2. Shares
Meaning :-According to Sec 2 (46) of the Companies
Act, share has been defined as a share in the share
capital of the company and it includes stock . Shares are
the units into which the capital of the company is
divided.
Classes of shares :- Preference shares and Equity shares
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3. Mode of Issue
There are three ways of issue of shares.
Private placement
Public issue
Right issue
Private placement: Under this the shares are
distributed to the promoters and their group. In case
of private limited companies, which is prohibited from
the issue of shares to the public, shares are issued by
private placement
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4. Public issue:
Through Prospectus: The company invites the public to subscribe to
the shares through issue of prospectus. Only public limited company
can issue the shares to the public.
Procedure – Issue of prospectus, receipt of application with
application money, acceptance , allotment , calls.
IPO (Initial Public Offer): It is selling of shares or securities
(Which at a later date convertible into equity share) to the public in
the primary market. An unlisted company can make an IPO for issue
of shares on the fulfillment of certain conditions as per SEBI rules.
Book building: Book-building is a process to elicit demand for, and price of,
securities. There are two alternative: (a) 75 pre cent book-building and (b)
offer to public through book-building. The draft prospectus should indicate
the price band.
Rights issue: In this issue shares are first offered to the existing shareholders.
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5. Accounting treatment relating to issue
of shares
Issue of shares for cash
Private placement, Public issue, Rights issue,
ESOPs (Employee Stock Options)
Issue of shares for consideration other than cash
Bonus Issue
Issued to employees- sweat equity
Issued to vendor
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6. Accounting treatment for private
placement
Bank Account Dr.
To Share Capital A/c.
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7. Issued to vendors
Purchase of assets:
Purchase of assets Assets account Dr.
To Vendors Account
Payment in form of shares
At par Vendors Account Dr.
To Share Capital Account
At Premium Vendors account Dr.
To Share Capital Account
To Security Premium Account
At discount Vendors Account Dr.
Discount on issue of shares Account
To Share Capital AccountCA. MINAXI RACHCHH
8. Purchase of Business
Purchase of
business
Assets account Dr.
At profit To Liabilities Account
To Vendors/Liquidators Account
To Capital Reserve
At Loss Assets account Dr.
Goodwill Account Dr.
To Vendors/Liquidators Account
To Liabilities Account
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9. Payment in form
of shares
At par Vendors/Liquidators Account Dr.
To Share Capital Account
At Premium Vendors/Liquidators Account Dr.
To Share Capital Account
To Security Premium account
At discount Vendors/Liquidators Account Dr.
Discount on issue of shares Account
To Share Capital Account
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10. Rights issue
Full amount at the time of Application:
Amount received
At par Bank Account Dr.
To Share Application A/c.
At Premium Bank Account Dr.
To Share Application A/c.
To Security Premium A/c
At Discount Bank Account Dr.
Discount on issue of shares A/c Dr.
To Share Application A/c.
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11. Issue of bonus shares
Bonus shares issue may be done in two different ways:
Making partly paid-up shares as fully paid up
shares:- A company cannot utilize balance in
“Securities Premium Account”, ”Revaluation Reserve
Account” and “Capital Redemption Reserve Account”
for this purpose.
Issue of fully paid Bonus Shares: A company can
utilize balance in “Capital Redemption Reserve
Account”, “Securities Premium Account” and balance
from free Reserves for such issue of Bonus shares.
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12. Making partly paid-up shares as
fully paid up shares
Declaration of
Bonus
Profit & Loss/Free Reserves A/c Dr.
To Bonus to Share Holders A/c.
Call due on
shares
Share final Call A/c Dr.
To Equity Share Capital A/c.
Bonus in form
of shares
Bonus to Share Holders A/c. Dr
To Share Final Call A/c.
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13. Issue of fully paid Bonus Shares
1)Declaration of
bonus
Capital Redemption Reserve/ Securities Premium
/Reserves/ Profit & Loss A/c. Dr.
To Bonus to Share Holders A/c.
2)Bonus in shares
At par Bonus to Share Holders A/c Dr.
To Equity Share Capital A/c.
At Premium Bonus to Share Holders A/c Dr.
To Equity Share Capital A/c.
To Security Premium A/c
At Discount Bonus to Share Holders A/c Dr
Discount on issue of shares A/c Dr.
To Equity Share Capital A/c.
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14. Public issue
At Par
At Premium
At Discount
Under Subscription
Equal Subscription
Over Subscription
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