BBA THIRD SEMESTER CORPORATE ACCOUNTING - I AS PER KARNATAK UNIVERSITY SYLLABUS

1. Chapter – 1
Share capital
of a
company

2. contents
• Introduction
• Meaning of joint stock company
• Features of joint stock company
• Kinds of companies
• Formation of joint stick company
• Share capital of a company
• Meaning of shares and kinds of shares
• Stock
• Share and stock
• SEBI Guidelines on public issue

3. contents
• Issue of shares
• Issue of prospectus
• Issue of shares at par, premium & discount
• Under subscription and over subscription of
shares
• Calls-in arrears and calls-in-advance
• Forfeiture and re-issue of forfeited shares

4. Introduction

– The word ‘corporation’ is derived from the
Latin word “Corpus”, meaning body.
– It means an association of persons formed for
any common object of its members and acts on
behalf of all them.
According to prof. Haney, “a company is an
artificial person, created by law having a
separate entity with a perpetual succession and a
common seal.”

5. Meaning of joint stock company
It is an association of persons formed to carry
on business to earn profit , it has a common
seal of its own and perpetual succession.
According to HANEY, “Joint Stock Company is
a voluntary association of individuals for
profit, having a capital divided into
transferrable shares.”

6. Features of joint stock company
• Registered under companies Act.
• Separate legal entity
• Perpetual succession and existence will continue
in spite of death or insolvency
• Purchase or sell property
• Sue and be sued
• Artificial person
• Limited liability
• Shares are freely transferrable

7. Kinds of company
Chartered companies
Statutory companies
Registered companies
– Companies limited by shares
– Companies limited by guarantee
– Unlimited companies
 private company &
Public company

8. Formation of a joint stock company
The formation of joint stock company is
formed by four stages
1. Promotion
2. Incorporation
3. Raising of capital
4. Commencement of business

9. Documents to be filed with the roc
• MOA
• AOA
• List of persons who have given consent to act as
directors along with written consent
• Directors undertaking to take and pay for
Qualification Shares
• Address of registered office
• Statutory declaration by competent person
Along with the necessary documents the stamp
duty and fees are also paid

10. Certificate of incorporation & certificate of commencement
of business
• Certificate of Incorporation: After filing the
documents along with stamp duty and fees to the
ROC, if the registrar is satisfied then he will issue a
“Certificate of Incorporation” and the company is
formed or registered.
• Certificate of Commencement of Business: A public
company has to comply with certain other
requirements and the ROC will issue a “Certificate
of Commencement of Business.” then only the public
company can commence its business.

11. Minimumsubscription
It is the amount of capital to be collected from
the shareholders.
 Minimum Subscription is one of the
requirement to be complied with, to get
Certificate of Commencement of Business by
public company.

12. Share capital of a company
• It appears in the balance-sheet with the following
details-
1. Authorized Capital
2. Issued capital
3. Subscribed capital
4. Called-up capital
5. Paid-up capital

13. Reserve capital
• It is that portion of the subscribed capital
which is not to be called by the company,
except on its winding up.
• This reserve capital is available only to the
creditors in case of liquidation of the
company.

14. Meaning of shares and kinds of shares
• A share is defined as, “a share in the share
capital of the company and includes stock”
Share capital of the company is collected by
issue of shares.
Share is one of the units into which total
capital is divided.
The person who owns the share is called
shareholder.

15. Meaning of shares and kinds of shares
• A SHARE is the interest of the share holder in
a company.
• The capital of a company is divided into a no. of
units called shares.
KINDS OF SHARES –
• Preference Shares
• Equity Shares

16. KINDS OF SHARES
Types of
shares
Equity shares
Preference
shares
Cumulative and
non-cumulative
participating and
non-participating
Redeemable and
non-redeemable
Convertible and
non-convertible

17. Equity shares
• Equity shares are those shares which are
ordinary in the course of company's business.
• They are also called as ordinary shares.
• According to section 85 (2),“Equity share
capital” means, with reference to any such
company, all share capital which is not
preference share capital.

18. Equity shares
– Equity shares with Voting Rights :- The equity
shareholders are the real owners of the company.
The company does not specify the rate of
dividend, as rate of dividend depends on the
profit of the company. They are eligible to vote at
general meeting of the company.
– Equity shares with Differential rights :-
Differential rights as to dividend, voting or in
accordance with such rules and conditions as
prescribed.

19. TYPES OF EQUITY SHARES
 Blue Chip Shares.
 Income Shares.
 Growth shares.
 Cyclical Shares.
 Defensive shares.
 Speculative share.

20. TYPES OF EQUITY SHARES
Blue Chip Shares
-These are the shares of companies which are well established
and reputed in all fields.
-These shares normally pay dividends, and have a track record
of performance and earnings. Blue chip companies also have
no large amounts of liabilities.
-The Blue Chip companies include Microsoft, Coca- Cola,
Reliance, ONGC, NTPC, SBI, ICICI, Tata Steels, Wipro, and a
few others.
Income Shares
– These companies have a stable share value and always pay
high dividends.
– Since they have high dividend payout ratio, the profits of
the company saved are less and so their growth
opportunities are very less.

21. TYPES OF EQUITY SHARES
Growth Shares
– These are shares of companies which are on top
in their industry like Wipro in Computers, Tatas
in steel, Bajaj in automobiles etc.
– The shares here have less dividend payout and so
their growth rate is high.
Cyclical Shares
– Some company’s performance keeps fluctuating
like a business cycle meaning the share prices are
affected with any variations in the economy.
– Sugar and fertilizer are two such industries.

22. TYPES OF EQUITY SHARES
Defensive Shares:
– The shares of these companies are not affected by
the economical changes.
Speculative Shares
– The shares here are traded on speculations. These
shares are high risk in nature but also give very
high returns in short terms.
– The scrips fall sharply suddenly so investors should
always keep an eye on it always.

23. Preference shares
• Preference shares carry special rights with
respect to the payment of dividend, repayment
of capital on liquidation of the company , or
both.
• The dividends paid on these shares are fixed
and are paid first.
• When the company goes into liquidation , the
repayment of capital should be paid first to
these shares.

24. TYPES OF PREFERENCE SHARES
1. Cumulative Preference Shares
– Fixed rate of dividend is guaranteed.
– At the time of inadequate profit, they will not loss
anything.
– Arrear will get in subsequent years.
2. Non-Cumulative Preference Shares
– Fixed rate of dividend is guaranteed.
– At the time of inadequate profit, they will not get
anything.

25. TYPES OF PREFERENCE SHARES
3. Participating Preference Shares
– Fixed rate of dividend is guaranteed.
– Entitled to share the surplus profit.
4. Non-Participating Preference Shares
– Fixed rate of dividend is guaranteed.
– Does not share the surplus profit.
5. Redeemable Preference Shares
– Shares which a company may repay after a fixed period
of time or earlier.
6. Irredeemable Preference Shares
– It do not carry the arrangement for redemption.
– Shares are repayable only at winding

26. TYPES OF PREFERENCE SHARES
7. Convertible Preference Shares
– It can be converted into Equity shares within a
certain period.
8. Non-Convertible Preference Shares
– It cannot be converted into Equity shares.

27. Sweat equity shares
• It is issued to employees or directors of a company at
discounted rate.
• Issued for consideration other than cash.
It must follow these conditions;
1. Authorised by special resolution in general meeting.
2. Number, price, consideration (if any) and classes
should be specified in the resolution.
3. The company must complete one year.
4. Equity shares of those company must be listed in
recognised stock exchange.

28. stock
• It refers to total consolidation of holdings of shares
of a company held by different holders.
• Convert all fully paid up shares into stock and
reconvert that stock into fully paid shares of any
denominations, as per section 94(1)(c) of companies
Act.
• Stocks of a company can be defined as total units of
share.

29. Share and stock
Share Stock
1. A share may either be fully paid up or
partly paid up.
1. Stock can never be partly paid – up.
2. Shares can be issued originally. 2. A company cannot make an original issue
of stock.
3.A share has a nominal value 3. A shock has no such number.
4.A share has a definite number which
distinguishes it from other shares
4. A shock has no nominal value.
5. A share can be transferred only in its
entirety or in its multiples only.
5. Stock may be transferred in any fractions.
6. Shares can be issued by any company-
public or private
6.Stock is applicable only by public company
limited by shares.

30. SEBI Guidelines on public issue
• The companies whether listed or unlisted should
offer at least 25% of the issue size to the public
• In case of public issue at par an applicant should
apply for a minimum number of 200 shares of the
face value of 100 each. If the issue price is at
premium or public issue is for more than one
type of security, the application money for each
type of security should be for a minimum of
2000 irrespective of the size of such premium.

31. SEBI Guidelines on public issue
• The minimum application money to be paid by the
applicant with the application should not be less
than 25% of the issue price ( it is at 5% as per the
Act)
• In case, the subscription money is to be received in
calls, the calls should be structured that the entire
subscription money is to be collected within 12
months from the date of allotment. If the issue size is
above 500 crores and the issue is subject to
monitoring the requirements, the above time
restriction of 12 months to collect the calls, does not
apply. The shares are to be forfeited in case they do
not pay within 12 months.

32. SEBI Guidelines on public issue
• The companies are eligible for making public issue s
whether listed or not may price their share freely.
• Before the public issue of equity shares the company
has to ensure that all the partly paid shares or either
fully paid or they are duly forfeited.
• The shares may be issued in any denomination
subject to specified condition.
• There are also other guidelines regarding issue of
shares to promoters, etc..

33. Issue of shares
• The share capital of a company is divided in to
number of units called shares.
• Each share has a value called face value.
• The shares can be issued at par, premium and
discount.

34. Allotment of shares
• If minimum subscription has been received, the
company may proceed for allotment of shares for
fulfilling certain other legal formalities.
• Letter of Allotment are sent to those to whom shares
are allotted.
• Letter of Regret are sent to those to whom no
allotment has been made.

35. Issue of prospectus
• The company first issues prospectus to the public.
• Prospectus is an invitation to the public, that a new
company has come into existence and it needs fund
to do business.
• It contains complete information about the company
the manner in which the money is to be collected
from prospective investors.

36. Issue of shares at par, premium & discount
• Issue of shares at Par- It means the shares are issued
at a price equal to the face value of share.
• Issue of shares at Premium- It means the shares are
issued at a price higher than the face value of
shares.
• Issue of shares at Discount- It means the shares are
issued at a price lower than the face value of
shares.

37. Under subscription and
over subscription of shares
Under subscription – If the application money of
shares are received for less number of shares from
the public is called under subscription.
Oversubscription- If the application money of shares
are received for more number of shares from the
public is called over subscription.

38. Calls-in arrears and
calls-in-advance
• Calls-in arrears – The amount remaining unpaid on
allotment or on calls.
OR
It is the amount called up but not yet received by
the company.
• calls-in-advance - The amount received by the
company before calls are made.
OR
It is the money paid by the shareholders to the
company in advance but not actually called by the
company.

39. Forfeiture and
re-issue of forfeited shares
Forfeiture of shares- cancellation for the non payment
of allotment money and call money.
Re-issue of forfeited shares- The directors of the
company can reissue forfeited shares. These shares
are reissued at discount.