ANSWER:

A company is a voluntary association of people who contribute money for a common purpose. A company is an artificial person and a separate legal entity. Let us now understand the basic concepts of company ACCOUNTS. The contribution of money by people forms the capital of the company and the contributors are its members. Hence, the capital of a company is known as share capital and the contributors as shareholders. Indian Companies Act, 2013 governs all companies and provides guidelines for them to adhere to.

Basic Concepts of Company Accounts

Meaning of Shares

Section 2(84) of the Companies Act, 2013 DEFINES share as a share in the share capital of a company and it includes STOCK. The share capital of a company is divided into units of smaller denominations. Each such unit is called a Share. It entitles the holder to ownership in the company.

Types of share capital

As per Section 43 of the Companies Act, 2013 Share Capital of a company can be of two types:

EQUITY Share Capital

Preference Share Capital