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Share capital is the money raised by a company by issuing shares to specified persons in case of Private Co. or to the general public in other cases. Share capital is essentially the amount of money invested in a company by its shareholders. Shareholders receive a percentage of the company’s ownership in this long-term source of capital. The amount of money used to start a business is known as capital. It has been used in many circumstances throughout the Indian Companies Act. Capital refers to the assets that a company uses to run its operations.
Various categories of share capital are present in the market. Capital and share capital are often seen as interchangeable in the context of a company. A company’s capital needs to be specified in the memorandum and articles of association.
The term “share capital” can represent various things depending on the context. Accountants have a significantly more limited definition, which they apply to public companies’ balance sheets. It is referred to as the total amount of money earned by the company through stock sales.
Define Categories Of Share Capital
Authorised capital: Authorised share capital refers to the entire capital that a company takes from its investors by issuing shares mentioned in the company’s official documentation.
Issued capital: Issued share capital refers to the part of authorised share capital provided to the public for the subscription.
Unissued capital: Companies, as noted, issue shares regularly. As a result, they will have differently authorised and issued share capital. The company’s unissued share capital will be the difference between the two amounts. The number of shares that a company has available to raise capital is referred to as unissued capital.
Subscribed capital: Subscribed share capital refers to the part of issued capital already sold/given to the public.
Called-up capital: Called-up capital refers to the part of the subscribed capital that consists of the shareholder payment.
Paid-up capital: Paid-up capital refers to the portion of called-up capital that a shareholder pays.
Uncalled share capital: The term “unclaimed share capital” refers to the shares that have been issued but are unclaimed.
Reserve share capital: Reserve capital refers to the number of shares that a company cannot sell unless it becomes bankrupt.
Fixed and circulating share capital: Current assets are often considered as circulating share capital. Fixed share capital comprises long-term assets. The operational assets like a bank’s reserves, book debts, etc., provide this capital.
Share Capital Formula
- Formula 1: Share capital equals the issue price per share times the number of issued shares.
- Formula 2: Share capital equals the number of shares times the stock’s par value plus the paid-in capital above par value.
Conclusion:
Share capital refers to the amount of money raised by a firm’s stockholders. In accounting, it indicates the par value of a firm’s total number of outstanding shares. The companies can disclose various categories of share capital. These categories of share capital include authorised, issued, subscribed, unissued, called-up, paid-up capital, etc. Companies provide shares to raise their capital by diluting the ownership stake of the original shareholders. A stock’s price may fluctuate according to time. As a result, making wise stock market investments is always recommended.
Furthermore, the distinction between shares and share capital confuses many people. The money raised through the sale of equity to investors is referred to as a firm’s share capital. In contrast, a shareholder’s share is referred to as the amount of money provided to the company.
