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Preference Shares

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  Preference Shares:-   Preference Shares are those which carry preference over other classes of shares in the payment of dividend and repayment of capital at the time of winding up. Types of preference Shares:-   Preference Shares can be broadly divided into. 1) Redeemable preference Shares. 2)irredeemable preference Shares 3) Cumulative preference Shares 4) Non - Cumulative preference Shares 5) Convertible preference Shares 6) Non - Convertible preference Shares 7) participating preference Shares. 8) Non - participating preference Shares   Redeemable preference Shares:-   These are the shares, the capital of which is refundable after a stipulated period. Irredeemablepreference Shares:- These are the shares, capital of which is not refunded during the life time of the company. Cumulative preference Shares:- These are the shares on which a fixed rat of dividend is paid out of the current or future profits. If in any year, the company doesn't pay the dividend wil...
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Distinction between capital and Revenue expenditure

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  Capital Expenditure:- 1) It results in acquisition of fixed assets which are meant for use and not for resale.    The Assets acquired are used for earning profit as long as they can serve the purpose of the business and sold only when they become unfit or obsolete for business. 2) it results in improving the earning capacity of the fixed assets,e.g., over - hauling the machinery for improving the business by increasing the earning capacity of the machinery. 3) It represents unexpired cost i.e., cost of benefit to be taken in future. 4) it is a non - recurring expenditure. 5) The benefit of such Expenditure will be for more than one year.   Only a portion of such Expenditure know as depreciation is charged to profit and loss Account and balance amount of such Expenditure unless it is written off is shown in the Balance Sheet as an asset. 6) All items of capital expenditure which are not written off are shown in the Balance Sheet as Assets and are carried forward to ...
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Need providing Depreciation

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  To know the true profits:-     We have seen that depreciation is an expense and becomes an important element of the cost of production.    Though it is not visible like other expenses and never paid to the outside party yet it is desirable to charge depreciation on fixed assets as these are used for earning purposes.   So their depreciation must be deducted out of the income earned from their use in order to calculate true net profit or loss. To show true financial position:-  Financial position can be studied from the balance sheet and for the preparation of the Balance Sheet fixed assets are required to be shown at their true value.    If Assets are shown in the Balance Sheet without any charge made for their use or depreciation, then their value must have been overstated in the Balance Sheet and will not reflect the true financial position of the business.   So for the purpose of reflecting true financial position, it is necessary t...
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