Corporate Accounting Notes
Subject Overview
Corporate Accounting moves accounting into the world of companies — share and debenture accounting, company final accounts, and the specialised accounting used by banking and insurance companies. You'll cover the issue of shares and debentures (at par, premium, discount, buy-back), preparing final accounts for corporate entities, valuation of goodwill and shares, and accounting for amalgamation and internal reconstruction. The final unit covers insurance company accounts under IRDA provisions. This is a 6-credit core paper across 4 units, and it's the direct foundation for Company Law and the Corporate Accounting elective in Semester 5.
Subject at a glance
4
Units
23
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
- forfeited shares
- rights and bonus shares
- buy-back of shares
- redemption of preference shares
- issue and redemption of debentures
- preparation of company profit and loss account and balance sheet
- 1Application money received
Bank Dr to Share Application A/c
- 2Allotment
Share Application and Allotment transferred to Share Capital
- 3Calls made
Share First/Final Call A/c Dr to Share Capital
- 4Forfeiture on default
Share Capital Dr; Forfeited Shares A/c Cr
- 5Reissue
Forfeited amount used; balance to Capital Reserve
Study guide
Companies raise money by issuing shares and debentures. You study the issue of shares at par, premium and discount, forfeiture and reissue, rights and bonus shares, buy-back, redemption of preference shares, issue and redemption of debentures and preparation of company final accounts. Practise journal entries for share issue and forfeiture; they form the base of this paper.
- Valuation of goodwill and shares (simple problems)
- difference between banking and non-banking company balance sheets
- prudential norms
- asset structure of a commercial bank
- non-performing assets
Average profit
Average profit × number of years' purchase
Super profit
Super profit × years' purchase
Capitalisation
Capitalised value of average profit − net assets
Annuity
Present value of super profits
Study guide
This unit covers valuation of goodwill and shares in simple problems, the difference between banking and non-banking company balance sheets, prudential norms, the asset structure of a commercial bank and non-performing assets (NPAs). Learn the methods of valuing goodwill (average profit, super profit and capitalisation) with a worked example of each.
Concept and accounting treatment of amalgamation as per Accounting Standard 14, internal reconstruction concepts and accounting treatment
When
Amalgamation in the nature of merger
Amalgamation in the nature of purchase
Assets and liabilities
At existing book values
At agreed or fair values
Reserves
Preserved as they are
Only statutory reserves kept
Difference in consideration
Adjusted in reserves
Goodwill or capital reserve
Study guide
Companies sometimes combine or restructure. You study the concept and accounting treatment of amalgamation as per Accounting Standard 14 and internal reconstruction. Learn the difference between the purchase and pooling of interests methods.
- Books maintained by insurance companies
- special terms in insurance business
- accounts for life insurance business
- types of policies
- annuity business
- surrender value
- valuation balance sheet
- final accounts under IRDA provisions
- Premium
- Amount paid by the policyholder
- Claim
- Amount paid by the insurer on a loss
- Surrender value
- Amount paid if a policy ends early
- Annuity
- Regular payments, often after retirement
- Valuation balance sheet
- Compares life fund with actuarial liability
Study guide
Insurance companies follow special accounting rules. You study the books maintained, special terms, life insurance accounts, types of policies, annuity business, surrender value, the valuation balance sheet and final accounts under IRDA provisions. Learn the format of the revenue account and the specific terms used in insurance.
Why Corporate Accounting Matters
Corporate accounting is central to careers in audit, finance and company secretaryship, and it is a core subject for CA, CS and CMA exams. Understanding share capital, amalgamation and bank accounts helps you read company financial statements with confidence.
How to Prepare for Corporate Accounting
- Practise full-length problems on share issue, forfeiture and final accounts.
- Learn the formats of company balance sheet and profit and loss account.
- Understand NPAs and prudential norms with an example.
Corporate Accounting: Frequently Asked Questions
What is the difference between a bonus issue and a rights issue?
A bonus issue gives existing shareholders free additional shares from reserves, while a rights issue offers them the chance to buy new shares at a price, usually at a discount.
What is a non-performing asset?
An NPA is a loan or advance on which interest or principal has remained unpaid beyond a specified period, normally 90 days.