Mrs.Geetha Dasaraty is a commerce graduate with a Masters in Business Administration specialising in finance. Her stint with a Coimbatore based company and later with a consulting firm in Chennai has provided her with a decade of experience in project finance and appraisals, accounting and tax laws. She is a freelance writer and money matters are her forte. She is currently pursuing her final course in Company Secretaryship and is doing a course on Vaishnavism. She has a passion for literature and Carnatic music. She is also a violinist.

Chapter 9 - Company Accounts

To start with, business houses were small. They started out, as sole proprietors then went on to become partnership firms. When their size increased manifold they graduated into joint stock companies. In India, the joint stock companies came into existence with the joint Stock Companies' Act in 1913.

Today, all aspects of the companies, from their incorporation to their winding up are governed by the Companies Act, 1956.

A Company is an organisation formed by an association of a large number of people through law for the purpose of carrying on a business venture.

Characteristics of a company

• A Company is an artificial person created through law with an existence distinct from its members.
• A company has a perpetual succession and a common seal.
• The liability of the members of the company is limited to the value of the shares subscribed to by them.
• The shares of a company are freely transferable except for those of private companies.
• The management and ownership of a company are distinct.
• A company is a voluntary association of persons.
• A company can carry on only that business as specified in the Memorandum and Articles of Association.

Kinds of Companies.

• Statutory Companies: A statutory company is one which is formed by a special Act passed either by the central or State Legislature. These companies are governed by their Acts and do not have any Memorandum or Articles of Association.They are formed to carry out special public undertakings. Examples are Reserve Bank of India, Life Insurance Corporation of India.
• Registered Companies: These companies come into existence by registration under the Companies Act. These may be companies with limited liability and companies with unlimited liabilities.

On the basis of liability companies are divided into:

• Unlimited companies: where the liability of the shareholders is unlimited. In the event of loss the shareholders will be asked to contribute to the claims of the creditors in addition to the share amount.
• Companies limited by shares: here the liability of the company is limited to the amount of shares he agrees to contribute. He is liable only upto the amount he agrees to contribute on the shares.
  A company where not less than 51% of the paid up capital is held by the Central or state Government or by both is a Government company.
  
• Companies limited by guarantee: Here the liability of a member is limited to the amount, which he has voluntarily guaranteed to contribute in the event of deficiencies while winding up.

From the point of view of public participation companies are divided as follows:

• Private Companies: A private company is one which by its Articles:
  a) restricts the right to transfer its shares, if any.
  b) Limits the number of its members not including the present or past employee members to 50 and
  c) Prevents the public to subscribe for any shares in or debentures of the company.

A private company's name should end with 'Private Limited'.

• Public companies: A company is a public company if all three restrictions stated above are not applicable.

Questions on Chapter 8 Lesson D

1. What are the points to consider while purchasing a vehicle?
2. How can you cut down on food bills?