BBA Study Material Bookkeeping Capital Preference Shares
BBA Study Material Bookkeeping Capital Preference Shares :- In Ts Article You Can Find Meaning Preference shares Notes . and difference between reserves and provision Means That Its Is Best Topic of Bookkeeping Study For BBA 1st Semester Year . Here You Find Topic Wise,Chapter Wise, Subject Wise Study Material And other Links of Related to the Bookkeeping. How To Learn BBA Bookkeeping Notes Difference Between Reserves and Provision Meaning of Capital Preference Shares other You Here . we find the Equity shares Issue shares sweat equity meaning more. If we talk about BBA then Bookkeeping and Accounting is one of the most important Topic. Bookkeeping is common to all semesters Here we are presenting BBA Bookkeeping and Accounting Study Material and Notes for all Semesters. BBA Bachelor of Business Administration in Bookkeeping and Accounting notes study material in this website cyberpoint9.com/testing most important chapter and Question paper BBA notes in this page more links to BBA notes and study material and question paper mock paper. bba in accounting and finance is an undergraduate commerce course. BBA study in bookkeeping and accounting, financial planning, economics, business organisation and other similar areas of operation in any business organisation. full bba course three year degree course consists of Six semesters. the basic eligibility criterion for bba dgree is qualifying 10+2 or equivalent examination in any stream from a recognized board of the country.Bachelor of Business Administration (BBA) in Accounting programs combine the fundamentals of a business program with concentrated coursework in accounting. Find out what these programs entail and what students do after graduation.bba subject bookkeeping and accounting chapter wise notes study material, question paper, mock paper, sample paper, in this website study point to BBA notes.
Difference Between Reserves and Provision
BBA Study Material Bookkeeping Capital Preference Shares
|Point of Difference
|A reserve is mean for meeting an unanticipated situation.
|A provision is created for some specific objects.
|Mode of Creation
|A reserve is created only out of profit, if there is no sufficient profit, a reserve cannot be created.
|A provision is a charge against profit. It is created even through there is no profit.
|Time of creation
|A reserve is created after ascertaining profit.
|A provision is created before ascertaining the profit and loss of a busiess.
|The object of creating such reserve is to strengthen the financial position of the business and to increase the working capital.
|The object of making provision is arrangement made to provide funds for known liability.
|Reserve can be used in the payment of any liability or loss.
|Provision can be utilised only for purpose for which it is meant.
|General reserve are always available for distribution of profit, i.e. dividend.
|Provision cannot be utilised for distribution of profit, i.e. dividend.
|Presentation in balance sheet
|Reserve are always shown on the liabilities side in the balance sheet.
|A provision is shown as an item of deduction from its related assets of shown on liability sides.
Shares which are not preference shares are equity shares. The balance of profit after appropriating dividend to preference shares may be distributed as dividend to equity shareholders. At the time of winding up, the payment is made to creditors; then preference share capital is returned and thereafter, whatever remains belongs to equity shareholders.
The Companies (Amendment) act, 1999 has introduced a new class of equity shares called ‘sweat equity’. These shares may be issued by the company to employees or directors at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called.
A company may issue shares either privately to friends, relatives and associates or may make a public offer. A private company cannot make public offer. In case company is proposing to raise capital through public offer. Guidelines are issued by securities and exchange board of India.
Meaning of Fixed Instalment Method
Total loss on issue of debentures (discount on issue + premium on redemption) is dividend by number of years during which debentures continues and loss is written off in equal instalments every year. This method is suitable when total debentures are redeemed on a specific date.
Insurance Policy Method
According to this method an insurance policy is taken for the amount required to redeem debentures after certain specified period. The insurance premium is paid regularly every year. After the certain specified period the policy matures, insured amount is received and the debentures redeemed with the proceeds.
These shares have preferential rights for receiving dividends and repayment of capital. This means when a company decides to pay dividend, to equity shareholders. Similarly on liquidation of company before refunding capital to equity shareholders, capital of preference shareholders will be refunded in full.
Future Maintainable Profit
Future Maintainable Profit : It has been stated before that it is the future profits, likely be earned that are relevant for valuing goodwill. This is quite correct but the estimate for future profits will obviously be made on the basis of past profits. While estimating the future profits on the basis of past profits, the point to be remembered are for profits as under :
- All usual working expenses including interest to debenture holders and depreciation of the assets of the company should be provided for. If the fixed assets have to be revalued, depreciation should be raised on the values arrived at as a result of the revaluation.
- All necessary provisions for liabilities for, say, taxation or otherwise should be made. But transfer to general reserves, dividend equalization fund, or sinking for redemption of liabilities and the availability of profits is not affected.
- In case non-trading assets have been excluded from the capital employed the income derivec from such assets should be excluded.
- Preference dividend should be deducted.
- Profit for the past four of five years (during which conditions have remained normal) should be averaged since, the average is more reliable than a single year’s profit.
- Development which have already taken place but whose results are likely to come in the future should be taken into account.
Short note on Capital employed in a joint stock Company.
Capital Employed in a joint Stock Company : This is a most important factor in valuation of goodwill, since the size of profits is significant only in relation to the capital used to earn it. Capital employed is now recognised to mean fixed assets (less depreciation written off) plus net working capital (i.e. current assets minus current liabilities). This may also be expressed as aggregate of share capital, reserves and long term loans. Non-trading assets i.e. assets acquired because of spare funds such as government securities, are excluded. Assets that must be acquired even if they are in the nature of shares debentures, etc. cannot be treated as non-trading.
The above mentioned idea of capital employed, however is not suitable for the purpose of valuing goodwill of individual companies where it is essentially the advantage occurring to the shareholders which has to be evaluated. For this purpose, the amount of debentures or loans should also be excluded from capital (of course, the profit considered for valuation of goodwill will also be after interest on debentures and loans obviously goodwill is also
An important point to note is the change in the value of fixed assets, if these were acquired some years ago. Since, profits are expressed in terms of current prices, it is proper that fixed assets should also be valued at current prices.
A refinement is that the figure of capital employed should be the average for the year concerned since the figure changes at least because of the profit or loss during the year.