Corporate Accounting – I: Units I to V

Vocabulary flashcards covering core concepts, statutory rules, accounting treatments, and formulas from Corporate Accounting – I (Units I–V).

Share

A unit of ownership in a company that represents a claim on its assets and earnings, entitling the shareholder to receive dividends and voting rights at general meetings.

Pro-rata Allotment

The allotment of shares in proportion to the number of shares applied for when total applications exceed the number of shares offered by the company.

Calls-in-arrear

The amount remaining unpaid by shareholders on calls made by the company within the stipulated time.

Issue of Shares at Premium

The issuance of shares at a price higher than their face (nominal) value (e.g., a ₹10 share issued at ₹12, where ₹2 is the premium credited to the Securities Premium Reserve).

Issue of Shares at Discount

The issuance of shares at a price lower than their face value (e.g., a ₹10 share issued at ₹9); generally prohibited under the Companies Act, except in the case of sweat equity shares.

Calls in Advance

An amount paid by a shareholder on calls before it is actually due, which is treated as a liability for the company until the call becomes due.

Forfeiture of Shares

The cancellation of shares by a company when a shareholder fails to pay the allotment or call money within the stipulated time, resulting in the company forfeiting the amount already received.

Divisible Profits

Profits that are legally available for distribution to shareholders as dividends after meeting all necessary provisions and reserves.

Underwriting

An agreement wherein an underwriter guarantees to purchase the shares or debentures that are not subscribed by the public, ensuring the company raises the required capital.

Marked Applications

Share application forms that bear the mark or stamp of a specific underwriter, used to determine their commission and liability.

Firm Underwriting

An underwriting arrangement in which the underwriter agrees to take a fixed number of shares as definite purchases in addition to any shares they may have to take up under the normal underwriting agreement.

Capital Redemption Reserve Account

A reserve created out of profits when a company redeems its redeemable preference shares, maintained to protect creditors by ensuring the capital base is not reduced.

Debenture

A long-term debt instrument issued by a company to borrow funds from the public, carrying a fixed rate of interest and usually secured against the company's assets.

Redeemable Preference Shares

Preference shares that can be repaid by the company to shareholders after a fixed period or on a specific date in accordance with the terms of issue.

Cum Interest

A term indicating that the purchase price of a debenture includes accrued interest from the last interest payment date up to the date of purchase.

Own Debentures

Debentures purchased by a company from the open market for the purpose of cancellation, investment, or reissue.

Debentures Issued as Collateral Security

Debentures issued by a company as secondary or additional security for a loan, for which no immediate cash is received.

Company Final Accounts

Financial statements prepared at the end of an accounting year—including the Trading Account, Profit and Loss Account, and Balance Sheet—to show the financial performance and position of a company.

Managerial Remuneration

The total compensation payable to directors and key managerial personnel for their services, which includes salary, commission, and other benefits.

Interim Dividend

A dividend declared by the Board of Directors between two annual general meetings before the annual accounts are finalized.

Unclaimed or Unpaid Dividend

A dividend declared but not collected by shareholders within 30 days, which must be transferred to the Unpaid Dividend Account within 37 days and to the IEPF if unclaimed for 7 years.

Goodwill

An intangible asset representing the reputation, brand value, customer loyalty, and good name of a business that enables it to earn higher profits.

Capital Employed

The total long-term funds utilized in a business, calculated as $\text{Capital Employed} = \text{Total Assets} - \text{Current Liabilities}$ or $\text{Capital Employed} = \text{Fixed Assets} + \text{Working Capital}$.

Intrinsic Value of Shares

The real worth of a share based on net assets, determined by the formula: $\text{Intrinsic Value per Share} = \frac{\text{Net Assets available to Equity Shareholders}}{\text{Number of Equity Shares}}$.

Yield Value of Shares

The share value calculated based on expected returns, given by: $\text{Yield Value} = \frac{\text{Actual Rate of Return}}{\text{Normal Rate of Return}} \times \text{Paid-up Value per Share}$.

Fair Value of Shares

A balanced share valuation combining asset worth and earning potential, calculated as: $\text{Fair Value of a Share} = \frac{\text{Intrinsic Value} + \text{Yield Value}}{2}$.

Normal Rate of Return

The average rate of return expected in a similar business under normal circumstances, determined from industry standards and past performance.

Ind AS

Indian Accounting Standards, which are standards converged with IFRS and notified by the Ministry of Corporate Affairs for the preparation of financial statements in India.

International Financial Reporting Standards (IFRS)

A set of global accounting standards issued by the International Accounting Standards Board (IASB) to ensure transparency and comparability in financial reporting.

Ind AS 16

The Indian Accounting Standard governing the accounting treatment for Property, Plant, and Equipment (PPE), covering recognition, measurement, depreciation, and disclosures.