[Prachanda]

I have encountered a problem in understanding a balance sheet.

A private limited company with only one shareholder was registered 6 years ago with authorized capital of INR 500,000.00. Now in the year end figure of 2008, the balance sheet reflects 'Capital Investment" as INR 3,000,000.00. Isn't this is misleading? How can a company whose authorized capital is INR 500,000.00 can reflect capital investment of INR 3,00,000.00 in the balance sheet?

[rehmanvohra]

I think you do have a point there. It would be better if you had analysed the break up of the figure of INR 3,000,000. Just as a guess work, is this figure presented on the liabilities side of the balance sheet? In that case it probably means shareholders' equity.

Authorized capital gives the authority to issue shares of the face value of INR500,000. It may have been issued at a premium or there may be retained earnings, general and specific reserves, revaluation reserves, etc.

All you should do is analyse the figure. Find out what is it made up of and you should get the desired answer.