Companies Essay

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MODULE - 5

Company-An Introduction

Accounting for Shares and
Debentures

22

Notes

COMPANY-AN INTRODUCTION

You may have come across the name of organisation with suffix limited
(Ltd.), for example Hindustan Motors Ltd. or Hindustan Aeronautics Ltd.
etc. Have you ever thought what does this indicate? Names of organisations
with Ltd. indicate that these are forms of oganisations which are different
from sole proprietorship or partnership. These are called joint stock
companies.
As you know that the sole proprietorship and partnership forms of
organisation could not meet the growing needs of huge capital and
managerial skills required for increased scale of business and growing
economic activities. The liability of owner/owners of these organisations
is unlimited. In order to overcome these problems a new form of business
organisation known as company came into existance.
In this lesson, we shall study about company, its features and the methods
of raising capital through issue of shares.

OBJECTIVES
After studying this lesson you will be able to :
state the meaning of company as a form of business organisation;
describe the characteristics of company;
describe various types of companies;
distinguish between public and private company;
explain various types of shares;
distinguish between equity shares and preference shares;
explain the types of share capital.

ACCOUNTANCY

241

MODULE - 5
Accounting for Shares and
Debentures

Notes

Company-An Introduction
22.1 COMPANY–MEANING AND CHARACTERISTICS
A company is a voluntary association of individuals formed to carry on
business to earn profits or for non profit purposes. These persons contribute
towards the capital by buying its shares in which it is divided. A company
is an association of individuals incorporated as a company possessing a
common capital i.e. share capital contributed by the members comprising
it for the purpose of employing it in some business...

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