Company Accounts

Features of A Company

1. Incorporated Association:
A company comes into existence through the operation of law. Therefore,
incorporation of company under the Companies Act is must. It is regarded
as an artificial legal person.

2. Separate Legal Entity:

A company has a separate legal entity and is not affected by changes in
its membership. Therefore, being a separate business entity, a company
can contract, sue and be sued in its incorporated name and capacity

3. Perpetual Existence:
Since company has existence independent of its members, it continues to
be in existence despite the death, insolvency or change of members.

4. Common Seal:
Company is not a natural person; therefore, it cannot sign the documents
in the manner as a natural person would do.
In order to enable the company to sign is documents, it is provided with
as legal tool called 'Common Seal.
Now the use of common seal has been made optional. All such documents
which required affixing the common seal may now instead be signed by
two directors or one director and a company secretary of the company

5. Limited Liability:
The liability of every shareholder of a company is limited to the amount
on the shares allotted to him.

6. Distinction between Ownership and Management:

The large number of shareholders and their far locations gives rise to the
need of separation of the management and ownership
7. Not a citizen:
A company has a legal existence but does not enjoy the citizenship rights
and duties are enjoyed by the natural citizens.

8. Transferability of Share:
The capital is contributed by the shareholder through the subscription of
shares. Such shares are transferrable by its members expect in case of a
private limited company, which may have certain restrictions on such
transferability.

9. Maintenance of Books:
A limited company is required by low to keep a prescribed set of account
books and any failure in this regard attracts penalties.

10. Periodic Audit:

A company has to get its accounts periodically audited through the
chartered accounts appointed for the purpose by the shareholders on the
red commendation of board of directors.

11. Right of Access to Information:

The shareholders have a right to seek information from the directors by
participating in the meetings of the company through the periodic reports

Types of Companies
1. Government Company
“Government company” means company in which not less than fifty- one
per cent of the paid-up share capital is held by the Central Government
and partly by one or more state Governments and includes a company
which is a subsidiary company of such a government company.

2. Foreign Company
Foreign company” means any company or body corporate incorporated
outside India which-
a) Has a place of business in India whether by itself or through an agent
physically or through electronic mode; and
b) Conducts any business in India in any other manner.
3. Private Company
‘Private company’ is a company which by it articles, Restrict the right to
transfer its shares and issues shares by private placement

4. Public Company
A company which is not a private company (including any company which
is a subsidiary of a public company)
A company which is a listed public company if gets unlisted continues to
be a public company

No Minimum Paid-up Share Capital:

The minimum paid-up share capital requirement of INR 1,00,000 (in case
of a private company) and INR 5,00,000 (in case of a public company) has
been done away with under Companies Act, 2013.

5. One Person Company

“One Person Company” is a company which has only one person as a
member.

6. Small Company

“Small company” means a company, other than a public company

I.Paid-up share capital of which does not exceed fifty lakh rupees

II.Turnover of which as per its last profit and loss account does not
exceed two crore rupees

Note: The status of a company as a Small Company may change from

year to year.

7. Listed Company

''listed company” means a company which has any of its securities listed
on any recognized stock exchange.

8. Unlimited Company

''Unlimited company” means a company not having any limit on the

liability of its members.
9. Company limited by Shares
“Company limited by shares” means a company having the liability of
its members limited by the memorandum to the amount, if any, unpaid
on the shares respectively held by them.

10. Company limited by Guarantee

“company limited by guarantee” means a company having the liability of

its members limited by the memorandum to such amount as the
members may undertake to contribute to the assets of the company in
the event of its being wound up.

11. Holding Company

“Holding company”, in relation to one or more other companies, means a

company of which controls subsidiary companies.

12. Subsidiary Company

“subsidiary company” is a company in which the holding company:

i.Controls the composition of the Board of Directors; or

ii.Exercises or controls more than one-half of the total share capital either
at its own or together with one or more of its subsidiary companies.

Maintenance of Books of Account

Every company shall prepare and keep at its registered office:
1. Books of account
2. Other relevant books and papers and financial statement

For every financial year which give a true and fair view of the state of the
affairs of the company, including that of its branch office or offices, if any,
and explain the transactions affected both at the registered office and its
branches.
(The company may keep such books in electronic mode)
Preparation of Financial Statements
statements shall give a true and fair view of the state of affairs of the
company or companies, comply with the notified accounting standards
and shall be in the form or forms as may be provided for different class or
classes of companies, as prescribed in Schedule III.

The Board of Directors of the company shall lay financial statements at

every annual general meeting of a company.

Financial Statements as per Section 2(40) of the Companies

Act, 2013, inter-alia include -
I. A balance sheets

II. A profit and loss account, or in the case of a company carrying on

any activity not for profit, an income and expenditure account;

III. Cash flow statement;

IV. A statement of changes in equity, if applicable;

(In case of One Person Company, small company and dormant

company, Financial statements may not include the cash flow
statement.)

Provisions Applicable
(1) Specific Acts is Applicable
For instance, any
a) Insurance company
b) Banking company
c) Any company engaged in generation or supply of electricity or
d) Any other class of company for which a form of balance sheet or profit
and loss account has been prescribed under the Act governing such
class of company
(2) In case of all other companies:

Balance Sheet as per Form set out in Part I of Schedule III and
Statement of Profit and Loss as per Part II of Schedule III:

Compliance with Accounting Standards

It is mandatory to comply with accounting standards notified by the
Central Government from time to time.

AUTHOR: CA ROCHELLE D’sa