Share Capital
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Share Capital


The portion of an entity’s equity that has been raised by the issue of shares of stock in the entity to shareholders, usually for monetary amounts (cash). In other words, it is the amount of capital that corresponds to the amount of money the owners have invested in the entity as mainly represented by common and/or preferred shares. The share capital of an entity may be increased by issuing (selling) new shares (new issue) or by the so-called bonus issue: transferring an entity’s own funds from unrestricted equity to share capital.

A new issue involving raising new capital or reducing the amount debt outstanding (using its own economic resources). A bonus issue does not involve the supply of new capital, but only an internal transfer of funds (reposting) from unrestricted equity into share capital.

Share capital is the capital that is contributed by an entity’s shareholders which reflects the par value of all equity securities, including common shares and preferred stock. Share capital is usually contributed by a very large base of shareholders, and therefore capital contributions do not have separate identities in accounting, but rather all identities are merged in a capital account known as “share capital account.”

It is represents the collective shares in the investment made by shareholders whereby each has a respective share in its capital (and a corresponding interest (residual interest) in its net assets) are entitled to profits that arise from an increase in value of the company’s investments

A share is a type of security that represents ownership in a company/ corporation divided into equal portions that are a claim on its earnings (dividends) and assets (residual interest). More specifically, a share is the smallest division of the share capital of a company which represents a proportion of ownership of its assets and operations. Depending on its contractual rights, a share may have many forms including common share and preferred share.

Common share entitles its holders, in addition to the claim on earnings and assets, to vote in the election of management and other matters presented for decision taking at shareholders’ meeting (voting can be in person or by proxy). Preferred share, by nature, does not entitle its holders to such voting rights but it has priority as to their claims on earnings and assets. In other words, preferred share has a prior claim on dividends as compared to common share.

Share capital is also known as capital stock (United States), shareholders’ capital, equity share capital, equity capital, contributed capital, or paid-in capital.



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