Authorised capital

Hey kiddo, today we are going to learn about authorised capital! So basically, a company is like a big piggy bank that has a lot of money. Imagine this piggy bank has different sections - one for parents, one for grandparents, one for aunts and uncles, and so on.

Now, when a company is formed, it decides how much money it wants to be able to put in each section of the piggy bank, and this is called the authorised capital. This is the maximum amount of money that the company can put into the piggy bank.

But here's the tricky part - just because the company has authorised capital doesn't necessarily mean that it has put all that money in the piggy bank.

Think of it like this: if you have a piggy bank with different sections, you might decide to put your savings in different sections based on what you plan to do with the money. You might put some in the "fun fund" for toys, some in the "rainy day fund" for emergencies, and some in the "savings fund" for future expenses.

Similarly, a company might have different plans for its money too. Some of the authorised capital might be used to buy new equipment, some to build new factories, some to pay employee salaries, and so on.

So in summary, authorised capital is the maximum amount of money that a company can put in its piggy bank, but it doesn't necessarily mean that all the money is in the piggy bank at the same time. It depends on what the company needs the money for.