Face value of shares in balance sheet

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Guest

My query is regarding why in the balance sheet of a compnay share capital is shown at face value and not at market value as on 31st March. Doesn’t it affect substance over form principle it does not reflect true value of the company e.g. face value of TCS’s share is Re.1 and current market price is nearly Rs. 2400 per share. We use market value only while calculating certain ratios such as PE ratio. Why we cannot show Balance sheet on market value basis.

Replies (4)

Krishna Chaudhary

Accountant

4531 Points Joined February 2017

Share capital is always shows on its face value and the balance amount is shown in Securities Premium.

satish

teaching

2046 Points Joined February 2009

Company can issue shares at par or at premium. if company issued shares at premium over and above face value can be considered as capital profit. it is credited to share premium.

But company has the obligation to pay face value only at the time of company's winding up.

So company can disclose share at face value, even thought market value (Fair Value) is greater.

Law Aspire

755 Points Joined August 2009

if as per Registered valuer report the market value of one share is Rs.5 , of whose Nominal Value is Rs.10 and the Company issues the shares at Rs.10.
Does it means shares are issued at premium?