ACCOUNTS BY SONIA SETIA

 “Accounting is the art of recording, classifying, and summarizing in a significant manner in terms of money; transactions, and events, which are, in part at least, of a financial character, and interpreting the results thereof.” • -The American Institute of Certified Public Accountants Accounting records only those transactions and events that can be measured in terms of money. This involves identifying transactions that are part of economic activity. examples: Purchase of Raw Materials sale of finished goods payment of expenses purchase of land & building purchase of machinery These transactions are identified with the help of Bills and receipts as evidence of the transactions.  1. Identification of Financial Transactions and Events Accounting Measures the transactions and events in terms of a common measurement unit i.e., the currency of a country, in other words, financial transactions, and events are measured in terms of money. examples: rent paid Rs.500...

  ILLUSTRATIONS   FIRST CASE WHEN SUBSCRIBED SHARES ARE FULLY PAID-UP   Brave Ltd. is registered with capital of Rs.10,00,000 divided into 1,00,000 Equity Shares of 10 each. It issued 75,000 Equity Shares to the Public for subscription. It received applications for 70,000 Equity Shares. The Directors called Rs.10 per share which was received. How will Share Capital be shown in the Balance Sheet of Brave Ltd.?                            Brave Ltd .          BALANCE SHEET(EXTRACT) as at….   Particulars                                          Note no. Amou...

  RESERVE CAPITAL AND CAPITAL RESERVE Under the Companies Act 2013, there isn't a specific provision for "reserve capital" as was the case in earlier company law statutes. However, the concept of "capital reserve" is still recognized and regulated under the Companies Act 2013. Let's delve into both:   1. Reserve Capital:    - Reserve capital, as a term, was explicitly defined and regulated under earlier company law statutes, such as the Companies Act, 1956. It represented a portion of a company's authorized share capital that was kept aside and not available for distribution as dividends.    - Reserve capital was meant to provide a safeguard for the company's creditors in case of insolvency or liquidation.    - However, under the Companies Act 2013, the concept of reserve capital was not carried forward. Instead, the Act focuses more on the categorization and utilization of reserves, including capital reserves.   2. Capital Re...

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  “Called-up” and “Paid-up” Capitals Under the Companies Act 2013, "called-up capital" and "paid-up capital" are terms associated with a company's capital structure. Here's an elaboration on both:   1 . Called up Capital :    - Called-up capital refers to the portion of share capital that a company has called or demanded from shareholders.    - When a company issues shares, it may not require shareholders to pay the entire value immediately. Instead, it may ask them to pay in installments or on a specified schedule.    - Called-up capital represents the amount that the company has asked shareholders to pay at a particular point in time, whether in full or in part.   2 . Paid up Capital :    - Paid-up capital refers to the portion of called-up capital that shareholders have actually paid to the company.    - It represents the amount of money that shareholders have contributed to the company by purchasin...

  CALLS IN ARREAR Under the Companies Act 2013, "calls in arrears" refers to the unpaid portion of a call made by a company to its shareholders.   Here's a breakdown:     Call : A call is a demand for payment of a certain portion of the subscribed share capital of a company. It's a way for the company to collect funds from its shareholders to meet its financial needs.     Calls in Arrear : When shareholders fail to pay the call amount by the due date, the unpaid portion is termed "calls in arrear". This unpaid amount remains a liability on the shareholder until paid up.     Consequences : Companies typically have provisions to enforce payment of calls in arrears, which may include charging interest on the unpaid amount or even forfeiture of shares in extreme cases.     Disclosure : The company must disclose the details of calls in arrears in its financial statements, ensuring transparency regarding its financial obl...