Accounting for Share Capital
Examine the consequences if a company fails to receive the minimum subscription of 90% of the issued amount.
Define Authorised Capital.
Analyze the difference between 'Authorised Capital' and 'Issued Capital' of a company.
List any three features of a joint stock company.
Demonstrate the journal entry to record the issue of 10,000 shares of Rs. 10 each at a premium of Rs. 2 per share, where the premium is payable on allotment.
Name the two main types of shares a company can issue as per The Companies Act.
Briefly evaluate the importance of the 'perpetual succession' feature for a joint stock company's ability to raise long-term capital.
Calculate the amount of excess application money to be adjusted towards allotment when a company issues 50,000 shares of Rs. 10 each, receives applications for 70,000 shares, and makes a pro-rata allotment. The application money is Rs. 3 per share.
A company has a significant balance in its Securities Premium Reserve Account and also has accumulated preliminary expenses. Propose a journal entry to utilize the premium for writing off these expenses and justify this action.
Justify why the Securities Premium Reserve Account is not debited when shares, on which the premium has already been received, are forfeited for non-payment of subsequent call money.
Examine the accounting treatment when the number of shares subscribed is less than the number of shares issued, provided the minimum subscription has been received.
Explain the concept of 'Minimum Subscription'.
Describe the difference between 'Called-up Capital' and 'Paid-up Capital'.
Explain the term 'Over Subscription' and list the three alternatives available to directors.
Explain the procedure for the issue of shares for cash, from issuing a prospectus to the allotment of shares.
A company purchases machinery worth Rs. 4,40,000 and issues fully paid equity shares of Rs. 100 each at a premium of 10% as payment. Solve for the number of equity shares that will be issued to the vendor.
Analyze the journal entry required to forfeit 500 shares of Rs. 10 each, on which Rs. 7 per share has been called up. The shareholder paid Rs. 4 on application but failed to pay the allotment money of Rs. 3. Also, calculate the amount credited to the Share Forfeiture Account.
Contrast the accounting treatment of 'Calls-in-Arrears' and 'Calls-in-Advance' in the balance sheet of a company.
A new company is planning its first public issue of shares. The directors are concerned about the risks of both under-subscription and over-subscription. Propose a comprehensive strategy for the company's management to handle both scenarios effectively.
Describe the different categories of share capital from an accounting perspective.
Identify the account credited with the amount received on forfeited shares.
Summarize the key differences between a public company and a private company.
Recall the maximum rate of interest on Calls in Advance as per Table F.
Compare the liability of a shareholder in a 'Company Limited by Shares' versus an 'Unlimited Company'.
Demonstrate the journal entry for the receipt of first call money of Rs. 2 per share on 10,000 shares, where a shareholder holding 500 shares paid the final call of Rs. 3 per share in advance.
Formulate a brief statement to distinguish Reserve Capital from Capital Reserve, focusing on their creation and availability for distribution.
Critique the SEBI guideline that mandates a minimum subscription of 90 percent for a public issue of shares. Justify the regulation's purpose in protecting investors.
A company acquires a business for a purchase consideration of Rs. 55,00,000. It decides to issue equity shares of Rs. 100 each in satisfaction of this amount. Evaluate the impact on the company's capital structure and the number of shares issued if the shares are issued (a) at par versus (b) at a premium of 10 percent. Which option would you recommend?
A company makes a pro-rata allotment of 60,000 shares to applicants for 90,000 shares. An applicant, Ramesh, was allotted 400 shares. Formulate the calculation to determine the number of shares Ramesh must have applied for and the amount of his excess application money.
Apply the provisions of the Companies Act, 2013, to state any three purposes for which the amount in the 'Securities Premium Reserve Account' can be utilized.
Solve for the amount of interest on calls in arrears if a shareholder fails to pay the first call of Rs. 3 on 1,000 shares, and the payment is made three months after the due date. Assume the interest rate is 10% per annum as per Table F.
A company forfeits 500 shares and reissues only 300 of them. Justify why the entire balance in the Share Forfeiture Account is not transferred to the Capital Reserve Account. Formulate the principle that governs the amount to be transferred.
Critique the practice of showing 'Calls in Advance' under 'Current Liabilities' instead of adding it to 'Shareholders' Funds' in the Balance Sheet.
Create a journal entry to record the receipt of call money from a defaulting shareholder who pays the arrears of Rs. 5,000 along with interest as per Table F, assuming the delay was for six months. Assume an interest rate of 10 percent per annum.
Create a complex scenario involving the forfeiture of two different sets of shares. Design the necessary journal entries for forfeiture and the subsequent partial reissue of shares from both sets at a discount.
A company forfeited 100 shares of Rs. 10 each (issued at par) on which Rs. 6 per share was paid. Out of these, 70 shares were reissued as fully paid for Rs. 9 per share. Calculate the balance remaining in the Share Forfeiture Account after the reissue.
Summarize the conditions for a private company as per the Companies Act, 2013.
A company receives applications for 5,00,000 shares against an issue of 2,00,000 shares. The directors are considering three options: (a) reject 3,00,000 applications and allot in full to the rest, (b) make a pro-rata allotment to all applicants, or (c) a combination of both. Evaluate the fairness and administrative complexity of each alternative from the perspective of both the company and small investors.
List and explain the five purposes for which the Securities Premium amount can be utilized.
Critique the general prohibition on issuing shares at a discount as per the Companies Act, 2013, considering its potential impact on a company struggling to raise capital.
A company forfeited 200 shares of Rs. 10 each, fully called-up, for non-payment of the final call of Rs. 3 per share. These shares were reissued for Rs. 8 per share as fully paid-up. Calculate the amount to be transferred to the Capital Reserve.
Design the 'Notes to Accounts' for Share Capital based on the following information: Authorised Capital: 1,00,000 shares of Rs. 10 each. Issued: 80,000 shares. Subscribed: 75,000 shares. Called-up: Rs. 8 per share. Paid-up: All money received except for a first and final call of Rs. 3 on 1,000 shares (Note: call is Rs. 3 out of Rs. 8 called up). Also, 500 shares on which Rs. 5 per share was paid were forfeited and not yet reissued.
Define 'Reserve Capital'.
A shareholder, to whom 300 shares were allotted on a pro-rata basis out of a group of applicants for 450 shares, failed to pay the allotment money of Rs. 4 per share. The application money was Rs. 3 per share. Calculate the actual amount of unpaid allotment money (Calls-in-Arrears) from this shareholder.