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AUTHORIZED CAPITAL ACCOUNT
Kanaatov Anvar Shokirovich
Tutor of Samarkand Institute of Economics and Service
Boymurodov Otamurod Dilmurod ugli
Student of Samarkand Institute of Economics and Service
Orzuyev Otabek Oybekovich
Student of Samarkand Institute of Economics and Service
Baxtiyorova Feruza Obidjon qizi
Student of Samarkand Institute of Economics and Service
Annotation:
This article analyzes the economic essence of charter capital, its legal foundations,
and the procedure for its accounting in financial reporting. It examines the sources of charter
capital formation, accounting records, and the documentation process related to capital changes.
The paper also highlights common issues in the accounting of charter capital, provides insights
from international practices, and offers practical recommendations for improvement. The
analysis is based on the legislation of the Republic of Uzbekistan and international accounting
standards.
Keywords:
Charter capital, founder’s share, accounting, legal framework, capital changes,
financial reporting, international standards, corporate charter.
Authorized capital is a financial basis formed by the founders of an enterprise or organization
when it is established, which determines the property base of a legal entity and the shares
between the founders. Authorized capital is one of the important indicators of the legality of the
enterprise, its responsibility to creditors and reliability.
Authorized capital is the sum of funds contributed by the organizers of an enterprise (or legal
entity) to start and finance the activities of the enterprise. The size of the authorized capital is
determined by the founders and is included in the charter of the enterprise. This capital is
recorded in the official documents of the enterprise and is subject to state registration.
Authorized capital is the sum of financial, tangible or intangible assets contributed by the
founders to start the activities of an organization, form financial resources and ensure
responsibility to creditors, regardless of its legal form. Authorized capital is not only an
organizational and legal criterion, but also a guarantee of economic stability. Authorized capital
is important in the following ways:
Represents the financial independence of the enterprise;
Determines the share of the organization's participants;
Increases the level of confidence for investors and creditors;
Determines the limits of liability in the event of bankruptcy of the enterprise.
Authorized capital is a mandatory financial base that is deposited into a legal entity when it is
established. In order for the enterprise to start its activities, this capital must be contributed in the
form of real assets or money. The procedure for forming capital, shares between the founders
and other relevant issues are detailed in the charter of the enterprise.
Authorized capital can be formed in the following forms:
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Cash – the most common method;
Fixed assets – buildings, vehicles, equipment;
Intangible assets – software, patents, brands;
Tangible assets – inventories and other resources;
Cash equivalents – securities, currency.
Sources of formation of authorized capital:
Founders' own funds;
Funds within the framework of investment projects;
For corporate issuers - funds raised through the placement of shares.
Authorized capital is reflected in the passive section of the balance sheet. The following accounts
are used to record it:
75 – Settlements with founders – in the process of capital injection;
80 – Authorized capital – the formed capital is reflected here.
Example: If an enterprise forms its authorized capital in the amount of 100 million soums in cash,
the following accounting entries will be made:
Dt 51 – Settlement account (100 million)
Kt 75 – Settlements with founders (100 million)
After the capital is fully formed:
Dt 75 – Settlements with founders
Kt 80 – Authorized capital
If the authorized capital is contributed through fixed assets:
Dt 01 – Fixed assets
Kt 75 – Settlements with founders
The authorized capital may change in the following cases during the organization's activities:
Increase – additional share capitalization, capitalization from profits;
Decrease – participant withdrawal, compensation for losses, court decisions.
Any change in capital requires the introduction of appropriate amendments to the charter of the
enterprise and its re-registration.
Accounting entry:
Increase:
Dt 84 – Retained earnings / 83 – Reserve capital
Kt 80 – Authorized capital
Decrease:
Dt 80 – Authorized capital
Kt 75 – Settlements with founders
Legal regulation of the accounting of authorized capital is carried out by the following main
regulatory legal acts:
The Civil Code of the Republic of Uzbekistan – determines the formation of a legal entity,
the amount of capital, the shares of the founders;
Laws on LLCs and JSCs – the minimum amount of authorized capital, shares, the
procedure for changes, obligations between the founders;
IFRS and national accounting standards – determine the requirements for reflecting
capital in financial statements.
In practice, there are a number of problems in the formation and accounting of authorized capital:
The discrepancy between nominal and real capital - often the capital indicated on the
balance sheet is not supported by real assets;
Untimely registration of changes in the charter - which violates legality;
Poor documentation - there is no complete documentary confirmation of the capital
contribution;
Insufficient qualification of accountants - especially in small and new organizations;
Insufficient implementation of information systems - there is no possibility of electronic
tracking of the movement of authorized capital.
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Approaches to calculating authorized capital in international practice:
Germany: The minimum authorized capital for LLCs is €25,000. Capital is invested
through a bank, and strict financial control is in place.
USA: There is no strict requirement for the amount of capital, but the company's liability
is high and auditing is important.
Russia: The minimum authorized capital for LLCs is 10,000 rubles. However, it can be
provided not only with money, but also with property.
Kazakhstan: The minimum authorized capital is 100 tenge, but the company must be
fully formed within 1 year after registration.
These experiences may be useful in further improving the authorized capital system in
Uzbekistan.
Authorized capital is a key element determining the financial stability of any legal entity. Proper
accounting of authorized capital reflects the reliability and financial condition of the enterprise.
Although the existing legislation allows for the regulation of capital accounting, there are
problems with its correct application in practice. The following proposals have been developed:
Introduce a separate chapter on authorized capital in the standard accounting instructions.
Simplify the process of formation and registration of authorized capital for newly
established enterprises.
Introduce a mechanism for monitoring the formation of authorized capital through digital
platforms.
Make it mandatory to involve an independent appraiser in assessing the fairness of the
valuation of capitalized assets (fixed assets, intangible assets).
Strengthen the div that monitors the full compliance of authorized capital accounting
with IFRS requirements.
References
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2. Barry Elliot, Jamie Elliot. Financial accounting and reporting. London, 2015. 17th Edition.
3. Harry I. Wolk, James L. Dodd, John J. Rozycki. Accounting Theory. 8th edition. SAGE
Publications.USA, 2013.
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reporting. Textbook. - T.: “Economics-Finance”, 2018.
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