Company Accounts – I | Company Accounts – II | PAPER III – ACCOUNTING & FINANCIAL MANAGEMENT FOR BANKERS | MODULE B: FINANCIAL STATEMENTS AND CORE BANKING SYSTEMS

Company Accounts – I & II

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Company Accounts – I

Definition and Types of Companies

A company is a legal entity formed under the Companies Act, having a distinct identity separate from its members. Types of companies include:

• Private Limited Company: Restricts the right to transfer shares and limits members to 200.
• Public Limited Company: Can raise capital from the public and has no upper limit on members.
• One Person Company: Single-member company under specific legal structure.

Distinction between Partnership and Limited Liability Company

Particulars	Partnership	Company
Legal Status	No separate legal entity	Separate legal entity
Liability	Unlimited	Limited
Registration	Optional	Mandatory
Transferability	Restricted	Freely transferable in public company

Classes of Share Capital

• Authorized Capital: Maximum amount company can raise via share issue.
• Issued Capital: Portion offered to investors.
• Subscribed Capital: Portion actually subscribed by public.
• Paid-up Capital: Actual payment received from shareholders.

Issue of Shares

Shares can be issued at:

• Par (Face Value)
• Premium (Above Face Value)
• Discount (Below Face Value, subject to legal restrictions)

Illustration:
A company issues 1,000 shares at a face value of ₹10 each at a premium of ₹2.
Journal Entry:
Bank A/c Dr. ₹12,000
    To Share Capital A/c ₹10,000
    To Securities Premium A/c ₹2,000

Non-voting Shares

Shares issued without voting rights to raise capital without diluting control of promoters. Common in preference shares.

Company Accounts – II

Form of Balance Sheet

Under Schedule III of Companies Act, 2013:

• Vertical Format is used.
• Main heads include: Equity & Liabilities, Assets.

Particulars	Example
Equity	Share capital, reserves
Liabilities	Borrowings, trade payables
Assets	Fixed assets, inventory, receivables

Impact of Ind AS on Financial Statements

Ind AS (Indian Accounting Standards) ensures transparency and comparability in financial statements.

• Fair Value Measurement: Assets/liabilities may be reported at fair value.
• Revenue Recognition: Based on performance obligation rather than invoice.
• Component Accounting: Assets broken into components with different useful lives.

Illustration:
A building purchased for ₹50 lakhs includes ₹10 lakhs machinery. Under Ind AS, building and machinery are separately depreciated.

MCQs on Company Accounts

1. Which of the following is a characteristic of a company?
   a) Unlimited liability
   b) No separate legal existence
   c) Transferability of shares
   d) No legal registration
   Answer: c) Transferability of shares
2. Which capital represents the total face value of shares a company is allowed to issue?
   a) Paid-up Capital
   b) Subscribed Capital
   c) Authorized Capital
   d) Issued Capital
   Answer: c) Authorized Capital
3. Ind AS requires which method for revenue recognition?
   a) On receipt of cash
   b) On raising invoice
   c) Based on performance obligations
   d) At year-end
   Answer: c) Based on performance obligations
4. What distinguishes a partnership from a company?
   a) Partnership has limited liability
   b) Company has no perpetual existence
   c) Company is a legal person
   d) Partnership has share capital
   Answer: c) Company is a legal person
5. Shares issued without voting rights are called:
   a) Debentures
   b) Non-voting shares
   c) Redeemable shares
   d) Equity shares
   Answer: b) Non-voting shares
6. Which component is included in 'Equity' on a balance sheet?
   a) Long-term loans
   b) Trade payables
   c) Share capital
   d) Fixed assets
   Answer: c) Share capital
7. A company issues shares at ₹10 face value with ₹3 premium. What is the journal entry for 500 shares?
   a) Bank A/c Dr. ₹6500
   b) Share Capital A/c Dr. ₹6500
   c) Bank A/c Dr. ₹5000
   d) Securities Premium A/c Dr. ₹1500
   Answer: a) Bank A/c Dr. ₹6500
8. Under which act is the format of balance sheet prescribed for companies?
   a) Partnership Act
   b) Banking Regulation Act
   c) Companies Act, 2013
   d) Income Tax Act
   Answer: c) Companies Act, 2013
9. What is the effect of component accounting under Ind AS?
   a) Single depreciation rate
   b) Ignoring individual parts
   c) Different depreciation for components
   d) No change
   Answer: c) Different depreciation for components
10. What is the minimum number of members required for a public company?
    a) 1
    b) 2
    c) 3
    d) 7
    Answer: d) 7