Equity share capital

The equity share capital is the capital that a company raises by issuing common equity shares.

Equity or ordinary shares indicate ownership in a company. A company’s shares that are sold serve as a source of investment for the company as well.

What is the difference b/w Equity share capital & preference share capital?

Equity share capital is the common stock of the company. Equity shareholders have voting rights, and it is not mandatory to pay the dividend; they carry the maximum risk, whereas preference shareholders have the preferential right as to payment of dividends if a company goes into liquidation. They do not have the right to vote and participate in the meetings. 

How to calculate equity share capital?

Equity share capital = Price per share ❌ No. of outstanding shares

Or

Equity share capital = No. of shares (par value of share + paid-in capital in excess of par value)

Is equity share capital an asset?

No, equity share capital is not an asset. But the investor who buys equity shares of the company brings in cash in exchange for the shares given. This increases the assets of the company. Equity shares can also be issued to vendors in the exchange of the supplies or raw material provided by them. It comes under the head “Equity & Liabilities” in the balance sheet.

Types of equity share capital are authorized to share capital, issued share capital, subscribed, and fully paid-up share capital.