Company Final Accounts
Let’s learn about Company Final Accounts.
A company is a voluntary association of person formed for the purpose of doing some business. A company can be defined as an “artificial person”, invisible, intangible, created by or under Law, with a discrete legal entity, perpetual succession and a common seal. It is not affected by the death, insanity or insolvency of an individual member.
Characteristics of Company
A company as an entity has several distinct features which together make it a unique organization. The following are the basic characteristics of a company.
- Separate Legal Entity
- Limited Liability
- Perpetual succession
- Separate Property
- Transferability of Shares
- Common Seal
- Capacity to sue and being sued
- Separate Management
- One Shares-One Vote
Classification of company on the basis of liability
1. Unlimited companies: In an unlimited company liability of its members is unlimited. The members of such a company are liable to the full extent of their fortunes to meet the obligation of the company by contributing to its assets in the event of its being wound up.
2. Company limited by Shares: A company limited by shares is the type of company used for forming a small business. These limited companies will have limited liability – if the company fails there is no claim on the assets of the shareholders (beyond their original investment). No member of company limited by the shares can be called upon to pay more than the face value of shares or so much of it as is remaining unpaid.
3. Company Limited by guarantee: A company limited by guarantee is a registered company having the liability of its members limited by its memorandum of association to such amount as the members may respectively thereby undertake to pay if necessary on liquidation of the company.
Classification on the basis of number of members
1. Private Company:
A company is registered with minimum two members and is required to added words “Private Limited as a part of its name unless is has unlimited liability. It must have a minimum paid up capital of Rupees one lakh or such higher capital as may be prescribed
A private company should have the following:
- Company should be incorporated as a private company and must have minimum paid-up capital of Rs. 1,00,000.
- The No. of members should be not less than 2.
- The maximum no of member should not exceed 50
- There is complete restriction on the transferability of the shares
2. Public Company:
A public company is a limited liability company that offers its securities (stock/shares, bonds/loans, etc.) for sale to the general public, typically through a stock exchange, or through market makers operating in over the counter markets. Public companies, including public limited companies, can be either unlisted or listed on a stock exchange depending on their size and local legislation.
A public company should have the following:
- Public company should have a minimum paid-up capital of Rs. 5,00,000
- A public company should have minimum 7 members
- No restriction of maximum no of shares
- No restriction on transferability of shares
