Table of Contents
Liabilities of the Company
Liabilities are shown in the left side of the Balance Sheet. If Balance Sheet is prepared vertically, liabilities are shown under assets. The Companies Act has classified liabilities into five categories. Under each category, its subdivisions and particulars are to be specified. We shall now discuss the various items that are shown on the liabilities side of the Balance Sheet.
Share capital should be shown under the following heads:
1. Authorized Capital: It should be shown separately. The details as to number of shares and face value of each share should be shown. This amount will not be taken for the total of the Balance Sheet.
2. Issued Capital: It should give particulars as to number of shares issued in each class of share and the face value of each such share.
3. Subscribed Capital: It should give particulars as to number of shares subscribed for and the face value of each such share. A distinction is to be made between various classes of capital such as equity share capital and preference share capital.
4. Called up Share Capital: It should give the amount of share capital called up as on the date of the Balance Sheet. It should be adjusted with calls unpaid and amount originally paid on forfeited shares.
Generally in share capital, the following information should be given:
1. The company’s issued capital and subscribed capital should be stated. If different classes of shares have been issued they should be shown separately. In case redeemable preference shares have been issued, the date of redemption of these shares should be specified.
2. The number of shares issued for a consideration other than cash should be specified. If bonus shares have been issued; the details of such issue should also be specified.
3. The details of calls-in-arrears due from debtors and others should be disclosed separately.
4. The net amount obtained after deducting arrears on calls and amount originally paid up on forfeited shares from the called up capital is the amount, which should be shown under the head Share Capital in the Balance Sheet.
5. In case there are any options on unissued share capital, the particulars regarding such options should be given. Entitling the foreign collaborators of a company to subscribe to a specified percentage of any further issue of capital can be cited as an example here.
6. Any capital profit on reissue of forfeited shares should be transferred to capital reserve.
7. In the case of subsidiary companies, the number of shares held by the holding company as well as by the ultimate holding company and its subsidiaries should be separately stated.
However, the auditor is not required to certify the correctness of such shareholdings as certified by management.