Characteristics Of Company Accounts :

A company has the following essential characteristics:

1) Voluntary Association

It is a voluntary association of persons. No law can compel persons to form a company. It is their own creation and voluntary act.

2) Limited Liability

The liability of shareholders is limited to the amount he has agreed to pay to the company, either by purchasing shares or by giving a guarantee.

3) Separate Legal Entity

Company can hold, buy and sell properties. It can open bank account in its name and can enter into contracts. It can sue and be
sued.

4) Common Seal

Being an artificial person, it cannot sign the documents and can act only through natural persons, called Directors. Every company must, therefore have a common seal with its name engraved on it. The common seal of the company is regarded as the official signature of the company. Any documents prepared by the directors belongs to the company only when it contains the common seal.

5) Perpetual Succession

It is independent of members and its existence is not affected by the coming in and going out of its members. Its continuity is not affected by the changes in the membership.

6) Ownership and Management are separated

As the number of shareholders are large in number, it becomes difficult for them to carry on the day-to-day affairs of the business so
the ownership and management are separated. The management of the company is in the hands of the Board of Directors.

7) Transferability of shares

Shares are freely transferable without restriction.

8) Compulsory Registration

All companies must be registered under the Companies Act, 1956.

9) Maintenance of Books

A company is required by law to keep a prescribed set of account books and it has to observe the regulations carefully.

10) Periodic Audit

Audit of company’s accounts is compulsory by a practicing chartered accountant, who is appointed by the shareholders on the recommendation of Board of Directors, at the Annual General Meeting.