Question:
What is Share Capital?
What is Share Capital?
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$\text{Share Capital}$ represents permanent equity financing. Unlike debt, it does not require fixed interest payments and is not returned to investors except through a buyback or company liquidation.
Updated On: Jun 22, 2026
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Solution and Explanation
Step 1: Core Financial Definition:
Share capital (also known as equity capital) represents the total amount of permanent funds raised by a corporate entity by issuing equity or preference shares to investors in exchange for cash or other assets.
Step 2: Classifying Share Capital Types:
Share capital is divided into several categories on a corporate balance sheet:
• Authorized Capital: The maximum capital a company is legally permitted to raise, as defined in its Memorandum of Association (MoA).
• Issued Capital: The portion of authorized capital offered to investors.
• Subscribed Capital: The portion of issued capital accepted by investors.
• Paid-up Capital: The actual money received from shareholders.
Step 3: Accounting Presentation:
Share capital is recorded under Shareholder's Funds on the Liabilities side of the balance sheet and represents the permanent equity base of the company.
Share capital (also known as equity capital) represents the total amount of permanent funds raised by a corporate entity by issuing equity or preference shares to investors in exchange for cash or other assets.
Step 2: Classifying Share Capital Types:
Share capital is divided into several categories on a corporate balance sheet:
• Authorized Capital: The maximum capital a company is legally permitted to raise, as defined in its Memorandum of Association (MoA).
• Issued Capital: The portion of authorized capital offered to investors.
• Subscribed Capital: The portion of issued capital accepted by investors.
• Paid-up Capital: The actual money received from shareholders.
Step 3: Accounting Presentation:
Share capital is recorded under Shareholder's Funds on the Liabilities side of the balance sheet and represents the permanent equity base of the company.
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