Share: The company has the right to buy back the shares at a predetermined price.
      • Irredeemable Preference Share: The company is not obligated to buy back the shares.
  • Equity Shares: The most common type of share, representing basic ownership.
    • Classification of Equity Shares: Understand the different classifications and their implications.

Share Issuance & Rights

Learn about how companies raise capital by issuing shares:

• Public Subscription: The process of offering shares to the general public.
• Right Shares: Existing shareholders are offered the right to purchase additional shares.
• Bonus Shares: Issued to existing shareholders free of charge, typically based on shareholding.
• Sweat Equity: Shares issued to employees for services beyond their regular employment contract.
• Procedure for Issue of Shares: A detailed overview of the steps involved in issuing shares to the public.
• Important Points Relating to Issue of Shares: Key considerations for companies issuing shares.

Debentures: Debt Instruments

• Meaning of Debenture: A type of long-term debt instrument issued by a company.
• Share vs. Debenture: Understand the key differences between shares and debentures.
• Priority of Payment: Learn about the order of payment to different creditors during company winding up.
• Legal Expenses & Liquidator's Remuneration: Costs associated with the liquidation process.
• Preference Creditor, Debenture Holder, Preference Shareholder, Equity Shareholder: Understanding the different levels of claim on company assets.

Share Capital Structure

• Stock: A general term for shares.
• Share Capital: The total value of shares issued by a company.
• Types/Kinds/Forms of Share Capital: Explore the various forms and classifications of share capital.
• Authorized Capital: The maximum amount of share capital a company is permitted to issue.
  • Issued Capital: The portion of authorized capital that has been issued to shareholders.
  • Unissued Capital: The portion of authorized capital that has not yet been issued.
  • Subscribed Capital: The amount of capital that shareholders have agreed to subscribe to.
  • Unsubscribed Capital: The portion of the subscribed capital that has not been subscribed.
  • Called Up Capital: The portion of the subscribed capital that the company has demanded from shareholders.
  • Uncalled Up Capital: The portion of the subscribed capital that the company has not yet called up from shareholders.
  • Paid Up Capital: The amount of capital that shareholders have paid to the company.
  • Unpaid Capital: The portion of the called-up capital that has not yet been paid.
  • Reserve Capital: Capital set aside for future needs.
  • Unreserve Capital: Capital available for use.
• Issue Price: The price at which shares are offered to the public.
• Issue of Share for Cash: Shares offered in exchange