Final Accounts of Companies &

Accounting for Shares

Subject Corporate Accounting

Dates @March 1, 2023 → March 3, 2023

Status Completed

Note Progress 10

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Created @March 1, 2023 5:36 AM

Contents Notes

Final Accounts of Companies & Accounting for Shares 1

 Contents Final accounts are those accounts that are prepared by a
Keywords joint stock company at the end of a fiscal year. The purpose
Notes of creating final accounts is to provide a clear picture of the
Objectives of Final financial position of the organization to its management,
Accounts
owners, or any other users of such accounting information.
Accounting for Shares
Issue of Shares The final account is legally required for the entities. The
Forfeiture of Shares financial accounting and preparation of Financial statements
Re-Issue of Shares are obligatory for the entities and getting those accounts
Price Band audited. Final accounts provide an accurate and fair view of
Stock Investment
the organization’s financial performance by providing full
Bonus & Right Issue
information regarding the business with proper notes and
ESOP
disclosures of real facts.
Buy-back of Shares

Keywords
Objectives of Final Accounts
1. They are prepared to calculate Gross profit and net
profit earned by the organization for the relevant period
joint stock by presenting the Statement of Profit & Loss.
company
2. They are prepared to provide the company’s correct
fiscal year financial position as of the date.
common & 3. They provide information about the financial position of
preferred shares the company to its management, investors, and other
private placement stakeholders.

outstanding
shares Accounting for Shares
rights associated
with the shares Issue of Shares
The issue of shares is the process by which a company sells
capital reserve
its shares to the public or a specific group of investors in
account
exchange for capital. This is typically done to raise funds for
legal & regulatory the company's operations or to finance new projects. The
requirements shares sold can be either common shares or preferred

Final Accounts of Companies & Accounting for Shares 2

 shareholder shares, and the price per share is determined by the
approval company based on market conditions and other factors.

securities laws When a company issues new shares, it can either do so

through a public offering or a private placement. In a public
fair market value
offering, the shares are sold to the general public through a
underwriters stock exchange, while in a private placement, the shares are
gauge investor sold to a specific group of investors, such as institutional
interest investors or high net worth individuals.

capital gains After the shares are issued, they become part of the
company's outstanding shares, which are the total number
dividends of shares that have been issued by the company and are
employee benefit held by investors. The outstanding shares determine the
plan ownership and control of the company, as shareholders
have the right to vote on important corporate decisions and
succession
receive a portion of the company's profits in the form of
planning
dividends.
stock repurchase

earnings per
Forfeiture of Shares
share Forfeiture of shares is a process through which a company
cancels the shares held by a shareholder who fails to pay
return on equity
the amount due on shares within a specified time frame. As
a result, the shareholder loses all rights associated with the
shares, and the company can either resell the forfeited
shares or cancel them. The amount previously paid by the
shareholder on the forfeited shares is usually transferred to
the capital reserve account of the company.

Re-Issue of Shares
A company may choose to re-issue shares for a variety of
reasons, such as to raise additional capital or to reward
shareholders. When re-issuing shares, the company must
follow the appropriate legal and regulatory requirements,
which may include obtaining shareholder approval, filing the
necessary paperwork with regulatory bodies, and complying
with any applicable securities laws. The company must also

Final Accounts of Companies & Accounting for Shares 3

 ensure that the shares are issued at a fair market value and
that the proceeds are used for a legitimate business
purpose.

Price Band
Price band refers to the range of prices at which shares of a
company can be offered to the public during an initial public
offering (IPO). The price band is typically set by the
company and its underwriters and is meant to gauge
investor interest in the shares. The final offer price is usually
determined by the demand for the shares within the price
band.

Stock Investment
Stock investment refers to the purchase of shares in a
publicly traded company with the expectation of earning a
return on the investment. The return can come in the form of
capital gains, which occur when the value of the stock
increases, or through dividends, which are payments made
by the company to its shareholders. Investors may also
engage in stock trading, buying and selling shares in an
effort to profit from short-term price movements.

Bonus & Right Issue

Bonus Issues and Rights Issues are two types of corporate
actions that can be taken by companies to raise capital.

A bonus issue is when a company decides to issue

additional shares to existing shareholders at no cost. These
shares are issued in proportion to the number of shares
already owned by the shareholder. The intention is to
increase the number of shares outstanding and reduce the
price per share, making the shares more affordable for
investors. Bonus issues are typically funded by a company's
reserves.

Final Accounts of Companies & Accounting for Shares 4

 A rights issue allows existing shareholders to buy new
shares in the company at a discounted price. The number of
new shares that can be purchased is proportionate to the
number of shares already owned by the shareholder. The
intention is to raise capital from existing shareholders rather
than seeking external funding sources. Rights issues can be
fully underwritten, meaning that if not all of the new shares
are taken up by existing shareholders, the underwriter will
purchase the remaining shares.

ESOP
Employee Stock Ownership Plans (ESOPs) are a type of
employee benefit plan that allow eligible employees to
acquire ownership in the company they work for. This can be
achieved through various methods, such as purchasing or
receiving shares of the company's stock. ESOPs have
become a popular tool for succession planning, as they
provide a way for owners to gradually transition ownership to
employees over time. In addition, ESOPs can be used to
motivate and retain employees, as they provide a sense of
ownership and stake in the company's success. This can
lead to increased employee satisfaction, loyalty, and
productivity. Furthermore, ESOPs can offer a tax-efficient
way for business owners to sell their stock, as the proceeds
from the sale of stock to the ESOP can be tax-deferred or
even tax-free if certain requirements are met. Overall,
ESOPs can be a valuable component of a company's overall
benefits package and succession plan.

Buy-back of Shares
When a company buys back its own shares, it is known as a
share buyback or a stock repurchase. This is typically done
when a company believes that its shares are undervalued or
as a way to return capital to shareholders. Share buybacks
can also be used to improve financial ratios such as

Final Accounts of Companies & Accounting for Shares 5

 earnings per share and return on equity. However, it can
also be a signal that the company does not have any
profitable investment opportunities.

Final Accounts of Companies & Accounting for Shares 6