Corporate Accounting Notes
Subject Overview
Corporate Accounting is the first Finance specialisation elective — accounting for companies rather than sole proprietors, covering share and debenture accounting through to liquidation. You'll cover the issue and redemption of shares and debentures, final accounts of companies including managerial remuneration and dividends, amalgamation and internal reconstruction, and close with liquidation of companies. This is a 6-credit elective paper across 4 units, building directly on Basic Accounting and Cost and Management Accounting.
Subject at a glance
4
Units
28
Topics
6
Credits
4
Infographics
Unit-wise Syllabus
4 units — open any unit for detailed topic-wise notes, diagrams and important exam questions
- Issue of shares at par
- premium and discount
- forfeiture and re-issue
- buy-back of shares
- redemption of preference shares
- rights issue
- issue and redemption of debentures
- conversion of debentures into shares
- underwriting
- profits prior to incorporation
- 1Application
Money received with application
- 2Allotment
Shares allotted; allotment money due
- 3Calls
First and final call money
- 4Forfeiture
If a shareholder fails to pay calls
- 5Re-issue
Forfeited shares sold again
Study guide
This unit deals with how companies raise capital: share issue at par, premium and discount, forfeiture and re-issue, buy-back, redemption of preference shares, rights issue, issue and redemption of debentures, conversion of debentures into shares, underwriting and profits prior to incorporation. Practise the journal entries for each type of issue; they are the base of the subject.
- Provisions and reserves
- determination of managerial remuneration
- appropriation out of profits
- payment of dividend
- transfer to the Investor Education and Protection Fund
- bonus shares
- 1Net profit for the year
- 2Transfer to reserves
- 3Preference dividend
- 4Equity dividend
- 5Balance carried forward
Retained earnings
Study guide
You study final accounts of companies: provisions and reserves, managerial remuneration, appropriation of profits, payment of dividend, transfer to the Investor Education and Protection Fund and bonus shares. Learn the format of the company profit and loss account and balance sheet.
- Accounting treatment and disclosures for amalgamation
- calculation of purchase consideration
- treatment as per Accounting Standard 14
- internal reconstruction
- holding and subsidiary companies
- consolidated balance sheet preparation
Method
Pooling of interests
Purchase method
Assets and liabilities
Recorded at book values
Recorded at fair values
Reserves
Preserved
Only statutory reserves kept
Difference
Adjusted in reserves
Goodwill or capital reserve
Study guide
You study amalgamation (purchase consideration, treatment under AS-14), internal reconstruction, holding and subsidiary companies and consolidated balance sheets. Practise computing purchase consideration with the net asset and net payment methods.
- Scope
- contributory preferential payments
- preference dividend
- statement of affairs and deficiency/surplus account
- liquidator's final statement of account and remuneration
- receiver for debenture holders
- 1
Secured creditors
From the security
- 2
Liquidation expenses and liquidator's fee
- 3
Preferential creditors
Government dues, wages
- 4
Debenture holders with floating charge
- 5
Unsecured creditors
- 6
Preference shareholders
- 7
Equity shareholders
Whatever is left
Study guide
You study liquidation: scope, contributories, preferential payments, preference dividend, statement of affairs, the deficiency and surplus account, the liquidator's final statement and the receiver for debenture holders. Learn the order of payment in winding up.
Why Corporate Accounting Matters
Corporate accounting is the base for audit, finance and company secretary careers and for professional exams such as CA and CS. It also helps you read the financial statements of any listed company.
How to Prepare for Corporate Accounting
- Practise full problems on share issue, amalgamation and consolidation.
- Memorise the company balance sheet format.
- Use a real annual report to see these entries in practice.
Corporate Accounting: Frequently Asked Questions
What is a rights issue?
A rights issue offers existing shareholders the right to buy additional shares in proportion to their holding, usually at a discount.
What is purchase consideration?
Purchase consideration is the amount paid by the acquiring company to the shareholders of the company being acquired.