Written on Mar, 21, 2012 by in | Leave a comment

A company is an association of persons who contribute money or money’s worth to a common stock and use it for a common purpose.  It is a legal person created by law and governed by that particular law. Thus, a company is considered  as legal entity. A company is a business organization and is an association of individuals or other …

Written on Mar, 18, 2012 by in | 1 Comment.

Any interest payable or receivable at the time of preparation of balance sheet is known as accrued interest. For example when a business firm accepts any loan from outsiders, in that case it is the duty of the firm to pay the interest on loan to the lender as per the terms of the loan agreement. But it is always …

Written on Mar, 18, 2012 by in | 1 Comment.

When any amount is kept separate by a company out of its profit for future purpose then that is called as general reserves. In other words the general reserves are the retained earnings of a company which are kept aside out of company’s profits to meet future (known or unknown) obligations. General reserves are the part of Profit and Loss …

Written on Mar, 11, 2012 by in | Leave a comment

A sinking fund is fund which is created for a specific purpose.  The sinking fund is created for following purposes:- To redeem or repay long term liabilities.  For example:- debentures, long term loans etc. To replace a wasting assets. For example:- mines etc. To replace an assets of depreciable nature. For example fixed assets. REDEMPTION OF DEBENTURES OR OTHER LONG …

Written on Mar, 11, 2012 by in | Leave a comment

When the shares are issued at a price more than their face value or nominal value,  is said that the shares have been issued at a premium. The Company Act 1956 does not place any restriction on issue of shares at a premium but the amount received, as premium has to be placed in a separate account called Shares Premium …

Written on Mar, 10, 2012 by in | Leave a comment

Whenever a company redeems its preference shares then the nominal value or face value of the shares is put into capital redemption reserve fund. There after this fund becomes the part of the paid capital of the company. Capital Redemption Revere is also created when a company buys it owns shares which reduces its share capital. Suppose, the fresh equity …

Written on Mar, 10, 2012 by in | 236 Comments.

From accounting point of view provision means when a certain amount is kept separate for a particular purpose at a particular point of time, normally, at the time of preparation of final accounts. Provisions relate to expenditures only and are the part of profit and loss account. If the provision are not made then the correct position of profit or …

Written on Mar, 04, 2012 by in | Leave a comment

Preference shares:– The law defines preference shares as those which have a preferential right:- as to payment of dividend at a fixed rate during the lifetime of company; and as to  return of capital on winding up of the company. It may be remembered that preferential shareholders have no voting rights except in certain circumstances as defined by the law. …

Written on Feb, 29, 2012 by in | Leave a comment

Share Capital of Limited Company:- When a fixed amount is divided into small units then we call it shares. When the money is received by company after selling the shares that is called share capital. It means public can make contribution to the common stock of company. In other words share capital refers to the amount that a company can …


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