Terms Used in Financial Statements- it is very useful to learn and applicable in day to day working in Finance Field

General Terms used in Financial Statements

1. Terms Used in Financial Statements Ca Manmohan Jindal [email protected] Ph.8850385224

2. Capital Financial concept of capital is defined as : Invested money or invested purchasing power, capital is synonymous with the net assets or equity of the enterprise. Physical concept of capital is defined as operating capability, capital is regarded as the productive capacity of the enterprise based on, for example, units of output per day.

3. Share Capital- refers Aggregate amount of money paid or credited as paid on the shares and/or stocks of a corporate enterprise. Authorized Share Capital or nominal capital means Such capital as is authorized by the memorandum of a company to be the maximum amount of share capital of the company

4. Subscribed Share Capital- means Such part of the capital which is for the time being subscribed by the members of a company. Paid-up Share Capital or share capital paid-up- means Such aggregate amount of money credited as paid-up as is equivalent to the amount received as paid up in respect of shares issued and also includes any amount credited as paid-up in respect of shares of the company, but does not include any other amount received in respect of such shares, by whatever name called. Calls unpaid are to be disclosed separately.

5. Preference Share Capital- refers to A preference share is a share carrying preferential rights to dividends and repayment of capital. Preference share capital, with reference to any company limited by shares, means that part of the issued share capital of the company which carries or would carry a preferential right with respect to—

6. Contd … ( a) payment of dividend, either as a fixed amount or an amount calculated at a fixed rate, which may either be free of or subject to income-tax; and ( b) repayment, in the case of a winding up or repayment of capital, of the amount of the share capital paid-up or deemed to have been paid-up, whether or not, there is a preferential right to the payment of any fixed premium or premium on any fixed scale, specified in the memorandum or articles of the company;”

7. The rights, preferences and restrictions attached to shares are based on the classes of shares, terms of issue, etc., whether equity or preference. In respect of Equity Share Capital, it may be with voting rights or with differential voting rights as to dividend, voting or otherwise in accordance with such rules and subject to such conditions as may be prescribed under Companies (Issue of Share Capital with Differential Voting Rights) Rules, 2001.

8. In respect of Preference shares, the rights include (a) as respects dividend, a preferential right to be paid a fixed amount or at a fixed rate and, (b) as respects capital, a preferential right of repayment of amount of capital on winding up. Further, Preference shares can be cumulative, non-cumulative, redeemable, convertible, non-convertible etc. All such rights, preferences and restrictions attached to each class of preference shares, terms of redemption, etc. have to be disclosed separately.

9. Bonus shares Bonus shares are defined as shares allotted by capitalization of the reserves or surplus of a corporate enterprise. Reserve means The portion of earnings, receipts or other surplus of an enterprise (whether capital or revenue) appropriated by the management for a general or a specific purpose other than a provision for depreciation or diminution in the value of assets or for a known liability.” ‘Reserves’ should be distinguished from ‘provisions’.

10. ‘ capital reserve ’ is defined as “a reserve of a corporate enterprise which is not available for distribution as dividend”. Share Premium means The excess of the issue price of shares over their face value.” The terminology is also used as “Securities Premium” and the nomenclature as per the Act is “Securities Premium Account”.

11. ‘Capital Commitment ’ is defined as ‘Capital Commitment ’ is defined as Future liability for capital expenditure in respect of which contracts have been made. Hence, drawing inference from such definition, the term ‘commitment’ would simply imply future liability for contractual expenditure. Accordingly, the term ‘Other commitments’ would include all expenditure related contractual commitments apart from capital commitments such as commitments arising from long-term contracts for purchase of raw material, employee contracts, lease commitments, etc.

12. ‘Capital Commitment ’ is defined as The scope of such terminology is very wide and may include contractual commitments for purchase of inventory, services, investments, sales, employee contracts, etc. However, to give disclosure of all contractual commitments would be contrary to the overarching principle under General Instructions that “a balance shall be maintained between providing excessive detail that may not assist users of Financial Statements and not providing important information as a result of too much aggregation.

13. ‘ Profit and Loss statement’ is defined as “the Financial Statement which presents the revenues and expenses of an enterprise for an accounting period and shows the excess of revenues over expenses (or vice versa). It is also known as profit and loss account.”

14. Thanks Ca Manmohan Jindal Ex- Canara Bank, RV-SFA , Mumbai [email protected] 8850385224 Adv. Abhay Jindal [email protected] 7021113005