Tuesday, August 2, 2016

What are the different types of capital ?

When it comes to capital, it is the contribution by the owner in his business firm. It is called as the seed capital. It can be brought by the owner by his own sources or through funds mobilised from his friends, relatives and others.

In the case of companies which are incorporated as per Indian Companies act 1956 and for presently, the Indian Companies act, 2013, the capital can be classified as mentioned below:

Authorised capital:
Authorised capital is the capital as earmarked in the memorandum of association of the company for the purpose of mobilisation from the public in due course. This will not find a place in the balance sheet of the company.

Issued capital:
When the company is in need of funds, they are issuing some portion of the authorised capital for the public for subscription. When the shares are issued, the details are informed to the public by means of a prospectus and the prospectus contains the details of shares issued, the amount of each share available for subscription and the minimum subscription to be made by the investor

Subscribed capital:
It is the capital actually subscribed by the public. The issued capital and subscribed capital need not be the same. In the case of lesser subscription, the subscribed portion is found to be less than the issued capital

Paid up capital:
The paid up capital is the capital for which cash has been fully received by the company. Normally when are shares are issued, the investors are provided with option to pay the amount in several instalments namely - application money; allotment money; first call money and final call money etc.,
Sometimes, the entire money is received at the time of issue itself.

The paid up capital alone finds a place in the balance sheet since balance sheet provides the details of financial position of the firm.

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