It is very important to classify the share capital of any company into various kinds at the time of displaying it within the financial statements. This article will cover the various types of this and their modes for the presentation of those share capitals on the financial statements. There are mainly four basic types of share capital. These are:
- Authorized Share Capital
- Issued Share Capital
- Subscribed Share Capital
- Paid-Up Share Capital
Authorized Share Capital
The other name for the authorized capital is called the nominal capital. As mentioned in the Memorandum of Association, MOA, the authorized capital is the amount of the share capital which can be raised by the company at any time through the issuing of the new shares. A company has been limited up to the authorized capital and it cannot issue shares beyond that value. If any company wants to issue the shares surpassing the limit of the authorized share, it must amend the memorandum. This amendment can be done through a resolution that has been passed during a general meeting comprising of the shareholders. After the amendment of the memorandum, the limit of the authorized capital with increase and thus, the company can raise more money through the sale of their shares. To know more about the increment of the authorized capital, please click here.
Issued Share Capital
The Issued Capital is that type of share capital that has been issued by the company often times. As mentioned in the memorandum, the issued capital must be within the limits of the authorized capital. It can never surpass the limits of the authorized capital. The other name for issued capital is known as called-up capital.
Subscribed Share Capital
There is an increment in the subscribed capital when the members get subscribed to the shares which belong to the company. It is important to note that the subscribed share capital has to be equal to or less than the total issued share capital. On the contrary, the capital that has not been allocated out of the subscribed share capital is called the unsubscribed share capital.
Paid Up Share Capital
Paid up share capital if the total sum of money that has been received for the issued shares from the shareholders. Therefore, the capital which has been allotted and paid by the shareholders of the company is called paid up capital. This depicts the quantity that has been received by the company in either cash or kind from the members of the shares that have been subscribed by them. The portion of the subscribed capital which is saved to be paid later is technically called “Calls in Arrears” or simply “unpaid share capital”. Hence, the paid up share capital is displayed after subtracting from the unpaid share capital or the subscribed capital.
Presenting Share Capital on Financial Statements
During the presentation of the share capital of any company on the financial statements, the following information given below must be presented:
- The number and the amount of the shares that are authorized.
- The number of shares issued or subscribed to and fully paid or subscribed to but not paid in whole.
- Par value of each share.
- A reconciliation of the total number of the shares which are outstanding at the start and at the end of the total reporting period.
- The rights, the preferences, and the restrictions connected to each class of the shares with the inclusion of the restrictions on the distribution of the dividends and the total repayment of capital.
- Shares belonging to each class in the company that has been held by its holding company or the ultimate holding company with the inclusion of the shares held by the subsidiaries or the associates of the holding company or the ultimate holding company in summation.
- Shares in the company that have been held by each of the stakeholder holding more than five percent of the total shares with a specification of the number of shares held.
- Shares that are reserved for the issue under choices and the contracts the commitments for the sale of the shares or the disinvestment with the inclusion of the terms and amounts.
- Terms of any of the securities convertible into the equity or the preference shares that has been issued along with the earliest conversation date in the descending order beginning from the farthest date.
- Calls that are unpaid by the directors and the officers.
- Forfeited shares which are showing originally paid up shares.
It is important to learn about the various types of share capital in order to know about the condition of the company and work accordingly.
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