TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021

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Solutions for T.S. Grewal's Double Entry Book Keeping: Accounting for Not for Profit Organizations and Partnership Firms (Vol.2)
Textbook for CBSE Class 12
TS Grewal Solutions Class 12 Accountancy
Chapter 8
Company Accounts- Accounting for Share Capital


Very Short Answer Type Questions:-

Question 1. Define a Company.

Answer:
According to Section 2(20) of the Companies Act, 2013, “Company means a company incorporated under this Act or any previous Companies Acts.” Company is an artificial person created by the process of law, having separate entity with perpetual succession. It may or may not have a common seal.
 
Question 2. What are the essential characteristics of a company?

Answer:
(i) Incorporation:- A company is an artificial person created through the process of law, i.e. the companies Act either under the present Companies Act, 2013 or under any previous Companies Acts.
(ii) Separate Legal Entity:- A company is an artificial person having a legal entity separate from its shareholders.
(iii) Artificial Person:- on the eyes of law it is artificial person. It can own property, enter into contract, conduct business, sue or be sued for its debts and actions.
 
Question 3. Give the definition of a Share.

Answer:
According to Section 2(84) of the Companies Act, 2013, “Share means a share in the share capital of a company and includes stock.” Share Capital of a company is divided into units with a nominal value. Each of these small units is called a share.
 
Question 4. Explain the term Preference Share.

Answer:
Preference Shares are those shares which carry following two rights in preference to Equity Shares:
(i) As regards divided, they have preferential right of dividend to be paid as fixed amount or an amount calculated at a fixed rate, which may either be free of or subject to income tax, and
(ii) As regards capital, in the event of winding up, they have preferential right to be repaid the capital before it is repaid to Equity Shareholders.
 
Question 5. What is meant by Cumulative Preference Share?

Answer:
Cumulative Preference Share are those Preference Shares which carry the right to receive arrears of dividend before dividend is paid to the Equity Shareholder.
 
Question 6. What is meant by Authorised Capital?

Answer:
According to Section 2(8) of the Companies Act, 2013, “Authorised Capital” or “Nominal Capital” means such capital as is authorised by the memorandum of a company to be the maximum share capital of the company.” It is the maximum amount which the company is, for the time being, authorised to raise.
 
Question 7. Give the meaning of ‘Registered Capital’ of a Company.

Answer:
According to Section 2(8) of the Companies Act, 2013, “Authorised Capital’ or ‘Nominal Capital’ means such capital as is authorised by the memorandum of a company to be the maximum share capital of the company.” It is the maximum amount which the company is, for the time being, authorised to raise.
 
Question 8. What is meant by Issued Capital?

Answer:
‘Issued Capital’ means such capital which the company issues from time to time for subscription.
 
Question 9. What is meant by Subscribed Capital?

Answer:
‘Subscribed Capital’ means such part of the capital which is for the time being subscribed by the members of a company.
 

Question 10. Differentiate between 'Issued Share Capital and 'Subscribed Share Capital.

Answer:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021

Question 11. Differentiate between 'Called-up Share Capital' and 'Paid-up Share Capital.

Answer:
TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-

Question 12. What is meant by Reserve Capital?

Answer:

Reserve Capital is that part of the uncalled capital which the company, by passing a special resolution, may reserve to be called upon only on winding up of the company.

 

Question 13. Is 'Reserve Capital' a part of 'Unsubscribed Capital' or 'Uncalled Capital’?

Answer:

Reserve Capital is included in uncalled Capital.

 

Question 14. What is meant by Capital Reserve?

Answer:

Capital Reserve is a reserve created out of the profits of capital nature which are not available for distribution as dividend.

 

Question 15. What are Preliminary Expenses?

Answer:

Preliminary expenses are those expenses which are incurred for incorporation of a company.

 

Question 16. What is the name given to the "part of capital" of a company which is called-up only on winding up?

Answer:

"Part of capital" of a company which is called-up only on winding up of the company is known as “Reserve Capital”.

 

Question 17. What is meant by Allotment?

Answer:

Share allotment is the creation and issuing of new shares, by a company. New shares can be issued to either new or existing shareholders. Share allotment can have implications for any existing shareholders share proportion. Typically, new shares are allotted to bring on new business partners.

 

Question 18. What is meant by pro rata allotment of shares?

Answer:

Pro rata allotment of shares means allotment of shares in a fixed proportion. Pro rata allotment takes place only when the public issue of shares is oversubscribed.

 

Question 19. When does the need for a pro rata allotment arise?

Answer:

Pro rata allotment of share means allotment of shares in a fixed proportion. Pro rata allotment takes place only when the public issue of share is oversubscribed.

 

Question 20. What is meant by Public subscription of shares?

Answer:

Public issue of shares means an invitation by a company to public to subscribe the shares offered through a prospectus.

 

Question 21. What is meant by Private Placement of Shares?

Answer:

Private Placement of Shares implies issue and allotment of shares to a select group of persons privately and not to public in general through public issue. In order to place the shares privately, a company must pass a special resolution to this effect.

 

Question 22. What is meant by Minimum Subscription?

Answer:

Minimum Subscription (Section 39(1) of the Companies Act, 2013) means the amount which in the opinion of the Board of Directors of a company, must be received towards subscription of the issued share capital.

As per the Guidelines of the Securities and Exchange Board of India (SEBI), a company must receive a minimum of 90% subscription of the Issued Share Capital before making, any allotment of shares or debentures to the public.

 

Question 23. What is meant by Securities Premium Reserve?

Answer:

The excess of issue price over the nominal (face) value of a Share/Debenture is ‘Securities Premium’.

 

Question 24. State any one purpose for which Securities Premium Reserve Account can be utilised.

Answer:

Purpose for Securities Premium Reserve Account can be utilised for issuing fully paid bonus shares to the members of the company.

 

Question 25. Name the head under which the Securities Premium Reserve Account will appear in the Balance Sheet.

Answer:

Securities Premium Reserve Account and is shown in the Equity and Liabilities part of Balance Sheet under the head ‘Shareholders Funds’ and sub-head ‘Reserves and Surplus’ as Securities Premium Reserve.

 

Question 26. State the name of capital which refers to that amount which is stated in the Memorandum of Association as the share capital of the company.

Answer:

‘Authorised Capital’ or ‘Nominal Capital’ is stated in the Memorandum of Association and is the maximum amount that a company can raise as share capital.

 

Question 27. What is meant by issue of shares for consideration other than cash?

Answer:

When the company purchases some assets (including services) or purchases a running business, instead of making the payment to the vendor in cash, it issues its shares. Such issue of shares is termed as Issue of Shares of consideration other than cash.

 

Question 28. Give the meaning of oversubscription of shares.

Answer:

Oversubscription of Shares means the number of shares applied for is more than the number of shares offered for subscription.

 

Question 29. Give any two alternatives available to a company for the allotment of shares in case of oversubscription.

Answer:

(i)             To Make Pro-rata allotment to all the applicants.

(ii)            (a) Accepting some applications in full. (b) Allotting the remaining on pro rata basis.

 

Question 30. What is meant by under subscription of shares?

Answer:

Under subscription of Shares means the number of shares applied for is less than the number of shares offered for subscription.

 

Question 31. What is meant by Call money?

Answer:

After allotment of shares remaining part of share money, when called-up is called Call money. Call money may be called by the company to be paid by the shareholders in one or more instalments.

 

Question 32. Give the meaning of Calls-in-Arrears.

Answer:

Calls-in-Arrears are that part of capital which has been called-up but has not yet been paid by the shareholders.

 

Question 33. How is Calls-in-Arrears shown in the Balance Sheet?

Answer:

It is shown in the Note to Accounts on Share Capital under Subscribed Capital as follows:

Subscribed and fully paid-up:                                         Amount

1,40,000 Equity Shares of Rs. 10 each                             14,00,000

Subscribed but not fully paid-up:

10,000 Equity Shares of Rs. 10 each           1,00,000

Less: Calls-in-Arrears (10,000 × Rs. 2)          20,000             80,000

                                                                _____________________

                                                         Total                       14,80,000

                                                                                 ___________


Question 34. What is Calls-in-Advance?

Answer:

Calls-in-Advance refers to the amount paid by shareholders in excess of the amount due from them.

 

Question 35. On 28th February, 2016 the first call of Rs. 2 per share became due on 50,000 Equity Shares allotted by Kumar Ltd. Komal, a holder of 1,000 shares, did not pay the first call money. Kovil, a holder of 750 shares, paid the second and final call of 4 per share along with the first call.

Pass the necessary Journal entry for the amount received by opening Calls-in-Arrears and Calls–in-Advance account in the books of the company.

Answer:
TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A

Question 36. Y Ltd. forfeited 100 equity shares of 10 each for non-payment of first call of 2 per share. The final call of Rs. 2 per share was yet to be made.

Calculate the maximum amount of discount at which these shares can be reissued.

Answer:

The maximum discount at which these shares can be re-issued is the credit balance in the Share Forfeiture A/c i.e. Rs. 600.

 

Question 37. Where is Calls-in- Advance shown in the Balance Sheet?

Answer:

Call-in- Advance shown in Balance Sheet as ‘Other Current Liabilities’ under the main head ‘Current Liabilities’.

 

Question 38. Give the meaning of Forfeiture of Shares.

Answer:

If a shareholder fails to pay any call made on him, which is due on shares, the company may cancel his shares. This cancellation of shares for non-payment of non-payment of amount due on shares is known as Forfeiture of Shares.

 

Question 39. When does a company forfeit its shares?

Answer:

Share can be forfeited for the non-payment of call money.

 

Question 40. At the time of forfeiture of shares, with what amount the Forfeited Share Account is credited?

Answer:

Forfeited Shares become the property of the company and the company can reissue them at par, at premium or at discount. However, discount cannot exceed the amount forfeited.

 

Question 41. How the balance in Forfeited Shares Account shown in the Balance Sheet of a company?

Answer:

The time forfeited shares are reissued, balance of the Forfeited Shares Account is added to paid-up capital under Subscribed Capital in the Note to Accounts on ‘Share Capital’, being part of Shareholders’ Funds shown under Equity and Liabilities part of the Balance Sheet.

 

Question 42. At the time of forfeiture Shares, with what amount the Share Capital Account is debited?

Answer:

Share Capital Account is debited with the amount called-up to the date of forfeiture on share forfeited.

 

Question 43. Can the forfeited shares be reissued at a discount?

Answer:

Yes, they can be reissued at a discount. And the discount limit is limited. This is different in different cases.

1.)   Originally issued at par or premium. But now re issued at a discount. Condition for discount is; the amount of discount should be less than or equal to the amount standing to the credit of forfeited shares account.

 

2.)   When the shares were originally issued at a discount and now are reissued at discount; maximum amount of discount should be less than or equal to the amount credited to Forfeited shares account and the original discount together.

 

Question 44. How is the gain (profit) on reissue of forfeited shares dealt with?

Answer:

If forfeited shares are reissued at par or premium, the total amount forfeited on the shares is a gain of capital nature and is transferred to Capital Reserved Account.

 

Question 45. What is meant by Employees Stock Option Plan (ESOP)?

Answer:

Employees Stock Option Plan (ESOP) means option granted by the company to its employees and employee directors to subscribe the share at a price that is lower than the market price (Fair Value). It is an option or a right granted by the company but it is not an obligation on the employee to subscribe it. The employees may or may not exercise the option.

 

Question 46. How is value of option determined?

Answer:

It is the difference between the market price and the issue price of the security.

 

Question 47. What is meant by Grant Date?

Answer:

It is the date at which the enterprise and its employees agree to the terms of employees Stock Option Plan (ESOP).

 

Question 48. What is meant by Vesting Period?

Answer:

It is the period between the grant date and the date on which all the specified vesting conditions of an Employees Stock Option Plan (ESOP) are to be satisfied. 

 

Short Answer Type Questions:-


Question 1. What is Reserve Capital? Does it differ from Capital Reserve?

Answer:

Reserve Capital is that part of the uncalled capital which the company, by passing a special resolution, may reserve to be called upon only on winding up of the company.

 

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A1


Question 2. Distinguish between Equity Share and Preference Share.

Answer:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A2

 

Question 3. Distinguish between Oversubscription and under subscription of shares issued by a company. How is Oversubscription dealt with?

Answer:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A3


Question 4. What is securities premium reserve? State any three purposes for which securities premium reserve can be used.

Answer:

The Companies Act, 2013 (Section 52 (1)) prescribes that the amount of the premium received on securities be credited to Securities Premium Account, i.e., Securities Premium Reserve Account. Section 52(1) of the Companies Act, 2013 requires that the amount of premium received on securities to be credited to ‘Securities Premium Account’. Schedule III (Form of Balance Sheet) of the Companies Act, 2013 has given the head ‘Securities Premium Reserve’.

The use of the amount received as premium on securities for the following purposes:

1.)   Issuing fully paid bonus shares to the members.

2.)   Writing off Preliminary expenses of the company.

3.)   Writing off the expenses of, or the commission paid or discount allowed on any issue of securities or debentures of the company.

 

Question 5. State any three purposes other than 'Issue of bonus Shares' for which securities premium can be utilised.

Answer:

According to Section 52(2) of the Companies Act, 2013, Securities Premium can be applied for the following purposes:

(1)   Writing off preliminary expenses of the company,

(2)   Writing off the expenses or the commission paid on any issue of shares or debentures or discount allowed on issue of debentures of the company,

(3)   Providing for the premium payable on the redemption of redeemable preference shares or of debentures. 

 

Question 6. State any three purposes other than 'buy back of shares' for which securities premium can be utilised.

Answer:

According to Section 52(2) of the Companies Act, 2013, Securities Premium can be applied for the following purposes:

(1)   Issuing fully paid bonus to the shareholders.

(2)   Writing off preliminary expenses of the company.

(3)   Writing off the expenses or the commission paid on any issue of shares or debentures or discount allowed on issue of debentures of the company.

 

Question 7. Securities Premium can be utilised for three purposes besides (i) issuing fully paid bonus shares' and (ii) Buy back of shares! State those purposes.

Answer:

When shares are issued at a price higher than the nominal (face) value, it is called issue of shares at premium. Excess of issue price over the nominal (face) value is the amount of premium (Securities Premium). It is a capital profit for the company and the amount so received is credited to a separate account called Securities Premium Reserve Account.

According to Section 52(2) of the Companies Act, 2013, Securities Premium can be applied for the following purposes:

(1)   Writing off preliminary expenses of the company.

(2)   Writing off the expenses or the commission paid on any issue of shares or debentures or discount allowed on issue of debentures of the company.

(3)   Providing for the premium payable on the redemption of redeemable preference shares or of debentures.

 

Question 8. Can Securities Premium Reserve be utilised for the purchase of fixed assets? Give reasons.

Answer:

No, According to Section 52(2) of the Companies Act, 2013, Securities Premium can be applied for the following purposes:

(1)   Writing off preliminary expenses of the company.

(2)   Writing off the expenses or the commission paid on any issue of shares or debentures or discount allowed on issue of debentures of the company.

(3)   Providing for the premium payable on the redemption of redeemable preference shares or of debentures.

(4)   Issuing fully paid bonus shares to the members.

(5)   Purchasing its own shares.

 

Question 9. How is Share Capital shown in the Balance Sheet of a Company?

Answer:

Balance Sheet of a company is prepared in the form prescribed in Part I of Schedule III of the Companies Act, 2013. It required a Company to show

(i)             Authorised Capital

(ii)            Issued Capital

(iii)           Subscribed Capital

 

(i)   Authorised Capital or Nominal Capital:- ‘Authorised Capital’ or ‘Nominal Capital’ means such capital as is authorised by the Memorandum of a company to be maximum amount of share capital of a company.

‘Authorised Capital’ or ‘Nominal Capital’ is stated in the Memorandum of Association and is the maximum amount that a company can raise as share capital.

It is stated separately for each class or kind of shares, i.e., Preference Shares and Equity Shares and is the maximum amount of shares capital under each class or kind of shares which a company can issue for subscription. Authorised Share Capital under each class or kind (Equity or Preference) may be more or equal to the issued share capital, but cannot be less than the issued capital.

 

(ii) Issued Capital:- ‘Issued Capital’ means such capital as the company issues from time to time for subscription. Issued Capital is a part of Authorised Capital that is issued for subscription. It includes besides shares issued for subscription, shares allotted for consideration other than cash, shares subscribed by signatories to the Memorandum of Association and shares taken by directors as qualifying shares. It should be kept in mind that issued capital cannot exceed the company’s Authorised Share Capital.

 

(iii)  Subscribed Capital:- ‘Subscribed Capital’ means such part of the capital which is for the time being subscribed by the members of a company. Subscribed Capital is a part of issued capital which the company has issued for cash or for consideration other than cash. It includes shares issued for subscription and subscribed, shares subscribed by signatories to the Memorandum of Association, shares subscribed by the directors as qualifying shares and shares allotted for consideration other than cash.

 

Question 10. Can forfeited shares be reissued? If so, at what terms?

Answer:

Yes, forfeited shares are reissued. Reissue of forfeited shares means selling the shares that were cancelled by the company. These shares may be reissued or sold by the company on the terms as it may decide. Thus, forfeited shares may be reissued by the company at par, at premium or at discount. However, if forfeited shares are reissued at discount, the amount of discount allowed on reissued of forfeited shares should not exceed the amount forfeited on reissued shares.

Maximum Permissible Discount on Reissue of Forfeited Shares:- Maximum discount that can be allowed on reissued of forfeited shares is the amount forfeited, i.e. the amount credited to the forfeited shares. In other words, reissue price cannot be less than the amount unpaid on forfeited shares.

Transfer of Balance in Forfeited Shares Account

When forfeited shares are reissued, one of the following two situations arises:

(1)   All forfeited shares are reissued

(2)   All forfeited shares are not reissued.

 

Question 11. Distinguish between Calls-in-Arrears and Calls-in-Advance.

Answer:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A4

Question 12. A company invited applications for 30,000 Equity Shares of Rs. 10 each at a premium of 2 each. The total application money received @ Rs. 2 per share was Rs. 72,000. Name the kind of subscription. List the three alternatives for allotting these shares.

Answer:

Application money per Share = Rs. 2 

Total Application money = Rs. 72,000

Number of Application received = 72,000/2 = 36,000

Share issued = 30,000

So, it is the case of oversubscription:-
 

1.)   Full Allotment – The Company may reject the oversubscribed shares. The company may reject the applications for 6,000 shares and make full allotment to remaining applications. 

2.)   Partial Allotment The Company may reject some of the applications and then make proportionate allotment to remaining applicants.  

3.)   Pro-rata Allotment – All the applicants may be allotted shares in the ratio of 36,000 : 30,000 i.e. 6:5.

 

Question 13. Guru Ltd. invited applications for issuing 5,00,000 equity shares of 10 each at a premium of 5 per share. Because of favourable conditions, the issue was over-subscribed and applications for 15,00,000 shares were received. Suggest the alternatives available to the Board of Directors for the allotment of shares.

Answer:

 

The following alternatives are available to the Board of Directors for the allotment of share:

(1)   First Alternative- Rejection of excess applications: The Company can make full allotment to some applicants and can reject the excess applications and return their application money. 

(2)   Second Alternative- Pro Rata Allotment: In this case, all the applicants are allotted shares on proportionate basis.

(3)   Third Alternative- Rejection and Pro Rata Allotment: In this case, combination of the above two alternatives is adopted.

 

Exercise  ::------>

 

Question 1:  Gopal Ltd. was registered with an authorized capital of 50,00,000 divided into Equity Shares of 100 each. The company offered for public subscription all the shares. Public applied for 45,000 shares and allotment was made to all the applicants. All the calls were made and were duly received except the final call of 20 per share on 500 shares.

Prepare the Balance Sheet of the company showing the different types of share capital.

Answer 1:

Balance Sheet of Gopal ltd. as per Schedule VI part I of the Companies act 1956 as at date:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A5

Point of Knowledge:-
 
1. Share Capital:  
  Authorized Share Capital  
  5,00,000 equity shares of Rs 10 each
  Issued Share Capital  
  5,00,000 equity shares of Rs 10 each                            50,00,000
                                                                                   _________
  Subscribed and Called-up Capital:  
  4,50,000 equity shares of Rs 10 each Rs. 45,00,000  
  Less: Calls in Arrears (500 shares × Rs 2) Rs. (1,000)    44,99,000
                                                                ____________________
   
2. Cash and Cash Equivalents: Cash at Bank                 44,99,000
                                                                             _____________
 
3.  ‘Authorised Capital’ or ‘Nominal Capital’ means such capital as is authorised by the Memorandum of a company to be maximum amount of share capital of a company.


Question 2:  Himmat Ltd has authorized share capital of Rs. 50,00,000 divided into 5,00,000 Equity Shares of Rs. 10 each. It has existing issued and paid up capital of Rs. 5,00,000. It further issued to public 1,50,000 Equity Shares at par for subscription payable as under:
 On Application:    Rs. 3
 On Allotment:      Rs. 4 and
 On Call:    Balance Amount
The issue was fully subscribed and allotment was made to all the applicants. Call was made during the year and was duly received.
Show share capital of the company in the Balance Sheet of the Company.
 
Answer 2:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A6


Question 3:  Lennova Ltd. has authorised share capital of Rs. 1,00,00,000 divided into 1,00,000 Equity Shares of Rs. 100 each. It has existing issued and paid up capital of Rs. 25,00,000. It further issued to public 25,000 Equity Shares at a premium of 20% for subscription payable as under:

 On Application:    Rs. 30
 On Allotment:      Rs. 60 and
 On Call:    Balance Amount.

The issue was fully subscribed and allotment was made to all the applicants. The company did not make the call during the year.

Show share capital of the company in the Balance Sheet of the Company.The issue was fully subscribed and allotment was made to all the applicants. The company did not make the call during the year. 

Answer 3:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A7


Question 4:  Star Ltd. is registered with capital of Rs. 50,00,000 divided into 50,000 equity shares of Rs. 100 each, The Company issued 25,000 equity shares for subscription. Subscription was received for 23,750 shares and all the due amount was duly received, except the first and final call of Rs. 20 per share on 600 shares. Show the 'Share Capital' in the Balance Sheet of the company.

Answer  4:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A8


Issue of Shares for Cash at Par


Question 5:  Moneyplus company issued 2,50,000 Equity Shares of Rs. 10 each to public. All amounts have been received in lump sum. Pass necessary Journal entries in the books of the company. 

Answer  5:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A9

Point of Knowledge:-

Authorized Capital 2,50,000 equity shares @ Rs 10 each

Issued and Subscribed Share = 2,50,000 × 10 = Rs. 25,00,000

 

Question 6:  The authorized capital of Rs. 16,00,000 of Bharat Ltd. is divide into 1,60,000 Equity Shares of Rs. 10 each. Out of these shares, 80,000 Equity Shares were issued at par to public for subscription. The full nominal value is payable on application. All the shares were subscribed by the public and total amount was paid for. Pass necessary journal entries in the books of the company.

Answer 6:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A10

Point of Knowledge:-

Authorized Capital 1,60,000 equity shares of Rs. 10 each

Issued and Subscribed Share = 80,000 × 10 = Rs. 8,00,000


Question 7:  Hema Ltd. invited applications for 10,000 shares of Rs. 100 each payable as follows:

Rs. 20 on application, Rs. 30 on allotment, Rs. 20 on first call and the balance on final call.

All the shares were applied and allotted. All the money was duly received.

You are required to journalize these transactions. 

Answer 7:

Issued and Subscribed Capital 10,000 shares of Rs. 100 each 

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A11

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A12


Question 8:  Marigold Ltd. was registered with the authorized capital of Rs. 3,00,000 divided into 3,000 shares of Rs. 100 each, which were offered to the public. Amount payable as Rs. 30 per share on application, Rs. 40 per share on allotment and Rs. 30 per share on first and final call. These shares were fully subscribed and all money was dully received. Prepare journal and Cash Book.

Answer 8:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A13


Question 9:  Modern Marbles Ltd. was registered with an authorised capital of Rs.10,00,000 divided into 7,500 Equity Shares of Rs.  100 each and, 2,500 Preference Shares of Rs.100 each. 1,000 Equity Shares and 500; 9% Preference Shares were offered to public on the following terms – Equity Shares payable Rs.10 on application, Rs.40 on allotment and the balance in two calls of Rs.  25 each. Preference Shares are payable Rs. 25 on application, Rs. 25 on allotment and Rs.50 on first and final call. All the shares were applied for and allotted. Amount due was duly received. Prepare Cash Book and pass necessary Journal entries to record the above issue of shares and show how the Share Capital will appear in the Balance Sheet.

Answer 9:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A14

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A15

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A16

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A17


Issue of Shares for Cash at Premium

 

Question 10:  Shiva Ltd. issued 1,00,000 Equity Shares of Rs. 10 each at a premium of Rs. 5 per share . The whole amount was payable on application. The issue was fully subscribed. Pass necessary Journal entries.

Answer  10:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A18

Point of Knowledge: 

Issued 1,00,000 equity shares of Rs. 10 each at a premium of Rs. 5

Applied 1,00,000 shares.

Total Application money = 1,00,000 × (10+5) = Rs. 15,00,000


Question 11:   Seema Ltd. offered for subscription 10,000 shares of Rs. 25 each, payable Rs. 5 per share on application, Rs. 10 per share on allotment (including Rs. 5 per share as premium), Rs. 5 per share as first call on the shares and the balance in two equal amounts at intervals of three months. All the shares were applied for and allotted. All the money was received except the second call and final call on 200 and 400 shares respectively.

Pass the entries in the company's Journal, Cash Book and the ledger. Also show the company's Balance Sheet on completion of the above transactions.

Answer 11:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A19

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A20

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A21

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A22

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A23

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A25


Question 12:  Bharat Ltd. was incorporated with a capital of Rs. 2,00,000 divided into shares of Rs. 10 each. 2,000 shares were offered for subscription and out of these, 1,800 shares were applied for and allotted. Rs. 3 per share (including Rs. 1 premium) was payable on application, Rs. 4 per share (including Rs. 1 premium) on allotment, Rs. 2 per share on first call and Rs. 3 per share on final call. All the money was received. Give necessary Journal entries and show share capital in the Balance Sheet.

Answer 12:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A26

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A27


Question 13:  Authorized capital of Suhani Ltd. is Rs. 45,00,000 divided into 30,000 shares of Rs. 150 each. Out of these company issued 15,000 shares of Rs. 150 each at a premium of Rs. 10 per share. The amount was payable as follows: Rs. 50 per share on application , Rs. 40 per share on allotment (including premium ), Rs. 30 per share on first call and balance on final call. Public applied for 14,000 shares.  All the money was duly received. Prepare an extract of Balance Sheet of Suhani Ltd. as per Schedule III, Part I of the companies Act, 2013 disclosing the above information. Also prepare 'Notes to Accounts ' for the same.

Answer 13:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A28


Oversubscription

 

Question 14:  A company invited applications for 75,000 equity shares of Rs. 100 each. The application money received @ Rs. 30 per share was Rs. 27,00,000. Name the kind of subscription. List the three alternatives for allotting these shares. 

Answer 14:

Number of Application received =  (Amount received on Application)/(Amount per Application) = 27,00,000/30
= 90,000 Applications
The kind of Subscription is oversubscription. The lists of three alternatives for allotting these shares are:
  1. Full allotment and refund of 15,000 applications.
  2. Partial prorate and refund i.e. 80,000 applications allotted 75,000 shares and rest 10,000 applications refunded.
  3. Full prorate.
 

Question 15:   Sangam Ltd. invited applications for 10,000 Equity Shares of Rs. 100 each issued at par. The amount was payable on application. The issue was oversubscribed by 2,000 shares and allotment was made on pro rata basis. Pass necessary Journal entries. 

Answer 15:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A29

Point of Knowledge:-

In case of oversubscription Share Application Money, on allotment, is transferred to Share Capital Account for the allotted shares. The balance application money, if any, is adjusted as follows:

  1. Application money is refunded to applicants to whom no allotment is made.
  2. If partial allotment is made, surplus of application money is adjusted towards ‘shares allotment money’ or ‘call money’ due, if the question so requires. The balance, if any, is refunded to the applicants.
  3. Since the total amount is receivable on application so the excess money on 2,000 shares has been refunded.

 

Question 16:  Citizen Watches Ltd. invited applications for 50,000 shares of Rs. 10 each payable Rs. 3 on application, Rs. 4 on allotment and balance on first and final call. Applications were received for 60,000 shares. Applications were accepted for 50,000 shares and remaining applications were rejected. All calls were made and received except First and Final call on 500 shares.

Pass the journal entries in the books of Citizen Watches Ltd.

Answer 16:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A30


Question 17:   Arti Ltd. offered for subscription 20,000 shares of Rs. 10 each payable Rs. 3 on application, Rs. 5 on allotment and balance on first and final call. Applications were received for 30,000 shares. Letters of regret were issued to applicants for 5,000 shares and their application money was refunded. Application money for other 5,000 shares was applied towards the payment for allotment money. The balance of allotment money was also received in due time. Company didn't make first and final call.

You are to prepare the Journal, Cash Book, and Ledger Accounts and show 'Share Capital' in the Balance Sheet of the company.

Answer 17:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A31

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A32

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A33


Question 18:  Eastern Company Limited, having an authorised capital of Rs. 10,00,000 divided into shares of Rs.  10 each, issued 50,000 shares at a premium of Rs.  3 per share payable as follows:
On Application                                                                                                                                                       Rs. 3 per share;
On Allotment (including premium)                                                                                                                      Rs. 5 per share;
On first call (due three months after allotment) and the balance as when required.                                       Rs. 3 per share;
Applications were received for 60,000 shares and the directors allotted the shares as follows:
(i) Applicants for 40,000 shares received in full.
(ii) Applicants for 15,000 shares received an allotment of 8,000 shares.
(iii) Applicants for 5,000 shares received 2,000 shares on allotment, excess money being returned.
All amounts due on allotment were received.
The first call was made and the money was received except on 100 shares.
Give journal and cash book entries to record these transactions of the company. Also prepare the Balance Sheet of the company.
 
Answer 18:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A34

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A35


Question 19:  Varun Ltd. issued Rs. 10,00,000 shares of Rs. 100 each at a premium of Rs. 20 for subscription payable as:

Rs. 10 per share on application,

Rs. 40 per share and Rs. 10 premium on allotment, and

Rs. 50 per share and Rs. 10 premium on final payment.

Over-payments on application were to be applied towards amount due on allotment and over-payments on application exceeding amount due on allotment was to be returned. Issue was oversubscribed to the extent of 13,000 shares. Applicants for 12,000 shares were allotted only 1,000 shares and applicants for 2,000 shares were sent letters of regret. All the money due on allotment and final call was duly received.
Pass necessary entries in the company's books to record the above transactions. Also, prepare company's Balance Sheet on completion of the above transactions. 

Answer 19:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A36

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A37

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A38


Question 20:  Sugandh Ltd. issued 60,000 shares of Rs. 10 each at a premium of Rs. 2 per share payable as Rs. 3 on application, Rs. 5(including premium) on allotment and the balance on first and final call. Applications were received for 92,000 shares. The Directors resolved to allot as:
(i) Applicants of 40,000 shares 30,000 shares,
(ii) Applicants of 50,000 shares 30,000 shares,
(iii) Applicants of 2,000 shares Nil.
 
Mohan, who had applied for 800 shares in Category 
(i) and Sohan, who was allotted 600 shares in Category 
(ii) failed to pay the allotment money. Calculate amount received on allotment.
 
Answer 20:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A39

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A41


Question 21:  Sony Media Ltd. issued 50,000 shares of Rs. 10 each payable Rs. 3 on application, Rs. 4 on allotment and balance on first and final call. Applications were received for 1,00,000 shares and allotment was made as follows:

(i) Applicants for 60,000 shares were allotted 30,000 shares,

(ii) Applicants for 40,000 shares were allotted 20,000 shares, Anupam to whom 1,000 shares were allotted from category (i) failed to pay the allotment money. Pass journal entries up to allotment.

Answer 21:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A42


Under-subscription


Question 22:  The Kalyan Cotton Mills Ltd.was registered on 1st January, 2011 with a capital of Rs.10,00,000 divided into 1,00,000 shares of Rs. 10 each . The company issued 42,000 shares of which 40,000 shares were taken up by the public and Rs. 1 per share was received with application. On 1st February, these shares were allotted and Rs. 2 per share was duly received on 28th February as allotment money. A first call of Rs. 3 per share was made on 1st March and the call money on all shares with the exception of 100 shares was received. The final call of Rs. 4 per share was made on 1st June and the amount due, with the exception of 400 shares, was received by 30th June. Pass necessary journal and Cash Book entries and prepare the Balance Sheet as at 30th June, 2011.

Answer 22:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A43

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A44

Point of Knowledge:- 

Authorised Capital 1,00,000 shares of Rs. 10 each

Issued Capital 42,000 shares of Rs 10 each

Applied 40,000 shares

Payable as:

Rs 1 on application

Rs 2 on allotment

Rs 3 on first call

Rs 4 on final call


TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A45


Calls-in-Arrears and Calls-in-Advance


Question 23:  Ghosh Ltd. made the second and final call on its 50,000 Equity Shares @ Rs. 2 per share on 1st January, 2016. The entire amount was received on 15th January, 2016 except on 100 shares allotted to Venkat. Pass necessary journal entries for the call money due and received by opening Calls-in-Arrears Account.

Answer  23:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A46


Question 24:   Star Ltd was registered with a capital of Rs. 5,00,000 in shares of Rs. 10 each and issued 20,000 such shares at a premium of Rs. 2 per share, payable as Rs. 2 per share on application, Rs. 5 per share on allotment (including premium) and Rs. 2 per share on first call made three months later. All the money payable on application and allotment was duly received but when the first call was made, one shareholder paid the entire balance on his holding of 300 shares and another shareholder holding 1,000 shares failed to pay the first call money.

Pass journal entries to record the above transactions and show how they will appear in the company's Balance Sheet.

Answer 24:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A47

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A48

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A49


Question 25:   Green Ltd. issued 8,000 Equity Shares of Rs. 10 each. Rs. 5 per share was called, payable Rs. 2 on application, Rs. 1 on allotment, Rs. 1 on first call and Rs. 1 on second call. All the money was duly received with the following exceptions:

A who holds 250 shares paid nothing after application.

B who holds 500 shares paid nothing after allotment.

C who holds 1,250 shares paid nothing after first call.

Prepare Journal and the Balance Sheet. 

Answer 25:

Issued Capital 5,000 Shares of Rs.10 each Rs. 5 called up

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A50

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A51

 

Question 26:   Bharat Ltd made the first call of Rs. 2 per share on its 1,00,000 Equity Shares on 1st March , 2006. Ashok, a shareholder, holding 800 shares paid the second and final call amount along with the first call money. The second and final call amount was Rs. 3 per share. Pass necessary journal entries for recording  the above using the Calls-in Advance Account.

Answer  26:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A52


Question 27:  2,000 Equity Shares of Rs. 10 each were issued to Limited from whom assets of Rs. 25,000 were acquired. Pass Journal entry.

Answer  27:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A53


Question 28:  'Amrit Dhara Ltd.' issued 800 Equity Shares of Rs. 100 each at a premium of 25% as fully paid-up in consideration of the purchase of plant and machinery of Rs. 1,00,000.

Pass entries in company's Journal.

Answer  28:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A54


Question 29:   Rajan Ltd. purchased assets from Geeta & Co. for Rs. 5,00,000. A sum of Rs. 1,00,000 was paid by means of a bank draft and for the balance due Rajan Ltd. issued equity Shares of Rs. 10 each at a premium of 25%. Journalize the above transactions in the books of the company.

Answer  29:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A55


Question 30:  Z Ltd. purchased furniture costing Rs. 2,20,000 from C.D Ltd. The payment was to be made by issue of 9% Preference Shares of Rs. 100 each at premium of Rs. 10 per share. Pass necessary Journal entries in the books of Z Ltd.

Answer  30:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A56


Question 31:  Goodluck Ltd purchased  machinery costing Rs. 10,00,000 from Fair Deals Ltd. The company paid the price by issue of Equity Shares of Rs. 10 each at a premium of 25%.

Pass necessary Journal entries for the above transactions in the books of Goodluck Ltd. 

Answer  31:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A57


Question 32:  Jain Ltd. purchased machinery costing Rs. 10,00,000 from Ayer Ltd. 50% of the payment was made by cheque and for the remaining 50%, the company issued Equity Shares of Rs. 100 each at a premium of 25%. Pass necessary Journal entries in the books of Jain Ltd. for the above transaction.

Answer  32:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A58


Question 33:   Sona Ltd.  Purchased machinery costing Rs. 17,00,000 from Mona Ltd. Sona Ltd. paid 20% of the amount by cheque and for the balance amount issued Equity Shares of Rs. 100 each at a premium of 25%. Pass necessary Journal entries for the above transactions in the books of Sona Ltd .Show your Point of Knowledge clearly.

Answer 33:

TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021-A59



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TS Grewal Accountancy Class 12 Solutions Volume 1
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TS Grewal Solution Class 12 Chapter 1 Financial Statement of Not for Profit Organisations 2020 2021
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TS Grewal Solution Class 12 Chapter 4 Change in Profit Sharing Ratio Among the Existing Partners 2020 2021
TS Grewal Solution Class 12 Chapter 5 Admission of a Partner
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TS Grewal Solution Class 12 Chapter 7 Death of a Partner 2020 2021
TS Grewal Solution Class 12 Chapter 8 Dissolution of a Partnership Firm 2020 2021
TS Grewal Accountancy Class 12 Solutions Volume 2
TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital 2020 2021
TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures 2020 2021
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TS Grewal's Analysis of Financial Statements
TS Grewal Solution Class 12 Chapter 1 Financial Statement of a Company 2020 2021
TS Grewal Solution Class 12 Chapter 2 Financial Statement Analysis 2020 2021
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