What is effective capital and why should we calculate effective capital?
Answers
Answered by
40
Effective capital means the aggregate of the paid-up share capital (excluding share application money or advances against shares); amount, if any, for the time being standing to the credit of share premium account; reserves and surplus (excluding revaluation reserve); long-term loans and deposits repayable after one year (excluding working capital loans, over drafts, interest due on loans unless funded, bank guarantee, etc., and other short-term arrangements) as reduced by the aggregate of any investments (except in case of investment by an investment company whose principal business is acquisition of shares, stock, debentures or other securities), accumulated losses and preliminary expenses not written off.
karan7492:
dobi unblock kar
Answered by
7
Effective capital refers to the aggregate of the paid-up share capital (excluding share application money or advances against shares).
It is calculated as on the last date of the financial year preceding the financial year in which the appointment is made.
It is calculated for ascertaining
1. Paid-up share capital
2. Share premium account
3. Reserves and surplus
4. Long-term loans and deposits repayable after one year
Similar questions