COMPARE EQUITY SHARES AND PREFERENCE SHARES

INTRODUCTION

India is a developing country. Nowadays many people are interested to invest in

financialmarkets especially on equities to get high returns, and to save tax in honest way.

Equity Shares are the shares that carry voting rights and the rate of dividend also
fluctuate every year as it depends on the amount of profit available to the company. On the
other hand, Preference Shares are the shares that do not carry voting rights in the company as
well as the amount of dividend is also fixed.

Need, Importance, Aims & Objective

To start any business capital plays major role. Capital can be acquired in two
ways byissuing shares or by taking debt from financial institutions or borrowing
money from financial institutions.

T h e o w n e r s o f t h e c o m p a n y h a v e t o p a y r e g u l a r i n t e r e s t a n d principal
amount at the end.

Investors purchase shares with two basic objectives;

1.To make capital profits by selling shares at higher prices.

2.To earn dividend income.

A Company can issue two types of shares viz. Equity Shares and Preference Shares.
While Preference shareholders enjoy the benefit of receiving their dividend distribution first;
the equity shareholders enjoy voting rights in major company decision including mergers or
acquisitions. Preference shares have the right to receive dividend at a fixed rate before any
dividend is paid on the equity shares. Further, when the company is wound up, they have a
right to return of the capital before that of equity shares.

Further Preference Shareholders gets accumulated arrears of dividend whereas no

accumulation is for the equity shareholders. In contradictory equity shareholders have right to
votes as well as right to participate in management.
Methodolodgy

Research design or research methodology is the procedure of collecting,

analyzingand interpreting the data to diagnose the problem and react to the opportunity in
sucha way where the costs can be minimized and the desired level of accuracy can
beachieved to arrive at a particular conclusion.

Source of Data :- Various sites.

Analysis & Conclusion

Investment success is pretty much a matter of careful selection and

t i m i n g o f s t o c k purchases coupled with perfect matching to an individuals risk tolerance. In
order to carryout selection, timing and matching actions an investor must conduct deep
security analysis.

Preference shares are most commonly issued by companies to institutions. It is out of

the reach of the retail investor. For example, banks and financial institutions may want to invest
in a company but do not want to bother with the hassles of fluctuating share prices. In that
case, they would prefer to invest in a company’s preference shares. Companies, on the other
hand, may need money but are willing to take loan so they will issue preference shares to bank
and financial institutions. This will ultimately appears in Companies Balance Sheet as Capital
and not as Loan.

Preference shares are not liquid assets whereas Equity shares are traded in market.
Equity shares prices goes up and down but there is little scope for price fluctuation incase of
preference shareholders. But this does not mean investor stuck to his shares.

From above it is concluded that Preferene shares investments are safer than equity
shares.
RETIREMENT OF PARTNER

Introduction

A partner or partners may retire from firm due to various reason like old age, better
opportunity, ill health conflict between partner and so on. He may retire with consent of the
other partners or in accordance with the agreement between them. Retirement of partner
result in reconstitution of partnership firm. The retiring partner continues to be liable to the
third parties unless he discharge himself by notation.

Objective

1. Calculate new profit sharing ratio and gaining ratio;

2. Make adjustments relating to goodwill, accumulated reserves and undistributed
profits at the time of retirement/death of a partner;
3. Explain the need for revaluation of assets and reassessment of liabilities at the time
of retirement/death;
4. Prepare the revaluation account relating to retirement/death of a partner;
5. Illustrate the various methods of settling the claim of retiring partner and the
related accounting treatment;
6. Illustrate the accounting treatment of partners capital and its adjustment;

Conclusion

One major change in the constitution of a partnership firm may occur if a partner undergoes
retirement from the firm or in the event of his death. In both cases, the partner’s account will have to be
settled, and new ratios will have to be calculated. There is also the issue of treatment of goodwill.