Terms used in Corporate Accounting

☼ Corporate or Company

Corporate or company is the synonym. Company means association of person which do any business for earning profit. But it must register and formed under any company law of any country. Because company is an artificial person and do work with separate entity. Company has its own charter and internal article of association.

☼ Shares

This is main term of corporate accounting. When we divide total capital of company into parts then each part is called share. Suppose, if you have 100000 capitals and if you divide into 1000 parts. Then it means company has 1000 shares of 100 rupees each.

☼ Preference Shares

Preference shares are the main type of shares if company issues that type of shares, then the share holder of these types of shares has the benefit that they can get part of profit with fixed rate and before giving the part of profit to equity shareholders. In the end of company, these shares are get preference of their repayment.

☼ Equity Shares

Equity Shares are the shares which are differ from preference shares. The shareholder of these shares has no preference relating getting dividend or any repayment. They are real owner of company and have the right to give the vote.

☼ Dividend

Dividend is that part of profit which distribute among shareholder. Its other name is divisible profit. Dividend may be given by cash or through bonus or any other type.

☼ Debenture

Debenture is just paper which is given by company when company takes loan from public. It is issued under company seal. In this paper company accepts that he will repay the loan taken by him after certain period with given rate of interest.

☼ Redemption

Redemption is technical term in corporate accounting .It means repayment of loan taken by company. When company issued debenture then company also writes the mode of redemption of debenture. There are different ways of redemption of debenture. The best way is to create sinking fund and keep some part of profit in it as annual installment. So that company can pay his taken loan without any tension.

☼ General Reserve

General reserve is the part of retained profit. It is very compulsory to make general reserve in company for payment of contingent liabilities or for development of company. Every finance bill has right to amend or change the rate of % in general reserve. This part is not issued as dividend.