Capitalisation

Capitalisation

Capitalisation means the total par value of all the securities, i.e. shares and debentures issued by a company and reserves, surplus and value of all other long term obligations.

OVER CAPITALISATION

when a company is not in a position to pay dividends and interests on its shares and debentures at fair rates, it is said to be over capitalised. It means that an over-capitalized company is unable to pay a fair return on its investment.

Causes of Over-capitalization

Inflationary conditions, High rates of taxation, Low production

Remedial measures to correct Over-capitalisation

Reduction of preference shares,Reduction of face value of the shares.

UNDER CAPITALISATION

The state of under-capitalisation is where the value of assets are much more than it appears in the books of the company

Causes of Under-capitalisation
Under estimation of capital requirements.
Under estimation of future earnings.

Accrued income

Amount earned in the current accounting period, but which will be received in a subsequent period.

Accrued expenses(liability)

Accrued expenses are expenses that have been incurred, but not yet paid for

Accrued revenue refers to revenue that has been incurred but not yet received. Examples of accrued revenue items might be services you have provided but that have not yet been billed or paid for.   The service industries account for a large number of accrued revenue transactions, since quite often services are provided over a week, month, or even year, but aren’t billed until the job is complete.

Absorption costing, also known as full absorption costing, can be defined as a managerial accounting cost method of expensing all costs related to manufacturing of a specific product