Related Aspects Of Company Accounts, CS Executive Dec 2025 Corporate Accounting
Related Aspects of Company Accounts explain ESOP, underwriters, issue and redemption of shares and debentures. They show how to record these transactions and maintain accurate company accounts. Understanding these aspects is essential for CS Executive Corporate Accounting and audits.
Muskan Verma21 Nov, 2025
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Related Aspects of Company Accounts is one of the important aspects of the CS Executive Corporate Accounting. It helps in covering the accounting treatments and concepts that are connected to the company’s finance. This especially refers to the employees' benefits, share issuance, underwriting, etc.
Therefore, understanding these topics is one of the important aspects. It helps one in managing the company accounts and audits. Thereby also assisting in preparing financial statements correctly, and then complying it with the legal requirements. So, let’s understand these concepts in more detail through the information mentioned here.
Related Aspects of Company Accounts Overview
Related Aspects of Company Accounts focus on special transactions that companies undertake other than normal operations. These include accounting for employee benefits like ESOP, underwriting of shares, and other related corporate transactions.
| Related Aspects of Company Accounts Overview | |
| Topic | Brief Overview |
| Employee Stock Option Plan (ESOP) | Incentive scheme for employees to purchase company shares at a fixed price. |
| Underwriters | Parties that guarantee a minimum subscription in share issues. |
| Buyback of Shares | The company buys back its own shares (already covered in the shares chapter). |
| Redemption of Preference Shares | Payment of fixed dividends and repurchase of preference shares. |
| Redemption of Debentures | Payment to debenture holders at maturity. |
Employee Stock Option Plan (ESOP)
An Employee Stock Option Plan (ESOP) is a tool that companies use to reward and retain employees. Through this, employees get the right to purchase company shares at a fixed price after a certain period. ESOP encourages loyalty of employees and aligns the employees’ interests with the company’s growth.
| Important Terms in ESOP | |
| Term | Meaning |
| Grant Date | Date on which the company grants the stock option to an employee. |
| Vesting Period | Minimum duration an employee must work to exercise the option. |
| Exercise Period | Period after vesting during which the employee can buy shares. |
| Unvested Option | Options that lapse if the employee leaves before vesting. |
| Vested Option | Options that can be exercised after vesting; may lapse if not used. |
| Employee Compensation Expense | Expense recognized by the company for the benefit provided. |
| Employee Stock Option Outstanding | Liability account showing the company’s obligation under ESOP. |
| General Reserve |
Reserve where excess or unearned ESOP expenses are transferred. |
Accounting for ESOP
ESOP accounting involves recognizing expenses over the vesting period. Below, we’ve mentioned simple steps:
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Determine the expense per share: Expense = Market Price – Exercise Price
-
Total ESOP Expense: Total Expense = Expense per share × Number of shares
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Annual Recognition: Spread the total expense over the vesting period.
Example: ESOP Accounting
Below, we’ve mentioned the example ESOP Accounting:
- The company grants 300 shares at ₹40 each, market price ₹100.
- Expense per share = ₹100 – ₹40 = ₹60
- Total expense = 300 × ₹60 = ₹18,000
- Vesting period = 3 years, yearly expense = ₹6,000
Journal Entries per Year:
Below, we’ve mentioned the journal entries that will be done per year:
- Debit: Employee Compensation Expense ₹6,000
- Credit: Employee Stock Option Outstanding ₹6,000
- Transfer to P&L: Debit: Profit & Loss Account ₹6,000 Credit: Employee Compensation Expense ₹6,000
If an employee leaves early, adjustments are made for unvested options, either by transferring to the General Reserve or writing off the difference.
Underwriters and Their Role
Underwriters are parties who guarantee the subscription of shares when a company issues them to the public. If the public subscription is below expectations, underwriters buy the remaining shares. This ensures the company receives the minimum required capital.
| Types of Underwriting | |
| Type | Description |
| Fully Underwritten | Underwriter agrees to take all shares not subscribed by the public. |
| Partially Underwritten | Underwriter takes only a part of the unsubscribed shares. |
| Marked Applications | Shares are linked to a specific underwriter to reduce their liability. |
| Unmarked Applications | Shares not linked to any underwriter; benefits all underwriters proportionally. |
| Firm Underwriting | Commitment by the underwriter to take certain shares regardless of public subscription. |
Accounting Treatment for Underwriters
Accounting for underwriters involves calculating their gross liability and adjusting for marked/unmarked applications and firm commitments.
Below, we’ve mentioned the steps to calculate net liability
- Identify the total shares underwritten by each underwriter (Gross Liability).
- Deduct marked applications received by each underwriter.
- Adjust for unmarked applications benefiting all underwriters.
- Include firm underwriting commitments.
- Calculate the Net Liability of each underwriter.
Journal Entries: When shares are allocated to underwriters:
- Debit: Bank / Subscription Receivable
- Credit: Share Capital and Securities Premium (for subscribed shares)
Related Aspects of Other Company Accounts
Other Related Aspects of Company Accounts include special corporate accounting entries that ensure proper treatment of shares, debentures, and preference shares.
| Related Aspects of Other Company Accounts | ||
| Related Aspect | Description | Accounting Treatment / Entries |
| Issue of Shares | A company raises capital by issuing equity shares to the public or investors. | Debit: Bank AccountCredit: Share Capital (Face Value)Credit: Securities Premium (if any) |
| Issue of Debentures | The company raises debt capital by issuing debentures. | Debit: Bank AccountCredit: Debenture Account |
| Redemption of Preference Shares | The company repays preference shareholders and clears dividend obligations at the redemption date. | Debit: Preference Share CapitalDebit: Securities Premium (if any)Credit: Bank Account |
| Redemption of Debentures | Repayment of debenture holders at maturity along with premium or interest. |
1. Create the Debenture Redemption Reserve (DRR) before redemption
2. Debit: Debenture Account, DRR, Premium (if any)3. Credit: Bank Account |
| Company Accounts and Audit | Ensures proper recording, verification, and compliance of all financial transactions. | Regular review of accounts, journal entries, and reconciliation to maintain accuracy and meet statutory requirements |
Related Aspects of Company Accounts cover important areas such as ESOP, underwriters, share and debenture issuance, and redemption. These concepts are part of CS Executive Corporate Accounting and help maintain accurate company accounts and audits.
Key points to remember:
- ESOP ensures employee motivation; accounting spreads the expense over the vesting period.
- Underwriters guarantee a minimum subscription; net liability is calculated after adjustments.
- Issue and redemption of shares and debentures must be recorded accurately for legal compliance.
- All transactions directly impact the company’s financial statements and shareholder equity.
By understanding the Related Aspects of Company Accounts, CS Executive students can confidently handle practical accounting problems, prepare accurate accounts, and make sure compliance with corporate regulations. Practice with examples, journal entries, and numeric problems is essential for mastering this topic.