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Hello Sir,
There is a company which has not recorded share capital in its books
It has recorded fixed deposit which is treated the same way as issued share capital.
(Meaning the shareholders have deposited their amount of shareholdings in the form of fixed deposit).So how is it treated in socie and sfp without showing share capital?
We cannot reclassify them because fixed deposit has a debit balance while share capital has a credit balance.
Please help.
All I can do is suggest you answer with reference to the definitions of equity and financial liability. If the instrument is a residual interest it is equity and should be classified as such.
In the exam you only need to refer to it as equity – they won’t test the minutiae of disclosure.
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