AUTHORIZED CAPITAL ACCOUNT

Аннотация

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, corporatecharter. 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, itsresponsibility 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 theofficial documents ofthe enterprise and is subject to stateregistration. 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 isimportant in thefollowing ways:  Represents the financial independence ofthe enterprise;  Determines theshareof theorganization's participants;  Increases thelevel ofconfidence forinvestors andcreditors;  Determines thelimits ofliabilityin theevent of bankruptcy of theenterprise. 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 andotherrelevant issues are detailed in thecharterof theenterprise. Authorizedcapital can beformed in thefollowing forms: https://ijmri.de/index.php/jmsi volume 4,issue4,2025 550  Cash –themostcommon method;  Fixedassets –buildings, vehicles, equipment;  Intangibleassets –software, patents, brands;  Tangibleassets –inventories and otherresources;  Cash equivalents –securities, currency. Sources offormation ofauthorized capital:  Founders' own funds;  Funds within theframework ofinvestment projects;  Forcorporate issuers -funds raised through the placement ofshares. Authorized capital is reflected in the passivesection of thebalance sheet. The following accounts areused to record it:  75 –Settlementswith founders –inthe process of capital injection;  80 –Authorizedcapital –theformed capital is reflected here. Example: If an enterprise forms its authorized capital inthe amount of100million soums in cash, thefollowing accounting entries willbe made: Dt 51–Settlementaccount (100 million) Kt 75–Settlementswith founders (100 million) After thecapital is fully formed: Dt 75–Settlementswith founders Kt 80–Authorizedcapital If theauthorized capital iscontributed through fixed assets: Dt 01–Fixedassets Kt 75–Settlementswith founders Theauthorized capital may change in thefollowing cases during theorganization's activities:  Increase –additional sharecapitalization, capitalization from profits;  Decrease –participant withdrawal, compensation forlosses, 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–Authorizedcapital Decrease: Dt 80–Authorizedcapital Kt 75–Settlementswith founders Legal regulation of the accounting of authorized capital is carried out by the following main regulatory legal acts:  The CivilCode ofthe Republic ofUzbekistan – determines the formation ofa legal entity, theamount ofcapital, theshares of thefounders;  Laws on LLCs and JSCs – the minimum amount of authorized capital, shares, the procedurefor changes, obligations between thefounders;  IFRS and national accounting standards – determine the requirements for reflecting capital infinancial statements. In practice, there are a numberofproblems intheformation and accounting ofauthorized capital:  The discrepancy between nominal and real capital - often the capital indicated on the balance sheet is not supported byreal assets;  Untimely registration ofchanges in thecharter -which violates legality