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Dr. R.A.N.M ARTS AND SCIENCE COLLEGE�Affiliated to Bharathiar University , �Accredited with “ B+” NAAC

Mrs. A. Raameswari M.Com., � Assistant Professor,� Department of Commerce (CA)

Course Name : Corporate Accounting I

�Welcome You All

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Meaning

Underwriting is a contract between a company and underwriters. They may be individuals or institutions, ready to take up the whole or a portion of the shares or debentures issued, which are not subscribed for by the public for a consideration called underwriting commission.

UNDERWRITING

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Full underwriting

The Underwriting of the whole issue of shares or debentures of a company is called fu;l underwriting

Partial underwriting

The underwriting of a part of the issue of shares or debentures of a company is called partial underwriting

Firm underwriting

The agreement of an underwriting to by a definite number of shares or debentures in addition to the shares or debentures he has to take under the underwriting agreement is called firm underwriting.

Types of Underwriting

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PROFITS AVAILABLE FOR CAPITAL REDEMPTION RESERVE

Usually, the revenue profits or the profits available for dividend can be used to create the capital redemption reserve. They are:

A. General Reserve

B. Profits and Loss a/c

C. Dividend Equalization Fund

D. Reserve Fund

E. Revenue portion of profit on sale of investments

F. Revenue portion of profit on sale of fixed assets

G. Workmen‟s Accident Compensation Fund

H. Insurance Fund

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PROFITS NOT AVAILABLE FOR CAPITAL REDEMPTION RESERVE

The capital profits or profits not available for dividend cannot be used for the purpose of creating the capital redemption reserve. They are

General Reserve

Capital Redemption Reserve

Development Rebate Reserve

Depreciation Reserve

Shares forfeited account

Profit prior to incorporation

Profit on sale of fixed assets

Share premium account

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Own Debentures

The purchase of its own debentures by a company in the open market to be kept as an investment or to cancel at a later date is called own debentures.

Interest on own debentures

The total amount of interest due on debentures is deemed to be outstanding. But payment of interest on debentures is made only to the outsiders.

PURCHASE OF OWN DEBENTURES

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Purchase of own Debentures

When own debentures are purchased on a date other that the date of interest, distinction must be made between the capita; and revenue portion of the price paid for the debentures.

Cum – Interest

Cum – interest means that it is with interest. Thus the cum – interest quotation price is a purchase price that includes interest also.

Ex – Interest

Ex – Interest means that is is without interest. Thus, the Ex – Interest quotation price is a purchase price that excludes interest.

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Final Account of companies

In case of sole trading concern or partnership firm the preparation of find accounts is not compulsory. But companies have a statutory obligation to prepare final accounts as required by section 209 & 210 of the companies Act 1956.

The companies Act requires every company to prepare every year Trading a/c, profit and loss a/c, profit loss appropriation a/c and Balance Sheet.

A. Profit and loss statement

B. Balance sheet

C. Cash flow statement

D. Statement of changes in Equity

E. Notes to accounts