Accounting For Share Capital
by Yuvi K - October 25, 2023
What is Share Capital?
Share capital (शेयर कैपिटल) or equity capital is money received by a company from the sale of its shares. When a company issues (जारी) its new shares, it receives the money from people or entities who buy them. The money received from the sale of these shares is known as share capital.
Accounting for Share Capital
Accounting for share capital is the process of recording (रेकॉर्ड करना) investments made by investors for purchasing shares of a company. It involves tracking and recording the issuance (जारी) of new shares, transfers of existing shares, and any other changes made to the capital structure (प्रतिपत्ति की संरचना). This process is important to understand the sources of capital for a company and make decisions to manage a company’s financial situation.
Basic Steps Involved in Accounting for Share Capital
The basic steps involved in accounting for share capital are as follows (निम्नलिखित में):
- Initial capital issued (प्रारंभिक राशि जारी): The first step is to record the initial amount of share capital that a company issues when it starts operations. This is usually the total amount that was received from the sale of the shares to investors.
- Debit and credit accounting entries: Accounting entries should be made in the company’s books whenever there is an addition or subtraction in the share capital. In a double-entry accounting system, it is necessary to make two entries for every change. Generally, the shares account is credited when new shares are issued and debited when shares are cancelled or repurchased by the company.
- Accounting for transfers of old shares: Whenever shares are transferred from one shareholder to another, accounting entries need to be made so that the company can keep track of its financial position. Companies will generally debit or credit the paid-in capital account when shares are transferred and also update the register of shareholders, if applicable.
Conclusion
Accounting for share capital is an important process in any business that is involved in issuing and selling shares. It helps a company to understand the sources of its financing and make decisions to manage its financial situation. It is important to make sure that all relevant accounting entries are recorded and updated so that the company’s books of accounts remain accurate and up-to-date.
