In balance sheet statement, what is the difference between authorized shares and issued shares?

Question

10 pts. for good or detailed answer.

Answer 1

What is authorised capital?
The amount of share capital stated in the memorandum of association is the company's 'authorised' capital. An entity's charter prescribes the number of ordinary shares that an entity is authorised to issue (authorised capital).

What is issued capital?
Issued capital is the actual shares issued to shareholders. This means the nominal value of the shares rather than their actual worth (i.e. what you can get for them if you were to sell them). The amount of issued capital cannot exceed the amount of the authorised capital.

But what if the issued shares have reached the company's authorised capital? Does it mean it cannot raise any more funds? No, you merely have to increase the authorised capital, and then you can go ahead and allot more shares.

Can a company increase its authorised share capital?
A company can increase its authorised share capital by passing an ordinary resolution (unless its articles of association require a special or extraordinary resolution).

Answer 2

Authorized shares - Number of shares authorized for issuance by a firms corporate charter.

Issued share capital - Total amount of shares that are in issue. (Related:outstanding shares).
The amount of authorised share capital that shareholders have actually subscribed to a company for share ownership.

Answer 3

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