Paper 1st-Corporate

Accounting

1. Internal Reconstruction. 

Internal reconstruction can be de ned as the reorganization of the company, without
liquidating the existing company and forming a new one. In internal reconstruction, the
capital of the company is reduced, and external liabilities such as debenture holders and
creditors waive their claims by giving a discount.


2. Unrealised Pro ts. 


There are frequent purchase and sale transactions between holding and subsidiary
company. The portion of the mutual purchase which is unsold at the end of year includes
pro ts charged by the selling company. This is called unrealised pro t. 


3. Di erentiate between Reconstruction and Amalgamation. 


Amalgamation is the process where two di erent business entities join together for the
purpose of making a totally new business entity to sustain in the market by absorbing
the other company.  This process can also be referred as reconstruction as there is a
new formation of completely new entity.

The procedure of Reconstruction generates when a particular company transfers the
undertaking as well as the property to an absolutely new company and its shareholders. 
The objective of reconstruction is to re-organise the total amount of the capital.

Or

In corporate accounting, reconstruction refers to the process of reorganising a
company's nancial structure to improve its nancial stability or viability, usually through
debt restructuring or asset sales. Amalgamation, on the other hand, refers to the process
of merging two or more companies into a single entity.

4. Mutual Debts

Mutual debts in corporate accounting refer to a situation where two parties owe each
other money, and the debts can be o set against each other, leaving only the net
balance to be settled.

ff
fi
fi
fi


fi
ff
ff
fi
fi
5. Normal Rate Of Return

Normal rate of return in corporate accounting is the expected rate of pro t on a
company's assets, used to evaluate investment pro tability. It is based on industry
standards and the company's cost of capital.

6. Valuation Of Shares

Valuation of shares in corporate accounting is the process of determining the fair value
of a company's shares based on factors such as nancial performance, growth
prospects, and market conditions. This is done to inform investment decisions using
various techniques, such as discounted cash ow analysis and comparative market
analysis.


7. Valuation Of Right

Valuation of rights in corporate accounting refers to the process of determining the fair
value of certain rights or entitlements that are associated with a company's shares, such
as the right to buy additional shares or receive dividends. This is done by analyzing
factors such as market conditions and the terms of the rights, and using appropriate
valuation techniques.


8. Capitalisation of pro ts


In corporate accounting, pro t is typically capitalized only if it meets certain criteria for
recognition as an asset. These criteria include that the pro t must be expected to
provide future economic bene ts and must be reliably measurable. Otherwise, pro t is
recognized as income and is not capitalized.

9. Future Maintainable Pro ts


Future Maintainable Pro ts (FMP) is a concept in corporate accounting used to estimate
the sustainable level of earnings a business is expected to generate over the long-term.
It takes into account factors such as historical performance, market conditions, and
future growth potential to determine a realistic earnings forecast.








10. Fair Value Of Shares


The fair value of shares in corporate accounting is the estimated price that would be
received to sell an ownership interest in a company, assuming a willing buyer and seller,
and in an arm's length transaction. It is determined through various valuation
techniques, such as market-based or income-based approaches.

fi
fi
fi
fi
fi
fl
fi
fi
fi
fi
fi
 11. Pro t & Loss Appropriation Account

The Pro t and Loss Appropriation Account in corporate accounting is a nancial
statement that shows how a company's pro ts are allocated between di erent
accounts, such as retained earnings, dividends, or reserves. It helps to track the
company's nancial performance and plan for future business activities.


12. Firm Underwriting


Firm underwriting in corporate accounting is a type of underwriting agreement in which
the underwriter agrees to purchase all of the securities being o ered by the issuer, and
assumes the nancial risk of reselling those securities to investors. This provides a
guarantee of funds to the issuer.


13. Underwriting

Underwriting in corporate accounting refers to the process of guaranteeing a certain
amount of money will be raised from the sale of securities by an issuing company.
Underwriters assume the nancial risk of the o ering and may purchase and resell the
securities to investors or the public.


14. Co-underwriting

Co-underwriting in corporate accounting occurs when multiple underwriters share the
responsibility and risk of guaranteeing a securities o ering. Each co-underwriter
commits to purchasing a portion of the securities and may assist with marketing and
distributing the o ering to investors.




15. Sub Underwriting


Sub-underwriting in corporate accounting is the process of delegating a portion of the
underwriting commitment to other nancial institutions or investors. The sub-underwriter
agrees to purchase a speci ed number of securities from the underwriter, helping to
distribute the risk and raise capital for the issuing company.


16. Divisible Pro ts


Divisible pro ts in corporate accounting are the portion of a company's pro ts that can
be distributed to shareholders as dividends. These pro ts are calculated by subtracting
the company's retained earnings and other reserves from its total pro ts.

17. B-List Contributors


This list consists of those persons who were the members of the company during the 12
months preceding the date of winding up. In case the assets of the company are not
su cient to pay the liabilities of the company in the event of company’s winding up
liquidator can ask List ‘B’ contributories to contribute towards the assets of the
company, subject to certain conditions. However their liability is restricted to the amount
ffi
fi
fi
fi
fi
fi
fi
ff
fi
fi
fi
fi
ff
ff
fi
ff
fi
fi
ff
fi
 not called up when the shares were transferred.


18. Pro t prior and post to incorporation


Pro t prior to incorporation refers to the income earned by a company before it was
o cially registered, while pro t post incorporation refers to income earned after the
company has been established. Both pro ts are recorded and taxed di erently in
corporate accounting.

19. De ciency Account


A De ciency Account is a nancial statement used in corporate accounting to record
any losses or shortfalls in the value of a company's assets, such as inventory or
investments. This account helps to identify and address nancial weaknesses and to
prevent insolvency.

20. Guarantee Of Dividend


Guarantee of dividend is a legally binding commitment made by a company to its
shareholders to pay a speci ed dividend amount, regardless of the company's nancial
performance. This guarantee is often given in exchange for investments and may be
included in shareholder agreements or prospectuses.

21. Consolidated Pro t&loss A/c


Consolidated Pro t and Loss Account is a nancial statement that shows the combined
nancial performance of a parent company and its subsidiaries. It summarizes the
revenue, expenses, and pro ts of all the companies included in the consolidation,
providing a comprehensive view of the group's nancial results.


22. Holding And Subsidiary Company


A holding company is a corporation that owns a controlling interest in another company,
known as a subsidiary. The subsidiary operates independently, but the holding company
has signi cant in uence over its management and strategic decisions. This structure can
provide tax bene ts and limit legal liabilities.

fi
ffi
fi
fi
fi
fi
fi
fl
fi
fi
fi
fi
fi
fi
fi
fi
fi
fi
fi
ff
fi