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Issue of Shares
Issue of Shares
Issue of Shares
Issue of Shares
Every company has its own common seal, which act as the
official signature of the company.
The shares of a public company are transferable.
Shareholders are the true owners of a Company, but usually,
the number of shareholders is quite large, and as such it is
neither possible nor desirable for ach member to take part
in the day- to –day management of a Company.
S No. Basis Private
company
Public
company
1 Number of
members
Minimum- 2
Maximum- 200
Minimum- 7
Maximum- no limit
2 Invitation to the
Public
It cannot invite the public to
subscribe to its shares
It can invite the public to
subscribe to its shares
3 Transfer of Shares There is restrictions on the
transfer of its shares
There is no restrictions on the
transfer of its shares
1. : The shares which get
preferential right in respect of :
(a) Right of dividend
(b) Repayment of capital on winding up of
the company.
: It is an invitation to
public for subscription of shares or
debentures.
: In case of company money
is contributed by public and people who
contributed money are called
shareholders.
3. : Capital raised by issue of shares is called
share capital.
4. : Also called as Nominal or
registered capital. It is the maximum amount of capital a
company can issue. It is stated in MOA.
5. : This is part of authorized capital which
is offered to public for subscription. It cannot exceed
authorized capital.
6. Called Up Capital : It is the amount of nominal value
of shares that has been called up by the company for
payment by the subscriber towards the share.
:
:
:
AD Deli Ltd. invited applications for 20,000 Equity shares of Rs
10 each at the issue price of Rs. 10. The Amount payable along
with application is Rs. 10. This issue was fully subscribed. Show
the Balance sheet of the company.
Particulars Note
no.
Rs.
I. Equity and Liabilities
1. Shareholder’s funds
Share capital
TOTAL
II. ASSETS
1. Current Assets
Cash and cash Equivalents
TOTAL
1
2
2,00,000
2,00,000
2,00,000
2,00,000
Notes to Accounts
1. Share Capital
Authorised Capital
… Equity Shares of Rs. 10 each
Issued Capital
20,000 Equity Shares of Rs 10 each
Subscribed Capital
Subscribed and fully paid-up
20,000 Equity Shares of Rs. 10 each
2. Cash and Cash Equivalents
Cash at Bank
Rs.
2,00,000
2,00,000
2,00,000
ISSUE OF SHARES AT PAR
ISSUE OF SHARES AT PREMIUM
Shares are issued At premium to the public by well
managed and financially strong companies through
the IPO.
Called Value > Face Value
Securities Premium Reserve A/C is made for this
purpose.
This Premium can be called with any installment
like (Application , Allotment,1st Call,2nd Call .....)
In absence of information the amount of Premium
is to be recorded at the time Allotment
USE OF SECURITY PREMIUM
RESERVE
Under sec. 52 of co. Act 2013.,Amt.of sec. pre. Res.
Can be used for the following purposes
To issue fully paid up bonus shares to the
shareholders.
To Buy-back its own shares as per section 68.
To Write off:
•Preliminary expenses.
•Commission paid, Discount Allowed on issue of
shares or debentures
It refers to the amount which has
not been paid up by the shareholders on allotment or
calls made by the company till the last day fixed by
the company for payments. Company can charge
interest @10% p.a from the due date to the date of
actual payment
Account is shown separately in the balance sheet
It refers to the amount which has not called up by the
company but has been paid by some shareholder in
advance. Company is required to pay interest @ 12%
p.a
Shares issued for consideration other than
cash
 Sometimes a company purchases some assets from the vendor and
instead of paying the vendor in cash, the company may decide to issue
shares to vendors is known as issue of shares for consideration other
than cash shares can be issued to vendors at par, premium.
 The following entries will be pass
SOME CHANGES IN CO. ACT 2013.
Issue of share at Discount
on issue of shares at a discount
Prohibition on issue of shares at a discount
As per AS-26 Preliminary Expenses are
to be written off in the year in which
they are incurred. They should be
written off first from Securities
Premium Reserve Account and in its
absence from Profits & Loss in the
same year.
– Company act
2013 introduces a new type of entity to
existing list one person company means a
private ltd. Company with only person as its
members . Only natural person who is citizen
of India can be a member of OPC Its
minimum paid up capital is Rs. 1,00,000 it can
be formed for business as well as charitable
purpose.
NORMAL SUBSCRIPTION
UNDER SUBSCRIPTION
Shares applied < Shares offered
The number of sha
Accounting entries are made on the basis of number of
shares applied for by the public rather than offered for.
OVER SUBSCRIPTION
.
OVER SUBSCRIPITION
OVER SUBSCRIPITION
•Accounting Treatment in the case of Alternative 1:
Share Application A/C Dr.
To Share Capital A/C
To Bank A/C
OVER SUBSCRIPTION
•Accounting treatment in the case of
Alternative 2:
Share Application A/C Dr.
To Share Capital A/C
To Share Allotment A/C
To Calls in Advance A/C
• Due Application money is transferred to “Share
Capital A/C.”
• Excess money on application transferred to “Share
Allotment A/C” and the balance transferred to “Calls
in Advance A/C”.
OVER SUBSCRIPTION
•Accounting Treatment in the case of
Alternative 3:
Share Application A/C Dr.
To Share Capital A/c
• Due Application money is transferred to “Share Capital A/C”.
•Excess money on application transferred to ‘Share Allotment
A/C” and the balance transferred to “Calls in Advance A/C”.
•Excess money of rejected applications is refund
FORFEITURE OF SHARES
Shareholder fails to pay the Called up money on
allotment and further calls.
Shares can be cancelled and amount already paid
may be forfeited.
Issue of Shares
FORFEITURE OF SHARES
PAR or at
•Case 2 when shares are issued originally at
PREMIMUM (NOT RECEIVED )
FORFEITURE OF SHARES
RE-ISSUED OF FORFETED SHARES
•Case 1 when share are Re-Issued at PAR
Bank A/C Dr.
To Share Capital A/C
RE-ISSUE FORFEITURE OF SHARES
•Case 2 when shares are Re-issued at
RE-ISSUE OF FORFEITED SHARES
Share Forfeiture A/C
R Ltd. Forfeited 200 equity shares Rs. 10 each issued at a
premium of Rs. 5 per share payable along with allotment, for
the non-payment of allotment money of Rs. 8 per share
(including premium). Applications money was Rs. 2 per share.
The forfeited shares were reissued for Rs. 2,000 as fully paid
up. Pass the necessary journal entries.
Date Particulars L.F Dr. (Rs.) Cr.(Rs.)
Equity Share Capital A/c Dr.
Securities Premium reserve A/c Dr.
To Share Allotment A/c
To Forfeited Shares A/c
(Forfeited of 200 shares)
1,000
1,000
1,600
400
Bank A/c Dr.
To Equity Share Capital A/c
(Reissue of 200 shares)
2,000
2,000
Forfeited Shares A/c Dr.
To Capital Reserve A/c
(Transfer of profit on reissue)
400
400
CONCLUSION
• Equity shareholders are
Partly Owners of the
company.
• Premium received on the
issue of share is shown on
the Liabilities side of the
balance sheet.
Issue of Shares

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Issue of Shares

  • 5. Every company has its own common seal, which act as the official signature of the company. The shares of a public company are transferable. Shareholders are the true owners of a Company, but usually, the number of shareholders is quite large, and as such it is neither possible nor desirable for ach member to take part in the day- to –day management of a Company.
  • 6. S No. Basis Private company Public company 1 Number of members Minimum- 2 Maximum- 200 Minimum- 7 Maximum- no limit 2 Invitation to the Public It cannot invite the public to subscribe to its shares It can invite the public to subscribe to its shares 3 Transfer of Shares There is restrictions on the transfer of its shares There is no restrictions on the transfer of its shares
  • 7. 1. : The shares which get preferential right in respect of : (a) Right of dividend (b) Repayment of capital on winding up of the company.
  • 8. : It is an invitation to public for subscription of shares or debentures. : In case of company money is contributed by public and people who contributed money are called shareholders.
  • 9. 3. : Capital raised by issue of shares is called share capital. 4. : Also called as Nominal or registered capital. It is the maximum amount of capital a company can issue. It is stated in MOA. 5. : This is part of authorized capital which is offered to public for subscription. It cannot exceed authorized capital. 6. Called Up Capital : It is the amount of nominal value of shares that has been called up by the company for payment by the subscriber towards the share.
  • 10. : : :
  • 11. AD Deli Ltd. invited applications for 20,000 Equity shares of Rs 10 each at the issue price of Rs. 10. The Amount payable along with application is Rs. 10. This issue was fully subscribed. Show the Balance sheet of the company. Particulars Note no. Rs. I. Equity and Liabilities 1. Shareholder’s funds Share capital TOTAL II. ASSETS 1. Current Assets Cash and cash Equivalents TOTAL 1 2 2,00,000 2,00,000 2,00,000 2,00,000
  • 12. Notes to Accounts 1. Share Capital Authorised Capital … Equity Shares of Rs. 10 each Issued Capital 20,000 Equity Shares of Rs 10 each Subscribed Capital Subscribed and fully paid-up 20,000 Equity Shares of Rs. 10 each 2. Cash and Cash Equivalents Cash at Bank Rs. 2,00,000 2,00,000 2,00,000
  • 13. ISSUE OF SHARES AT PAR
  • 14. ISSUE OF SHARES AT PREMIUM Shares are issued At premium to the public by well managed and financially strong companies through the IPO. Called Value > Face Value Securities Premium Reserve A/C is made for this purpose. This Premium can be called with any installment like (Application , Allotment,1st Call,2nd Call .....) In absence of information the amount of Premium is to be recorded at the time Allotment
  • 15. USE OF SECURITY PREMIUM RESERVE Under sec. 52 of co. Act 2013.,Amt.of sec. pre. Res. Can be used for the following purposes To issue fully paid up bonus shares to the shareholders. To Buy-back its own shares as per section 68. To Write off: •Preliminary expenses. •Commission paid, Discount Allowed on issue of shares or debentures
  • 16. It refers to the amount which has not been paid up by the shareholders on allotment or calls made by the company till the last day fixed by the company for payments. Company can charge interest @10% p.a from the due date to the date of actual payment Account is shown separately in the balance sheet It refers to the amount which has not called up by the company but has been paid by some shareholder in advance. Company is required to pay interest @ 12% p.a
  • 17. Shares issued for consideration other than cash  Sometimes a company purchases some assets from the vendor and instead of paying the vendor in cash, the company may decide to issue shares to vendors is known as issue of shares for consideration other than cash shares can be issued to vendors at par, premium.  The following entries will be pass
  • 18. SOME CHANGES IN CO. ACT 2013. Issue of share at Discount on issue of shares at a discount Prohibition on issue of shares at a discount
  • 19. As per AS-26 Preliminary Expenses are to be written off in the year in which they are incurred. They should be written off first from Securities Premium Reserve Account and in its absence from Profits & Loss in the same year.
  • 20. – Company act 2013 introduces a new type of entity to existing list one person company means a private ltd. Company with only person as its members . Only natural person who is citizen of India can be a member of OPC Its minimum paid up capital is Rs. 1,00,000 it can be formed for business as well as charitable purpose.
  • 22. UNDER SUBSCRIPTION Shares applied < Shares offered The number of sha Accounting entries are made on the basis of number of shares applied for by the public rather than offered for.
  • 25. OVER SUBSCRIPITION •Accounting Treatment in the case of Alternative 1: Share Application A/C Dr. To Share Capital A/C To Bank A/C
  • 26. OVER SUBSCRIPTION •Accounting treatment in the case of Alternative 2: Share Application A/C Dr. To Share Capital A/C To Share Allotment A/C To Calls in Advance A/C • Due Application money is transferred to “Share Capital A/C.” • Excess money on application transferred to “Share Allotment A/C” and the balance transferred to “Calls in Advance A/C”.
  • 27. OVER SUBSCRIPTION •Accounting Treatment in the case of Alternative 3: Share Application A/C Dr. To Share Capital A/c • Due Application money is transferred to “Share Capital A/C”. •Excess money on application transferred to ‘Share Allotment A/C” and the balance transferred to “Calls in Advance A/C”. •Excess money of rejected applications is refund
  • 28. FORFEITURE OF SHARES Shareholder fails to pay the Called up money on allotment and further calls. Shares can be cancelled and amount already paid may be forfeited.
  • 31. •Case 2 when shares are issued originally at PREMIMUM (NOT RECEIVED ) FORFEITURE OF SHARES
  • 32. RE-ISSUED OF FORFETED SHARES •Case 1 when share are Re-Issued at PAR Bank A/C Dr. To Share Capital A/C
  • 33. RE-ISSUE FORFEITURE OF SHARES •Case 2 when shares are Re-issued at
  • 34. RE-ISSUE OF FORFEITED SHARES Share Forfeiture A/C
  • 35. R Ltd. Forfeited 200 equity shares Rs. 10 each issued at a premium of Rs. 5 per share payable along with allotment, for the non-payment of allotment money of Rs. 8 per share (including premium). Applications money was Rs. 2 per share. The forfeited shares were reissued for Rs. 2,000 as fully paid up. Pass the necessary journal entries. Date Particulars L.F Dr. (Rs.) Cr.(Rs.) Equity Share Capital A/c Dr. Securities Premium reserve A/c Dr. To Share Allotment A/c To Forfeited Shares A/c (Forfeited of 200 shares) 1,000 1,000 1,600 400 Bank A/c Dr. To Equity Share Capital A/c (Reissue of 200 shares) 2,000 2,000 Forfeited Shares A/c Dr. To Capital Reserve A/c (Transfer of profit on reissue) 400 400
  • 36. CONCLUSION • Equity shareholders are Partly Owners of the company. • Premium received on the issue of share is shown on the Liabilities side of the balance sheet.