Issue of shares for consideration other than cash Archives - RBL Academy

Share Capital Funds raised by company by issue of shares. Two types: Equity Share A share that provides voting rights to its holders, belong to owners of the company, carries maximum risk and return, in which dividend is not fixed and on winding up of the company the holders of these shares receive only what is left after paying off all the liabilities and obligations of the company including Preference Shareholder repayment. Preference Share A share which carries a preferential right to get fixed dividend over equity shares to its holders and repayment of capital before holders of equity share capital. It does not carry voting right. Classification of Share Capital Authorised or Nominal Capital Maximum amount of share capital that a company can raise as per Memorandum of Association. Issued Capital That part of authorised capital .which has been issued by company to raise funds from time to time. Subscribed capital That part of issued capital which has been subscribed by public. Called Up capital That part of Subscribed capital which has been called up by company to be paid by subscribers. Paid up capital That part of Subscribed capital which has been paid by subscribers. Note: Minimum 90 % subscription of issued capital is required as per Indian Companies Act, 2013. Otherwise, Company has to take back its issue. Disclosure of Share Capital in Company’s Position Statement / Balance Sheet Extract of Position Statement / Balance Sheet as on … I. Equity & Liabilities Shareholders’ Funds A. Share capital B. Reserve & Surplus C. Money received against Share Warrants II. Current Liability Other Current Liability Current Asset Cash & Cash Equivalent Notes to Accounts: A. Share Capital Authorised capital …Equity Shares of Rs.…each ….preference shares of Rs…..each Issued Capital …Equity Shares of Rs.…each ….preference shares of Rs…..each Subscribed Capital Subscribed & Fully Paid up …Equity Shares of Rs.…each ….preference shares of Rs…..each Subscribed but not Fully Paid up …Equity Shares of Rs.…each Less: Calls in Arrears ….preference shares of Rs…..each Less: Calls in Arrears Add: Forfeited Equity Shares Add: Forfeited Preference Share B. Other Current Liability Calls in Advance C. Reserve & Surplus Security Premium Reserve Capital Reserve D. Cash & Cash Equivalent Cash in hand & Bank Accounting of Share Capital Shares can be issued either for cash or for consideration other than cash. Issue of Shares for cash: Two methods Shares Payable in Lump sum It means when payment of shares is received in one instilment. Shares Payable in Installments: Payment of shares is received in installments. First installment comes with application known as application money, Second- allotment, third -First call, fourth - Second call and so on. Last installment is also called as Final call. Accounting Entries for issue of Shares Payable in Lump sum issued at Par 1. On receipt of application money Bank A/c ….....................….Dr To Share Application A/c 2. on allotment of Shares Share Application A/c……….Dr To Share Capital A/c Accounting Entries for issue of Shares Payable in Lump sum issued at Premium 1. On receipt of application money Bank A/c ….....................….Dr (Total Application money including Premium) To Share Application A/c 2. on allotment of Shares Share Application A/c……….Dr (Total Application money including Premium) To Share Capital A/c (with Nominal/ Face value) To Security Premium Reserve A/c (with Premium amount) Accounting Entries for issue of Shares Payable in Installments Issued at Par 1. On receipt of application money Bank A/c ….....................….Dr To Share Application A/c 2. on allotment of Shares Share Application A/c……….Dr To Share Capital A/c (with nominal/ face value) 3. Amount due on allotment Share allotment A/c……..Dr To Share Capital A/c 4. On receipt of allotment money Bank A/c………………………Dr To Share Allotment A/c 5. On First call being Due First Call A/c…………….Dr To Share Capital A/c 6. On receipt of First Call Bank A/c ……………….Dr To First Call A/c 7. On Second & Final Call being Due Second & Final Call A/c……….Dr To Share Capital A/c 8. On receipt of Second & Final Call Bank A/c ……………..Dr To Second & Final Call A/c Accounting Entries for issue of Shares Payable in Installments Issued at Premium: Case I. When premium is received at the time of application along with application money: 1. On receipt of application money Bank A/c ….....................….Dr (Total Application money including Premium) To Share Application A/c 2. on allotment of Shares Share Application A/c……….Dr (Total Application money including Premium) To Share Capital A/c (with nominal/ face value) To Security Premium Reserve A/c (with Premium amount) Note: All other Entries for allotment, First call and final call will remain similar as to the case of Shares issued at Par. Case II. When premium is receivable at the time of Allotment: 1. On receipt of application money Bank A/c ….....................….Dr To Share Application A/c 2. on allotment of Shares Share Application A/c……….Dr To Share Capital A/c (with nominal/ face value) 3. Amount due on allotment including Security Premium Share allotment A/c……..Dr To Share Capital A/c To Security Premium Reserve A/c 4. On receipt of allotment money including Security Premium Bank A/c………………………Dr To Share Allotment A/c Note: If question is silent with regard to receipt of Security Premium, it is assumed that it is due with allotment money. All other Entries for First call and final call will remain similar as to the case of Shares issued at Par. Case III. When premium is receivable at the time of Application, Allotment and all Calls: 1. On receipt of application money Bank A/c ….....................….Dr (Total Application money including Premium) To Share Application A/c 2. on allotment of Shares Share Application A/c……….Dr (Total Application money including Premium) To Share Capital A/c (with nominal/ face value) To Security Premium Reserve A/c (with Premium amount) 3. Amount due on allotment including Security Premium Share allotment A/c……..Dr To Share Capital A/c To Security Premium Reserve A/c 4. On receipt of allotment money including Security Premium Bank A/c………………………Dr To Share Allotment A/c 5. On First call being Due including Security Premium First Call A/c…………….Dr To Share Capital A/c To Security Premium Reserve A/c 6. On receipt of First Call including Security Premium Bank A/c ……………….Dr To First Call A/c 7. On Second & Final Call being Due including Security Premium Second & Final Call A/c……….Dr To Share Capital A/c To Security Premium Reserve A/c 8. On receipt of Second & Final Call including Security Premium Bank A/c ……………..Dr To Second & Final Call A/c

Class 12 Accounts

Accounting for Share Capital

notes on Accounting for Issue, Forfeiture, Reissue, under & over subscription and Pro rata Allotment of Share Capital

By admin, 2 yearsJune 22, 2022 ago