Corporate Accounting

Introduction
A corporation is an artificial being invisible,
intangible and existing only in the
contemplation of law
In India, a Company is formed and registered
under the Companies Act, 1956 (Substantially
Revised in 2013)

Characteristics of a Company

Incorporated Association
Separate Legal Entity
Perpetual Existence
Limited Liabilities
Separation of ownership and management
Periodic Audit
Memorandum of Association
Articles of Association
3

Types of Companies

Private Company
Public Company
Government Company
Foreign Company
Holding Company
Subsidiary Company
Public corporation
Departmental undertakings
4

Types of Companies

Private Company e.g. Flipkart

Public Company e.g. RIL, TCS
Government Company e.g. ONGC, SAIL
Foreign Company e.g. Vodafone, Samsung
Holding Company (Controlling more than 50 %)
Subsidiary Company ( Controlled by Holding
Company)
Public corporation like LIC, Air India
Departmental undertakings like Indian Railways,
postal Department.

New concepts under Companies Act

2013
One-person company: The 2013 Act introduces
a new type of entity to the existing list i.e.
apart from forming a public or private limited
company, the 2013 Act enables the formation
of a new entity a one-person company (OPC).
An OPC means a company with only one
person as its member

 Private company: The 2013 Act introduces a

change in the definition for a private company,
inter-alia, the new requirement increases the
limit of the number of members from 50 to
200.

 Dormant company: The 2013 Act states that a

company can be classified as dormant when it is
formed and registered under this 2013 Act for a
future project or to hold an asset or intellectual
property and has no significant accounting
transaction.
Such a company or an inactive one may apply to
the ROC in such manner as may be prescribed for
obtaining the status of a dormant company.

 Subsidiary: The definition of subsidiary as

included in the 2013 Act states that certain
class or classes of holding company (as may be
prescribed) shall not have layers of
subsidiaries beyond such numbers as may be
prescribed.
With such a restrictive section, it appears that
a holding company will no longer be able to
hold subsidiaries beyond a specified number

Raising fund for company

Debt

Equity

Shares and Share Capital

Total capital of the company is divided into a

number of small units of a fixed amount and

each such unit is called a share.
The fixed value of a share is called nominal/
par/ face value of a share.
A company can issue shares at a price

different from the face value of a share; this

is issue price of share. Generally at Premium

 Preference Shares:
The shares which are assured of preferential dividend at a
fixed

rate

during

the

life

of

company

and carry

preferential right over other shareholders to be paid first in

case of winding up of company.

Equity Shares:
Equity shares are those

shares, which are not

preference shares. It means that they do not enjoy

any preferential rights in the matter of payment of

dividend or repayment of capital.

Issue of share capital

The shares can be issued by company either for

cash or for the consideration other than cash.

A public company issues a prospectus inviting

general public to subscribe for its shares.

Full payment to be made either at the time of

application or in installments

Debentures
Debenture is one of the most
commonly used debt instrument
issued by the company to raise funds
for the business.
Debt financing does not only help in
reducing the cost of the capital but
also helps in designing appropriate
capital structure of the company.

Financial statements
Income statements/ profit and loss account
Balance sheet
Cash flow statement

Tata Motors
Financial Statements

Microsoft Corp.
Financial Statements

Income Statement
(In millions, except per share amounts)
Year Ended June 30,

2013

2012

2011

$ 77,849
20,249

$ 73,723
17,530

$ 69,943
15,577

Gross profit
Operating expenses:
Research and development
Sales and marketing
General and administrative
Goodwill impairment

57,600

56,193

54,366

10,411
15,276
5,149
0

9,811
13,857
4,569
6,193

9,043
13,940
4,222
0

Total operating expenses

30,836

34,430

27,205

Operating income
Other income

26,764
288

21,763
504

27,161
910

Income before income taxes

Provision for income taxes

27,052
5,189

22,267
5,289

28,071
4,921

Net income

$ 21,863

$ 16,978

$ 23,150

Earnings per share:

Basic
Diluted

$
$

$
$

$
$

Revenue
Cost of revenue

Weighted average shares outstanding:

Basic
Diluted
Cash dividends declared per common share

2.61
2.58
8,375
8,470

0.92

2.02
2.00
8,396
8,506

0.80

2.73
2.69
8,490
8,593

0.64

COMPREHENSIVE INCOME
STATEMENTS

(In millions)
Year Ended June 30,

Net income
Other comprehensive income (loss):
Net unrealized gains (losses) on derivatives (net of tax effects of $(14), $137,
and $(338))
Net unrealized gains (losses) on investments (net of tax effects of $195, $(210),
and $567)
Translation adjustments and other (net of tax effects of $(8), $(165), and $205)
Other comprehensive income (loss)
Comprehensive income

2013

2012

2011

$ 21,863

$ 16,978

$ 23,150

(26)

255

(627)

363
(16)

(390)
(306)

1,054
381

321

(441)

808

$ 22,184

$ 16,537

$ 23,958

BALANCE SHEETS
(In millions)
June 30,

2013

Assets
Current assets:
Cash and cash equivalents
Short-term investments (including securities loaned of $579 and $785)

3,804
73,218

2012

6,938
56,102

Total cash, cash equivalents, and short-term investments

Accounts receivable, net of allowance for doubtful accounts of $336 and $389
Inventories
Deferred income taxes
Other

77,022
17,486
1,938
1,632
3,388

63,040
15,780
1,137
2,035
3,092

Total current assets

Property and equipment, net of accumulated depreciation of $12,513 and $10,962
Equity and other investments
Goodwill
Intangible assets, net
Other long-term assets

101,466
9,991
10,844
14,655
3,083
2,392

85,084
8,269
9,776
13,452
3,170
1,520

$ 142,431

$ 121,271

Total assets

Liabilities and stockholders equity

Current liabilities:
Accounts payable
Current portion of long-term debt
Accrued compensation
Income taxes
Short-term unearned revenue
Securities lending payable
Other

4,828
2,999
4,117
592
20,639
645
3,597

4,175
1,231
3,875
789
18,653
814
3,151

Total current liabilities

Long-term debt
Long-term unearned revenue
Deferred income taxes
Other long-term liabilities

37,417
12,601
1,760
1,709
10,000

32,688
10,713
1,406
1,893
8,208

Total liabilities

63,487

54,908

67,306
9,895
1,743

65,797
(856)
1,422

78,944

66,363

$ 142,431

$ 121,271

Commitments and contingencies

Stockholders equity:
Common stock and paid-in capital shares authorized 24,000; outstanding 8,328 and
8,381
Retained earnings (deficit)
Accumulated other comprehensive income
Total stockholders equity
Total liabilities and stockholders equity

STOCKHOLDERS EQUITY STATEMENTS

(In millions)
Year Ended June 30,

Common stock and paid-in capital

Balance, beginning of period
Common stock issued
Common stock repurchased
Stock-based compensation expense
Stock-based compensation income tax benefits (deficiencies)
Other, net

2013

Balance, end of period

Retained earnings (deficit)
Balance, beginning of period
Net income
Common stock cash dividends
Common stock repurchased
Balance, end of period
Accumulated other comprehensive income
Balance, beginning of period
Other comprehensive income (loss)
Balance, end of period
Total stockholders equity

65,797
920
(2,014)
2,406
190
7

2012

63,415
1,924
(1,714)
2,244
(75)
3

2011

62,856
2,422
(3,738)
2,166
(292)
1

67,306

65,797

63,415

(856)
21,863
(7,694)
(3,418)

(8,195)
16,978
(6,721)
(2,918)

(17,736)
23,150
(5,394)
(8,215)

9,895

(856)

(8,195)

1,422
321

1,863
(441)

1,055
808

1,743

1,422

1,863

78,944

66,363

57,083