Is share capital a liability?

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Lane 0 Comments

How is the share capital included on the statement of financial position? I know that its the capital that its contributed by the shareholders but is it included as a liability from the company to the shareholders?

2 Answers

score 0 · Answer 1 · 2013-04-21T09:43:57+00:00

The share capital is part of the equity section on the balance (or the statement of financial position as it’s called). Remember that the accounting equity is :

Assets= Liabilities + Equity.

The equity included the share capital that the company has issued plus the reserves (share premium, profit and loss, revaluation reserves etc.).

score 0 · Answer 2 · 2012-12-02T21:42:51+00:00

No share capital is the capital that the owners of the business have contributed. Its not a liability, its just the capital invested. The company does not have a liability for this capital contribution to the shareholders. They have the right to sell their shares to third parties but the company does not have an obligation to re-buy the shares and hence no liability arises.