CBSE Class 12 Accountancy Accounting For Share Capital Notes

Download CBSE Class 12 Accountancy Accounting For Share Capital Notes in PDF format. All Revision notes for Class 12 Accountancy have been designed as per the latest syllabus and updated chapters given in your textbook for Accountancy in Standard 12. Our teachers have designed these concept notes for the benefit of Grade 12 students. You should use these chapter wise notes for revision on daily basis. These study notes can also be used for learning each chapter and its important and difficult topics or revision just before your exams to help you get better scores in upcoming examinations, You can also use Printable notes for Class 12 Accountancy for faster revision of difficult topics and get higher rank. After reading these notes also refer to MCQ questions for Class 12 Accountancy given our website


Accounting for Share Capital
 

Company: It is 

1. A Form of business organization 

2. It is an Association of persons who provide capital 

3. Is an artificial, invisible and intangible 

4. Has separate legal identity 

5. Has Perpetual existence 

6. Has Common seal 

7. is not affected by death , insolvency or insanity of individual 


Private company:
 

According to section 3(1)(iii) 

1. Has paid up capital of one lakh 

2. Maximum number of members is 50 

3. It restricts the right to transfer of shares 

4. Prohibits any invitation to public to subscribe for shares and Debentures 

5. Prohibits any invitation or acceptance of deposits from persons other than its members , directors or their relatives 


PUBLIC COMPANY:
 

According to section 3(1)(iv) 

1. Is not a private company 

2. Has minimum paid up capital of 5 lakhs or higher as may be prescribed

3. Is a private company which is subsidiary of a company which is not a private company

 GOVERNMENT COMPANY 

As per section 617 is a company in which more than 50% of paid up capital is held by Central or State Government or both 

FOREIGN COMPANY 

Section 591of Act states this type of company is incorporated outside India but has established business in India. 

Incorporation of company 

There are 4 stages

1. Promotion -conceiving an idea of business 

2. Incorporation or registration 

3. Capital subscription which means raising capital 

4. Commencement of business for which certificate of Commencement of business is to be obtained. 


Some 
important definitions(theory questions)
 

MINIMUM SUBSCRIPTION  It is number of shares on which amount received is sufficient to commence business . 

PROSPECTUS  It is an invitation to public for subscription of shares or debentures.

PRELIMINARY EXPENSES  : are expenses incurred for incorporating the company are carried in balance sheet unless these are written off. 

CAPITAL means amount invested in the business for the purpose of earning revenue. In case of company money is contributed by public and people who contribute money are called shareholders. 

SHARE CAPITAL: capital raised by issue of shares is called share capital. 

AUTHORISED CAPITAL : Also Called as Nominal or registered capital .It is the maximum amount of capital a company can issue . It is stated in Memorandum of Association. 

ISSUED CAPITAL this is part of authorized capital which is offered to public for subscription. It cannot exceed authorized capital . 

SUBSCRIBED CAPITAL  It is part of issued capital subscribed or applied by public. 

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. 

PAID UP CAPITAL : It is part of called up capital that the members of company or shareholders have paid. 

Example : X Ltd. is registered with the following share capital 1,25,000 equity shares of Rs. 10 each, payable in the following manner 10% on application,20% on allotment ,30% on first call the balance on final call . 

The company offered for subscription 80,000 equity shares .The public applied for 75,000 share The company duly allotted these shares .It made only first call by 31st March 2010.The first call was received on all shares except 300 equity shares. Prepare Balance Sheet of Company. 

Disclosure of share capital in Company’s Balance Sheet

class_12-Account_concept_118

Note No. :1

Authorised Captial

1,25,000 equity shares @ ` 10 each                                          12,50,000

Issued Capital

80000 Equity Shares @ ` 10 each                                              8,00,000

Subscribed & Paid up

75000 eq. shares of @ ` 10 each

issued to public @ ` 6                           4,50,000

Less : Unpaid calls                                 900                              4,49,100

                                                                                               4,49,100

Note No. 2 :                           Amount received on application

                                             75000 @ ` 1(10%)                       75,000

                                             Amount received on allotment       1,50,000

                                              75000 sh @ ` 2(20%)

                                             Amount Received on call                2,24,100

                                              74700 Shares @ ` 3(30%)

                                                                                                4,49,100

RESERVE CAPITAL : It is that part of uncalled capital which the company reserve to be called only upon winding up of company. For this a special resolution has to be passed

CAPITAL RESERVE : It is capital profit not available for distribution as dividend.

It is represented in balance sheet of company as Reserves and Surplus under the heading Shareholders' Funds

CLASSES OF SHARES : There are two classes of shares

1. Preference shares

2. Equity shares

CBSE Class 12 Accounting for Share Capital_0

Equity shares : The shares which are not preference shares are called equity shares and do not get preference in above respect.


ISSUE OF SHARES

Shares can be issued in two ways

1. for cash

2. for consideration other than cash


Terms of issue of share : shares can be issued in three ways

1. Issue of shares at Par

2. Issue of shares at Premium

3. Issue of shares at Discount


Shares payable in Instalments

1. First instalment paid along with application is called as application money.

2. Second instalment paid on allotment is called as allotment money.

3. Subsequent instalment paid are called as call money calls can be more than one and called First call, second call or as the case may be


ISSUE OF SHARES FOR CASH AT PAR :
 This means shares are issued at face value Journal entries

CBSE Class 12 Accounting for Share Capital_0

NOTE : For each entry narration is compulsory as given in example below and carries marks columns are compulsory table should be made in proper format ( all columns are compulsory) after each entry in column of particulars line must be drawn.

Example : X Ltd. invited application for 10,000 shares of the value of Rs.10 each. The amount is payable as Rs.2 on application and Rs.5 on allotment and balance on First and Final call. Teh whole of the above issue was applied and cash duly recived. Give Journal entries for the above transaction.

                                 In the Books of X Ltd.

Solution

CBSE Class 12 Accounting for Share Capital_0

ISSUES OF SHARES AT PREMIUM : It is issue of share at more than face value. (Section 78)

This premium can be utilised for

1. Issue of bonus shares

2. Write off preliminary expenses, discount, commission on issue of shares

3. Buy back of shares

4. Redemption of debentures o preference shares

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