Purchase capital

From CEOpedia | Management online

Purchase capital are capital items you purchase including: buiness assets you purchase such as machinery, cash registers, computers and cars (these items are also referred to as plant and equipment) land and buildings. The money that is required to buy a property such as a business. The bank or lender of the remaining funds does not care about the origin of the money. It can be money that the buyer has saved or has collected from other investors.

Charakteristic Of Purchase Capital

The Company is perceived as a group of people who donate money to achieve a common goal. It is distinguished by its separate features compared to other companies. These are [1]:

  • Body corporate,
  • Separate legal entity,
  • Limited liability,
  • Perpetual Succession,
  • Common seal,
  • Transferability of shares,
  • May sue or be sued.

Kinds of Companies

The classification of companies may be based on the number of persons or the liability of their members. As regards the liability of members, companies can be classified into three categories [2]:

  • Companies Limited by Shares - The liability of its members shall be limited to the nominal value of the shares held by them. If a member pays the full amount, it shall not be held liable unless such liability exists. In such a case, it may be enforced both during the existence of the company and during its liquidation.
  • Companies Limited by Guarantee - The liability of the members of that company shall be limited to the amount which they are obliged to contribute in the event of the company's liquidation.
  • Unlimited Companies - In this case, if there is no liability, the company is called a limited liability company. It may be the case that the assets are not high enough to pay the debts, so creditors can claim their receivables from their members.

On the basis of the number of members, companies can be divided into two categories [3]:

  • Public Company - A public company means a company which (a) is not aprivate company, (b) has minimum paid up capital of Rs. 5 lakh rupeesor such higher paid-up capital, as may be prescribed and (c) is a companywhich is not a subsidiary of a private company.
  • Private Company - A private company is one which has a minimum paidup capital of Rs. 1 Lakh rupees or such higher paid-up share capital asmay be prescribed, and which by its articles: (a)restricts the right to transfer its shares,(b)limits the number of its members to fifty (excluding its employees), (c)prohibits any invitation to the public to subscribe for any shares in ordebentures of the company, (d)prohibits any invitation or acceptance of deposits from person otherthan its members, directors, and relatives.


  1. Accounting for Share Capital, (2019)
  2. Accounting for Share Capital, (2019)
  3. Accounting for Share Capital, (2019)

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Author: Dżesika Mardaus