Accounting for Share Capital Accountancy - Accounting for Share Capital

Nirman Ltd. issued 50,000 equity shares of ₹ 10 each. The amount was payable as follows: Applications for 45,000 shares were received and shares were allotted to all the applicants. Pooja, to whom 500 shares were allotted, paid her entire share money at the time of allotment, whereas Kundan did not pay the first and final call on his 300 shares. The amount received at the time of making first and final call was:

1. ₹ 2,25,000
2. ₹ 2,20,000
3. ₹ 2,21,000
4. ₹ 2,19,500

Which of the following statements does not relate to 'Reserve Capital':

1. It is part of uncalled capital of a company.
2. It cannot be used during the lifetime of a company.
3. It can be used for writing off capital losses.
4. It is part of subscribed capital.

Valuation is related to _______________.

1. Past
2. Future
3. Present
4. Both (A) and (B)

The maximum amount beyond which a company is not allowed to raise funds, by issue of shares, is its _______________.

1. Issued Capital
2. Reserve Capital
3. Authorised Capital
4. Subscribed Capital

Ganesh Ltd. is registered with an authorised capital of ₹ 10,00,00,000 divided into equity shares of ₹ 10 each. Subscribed and fully paid up capital of the company was ₹ 6,00,00,000. For providing employment to the local youth and for the development of the tribal areas of Arunachal Pradesh the company decided to set up a hydro power plant there. The company also decided to open skill development centres in Itanagar, Pasighat and Tawang. To meet its new financial requirements, the company decided to issue 1,00,000 equity shares of ₹ 10 each and 1,00,000, 9% debentures of ₹ 100 each. The debentures were redeemable after five years at par. The issue of shares and debentures was fully subscribed. A shareholder holding 2,000 shares failed to pay the final call of ₹ 2 per share.
Show the share capital in the Balance Sheet of the company as per the provisions of Schedule III of the Companies Act, 2013. Also identify any two values that the company wishes to propagate.

K Ltd. took over the assets of ₹ 15,00,000 and liabilities of ₹ 5,00,000 of P Ltd. for a purchase consideration of ₹ 13,68,500. ₹ 25,500 were paid by issuing a promissory note in favour of P Ltd. payable after two months and the balance was paid by issue of equity shares of ₹ 100 each at a premium of 25%.
Pass necessary journal entries for the above transactions in the books of K Ltd.

For issuing shares at discount a company has to fulfil many conditions. State any three such conditions.

‘David Ltd.’ issued ₹ 40,00,000 equity shares of ₹ 10 each out of its registered capital of ₹ 10,00,00,000. The amount payable on these shares was as follows:
On application – ₹ 1 per share
On allotment – ₹ 2 per share
On first call – ₹ 3 per share
On second and final call – ₹ 4 per share
All calls were made and were duly received, except the second and final call on 1,000 shares held by Vipul. These shares were forfeited.
Present the ‘Share Capital’ in the Balance Sheet of the company as per Schedule VI Part I of the Companies Act, 1956. Also prepare ‘Notes to Accounts’.

‘India Auto Ltd.’ is registered with an authorised capital of ₹ 7,00,00,000 divided into 7,00,000 shares of ₹ 100 each. The company issued 50,000 shares to the vendor for building purchased and 2,00,000 shares were issued to the public. The amount was payable as follows:
On application and allotment – ₹ 20 per share
On first call – ₹ 50 per share
On second and final call – The balance
All calls were made and were duly received except on 100 shares held by Rajani, who failed to pay the second and final call. Her shares were forfeited.
Present the ‘Share Capital’ in the Balance Sheet of the company as per Schedule VI Part I of the Companies Act, 1956. Also prepare ‘Notes to Accounts’.

The partnership between A & B was dissolved on March 31, 2005. Their capitals on that date were Rs. 1,70,000 and Rs. 30,000 respectively. Rs. 1,00,000 was owed by the firm to A, and B owed to the firm Rs. 20,000. Creditors on that date were Rs. 2,00,000. The assets realised Rs. 4,50,000 exclusive of what was owed by B. Find the profit or loss on realisation.

Pass necessary journal entries for the following transactions in the books of Gopal Ltd:

1. Purchased furniture for ₹ 2,50,000 from M/s Furniture Mart. The payment to M/s Furniture Mart was made by issuing equity shares of ₹ 10 each at a premium of 25%.
2. Purchased a running business from Aman Ltd. for a sum of ₹ 15,00,000. The payment of ₹ 12,00,000 was made by issue of fully paid equity shares of ₹ 10 each and balance by a bank draft.

The assets and liabilities consisted of the following:

Plant ₹ 3,50,000; Stock ₹ 4,50,000; Land and Building ₹ 6,00,000; Sundry Creditors ₹ 1,00,000.

VXN Ltd. invited applications for issuing 50,000 equity shares of ₹ 10 each at a premium of ₹ 8 per share. The amount was payable as follows:
On Application: ₹ 4 per share (including ₹ 2 premium).
On Allotment: ₹ 6 per share (including ₹ 3 premium).
On First Call: ₹ 5 per share (including ₹ 1 premium).
On Second and Final Call: Balance Amount.
The issue was fully subscribed. Gopal, a shareholder holding 200 shares, did not pay the allotment money and Madhav, a holder of 400 shares, paid his entire share money along with the allotment money. Gopal’s shares were immediately forfeited after allotment. Afterwards, the first call was made. Krishna, a holder of 100 shares, failed to pay the first call money and Girdhar, a holder of 300 shares, paid the second call money also along with the first call. Krishna’s shares were forfeited immediately after the first call. Second and final call was made afterwards and was duly received. All the forfeited shares were reissued at ₹ 9 per share fully paid up.
Pass necessary journal entries for the above transactions in the books of the company.

‘Software Ltd.’ invited applications for issuing 70,000 equity shares of ₹ 10 each on which ₹ 7 per share were called up, which were payable as follows: The amount was received as follows: The directors forfeited 30,000 shares on which less than ₹ 7 per share were received. Later on the forfeited shares were re-issued at ₹ 5 per share, as ₹ 7 per share paid up.
Pass necessary journal entries for the above transactions in the books of the company.

Luxury Cars Ltd.’ invited applications for issuing 10,000 equity shares of ₹ 50 each at a premium of ₹ 100 per share. The amount was payable as follows: The issue was fully subscribed. A shareholder holding 400 shares paid his entire share money at the time of application. Another shareholder holding 300 shares did not pay the allotment money. His shares were forfeited. The forfeited shares were later on re-issued for ₹ 90 per share as fully paid up.
Pass necessary journal entries for the above transactions in the books of the company.

GY Ltd. invited applications for issuing 85,000 equity shares of ₹ 10 each at a discount of 10%. The amount was payable as follows: Applications for 2,00,000 shares were received. Applications for 30,000 shares were rejected and money refunded. Shares were allotted on pro-rata basis to the remaining applicants. The first and final call was made. All money was received except on 1,700 shares applied by Hari. His shares were forfeited. The forfeited shares were re-issued at the maximum discount permissible under the law.
Pass necessary journal entries for the above transactions in the books of the company.

NY Ltd. invited applications for issuing 90,000 equity shares of ₹ 10 each at a premium of ₹ 5 per share. The amount was payable as follows: Applications for 2,70,000 shares were received. Applications for 90,000 shares were rejected and money refunded. Shares were allotted on pro-rata basis to the remaining applicants. The first and final call was made. The amount was duly received except on 1,800 shares applied by Govind. His shares were forfeited. The forfeited shares were re-issued at ₹ 8 per share fully paid-up.
Pass necessary journal entries for the above transactions in the books of the company.

Assertion (A): Issued Share Capital & Subscribed Share Capital are always different.
Reason (R): Subscribed Share Capital is a part of Issued Share Capital. Thus, it will always be different from Issued Share Capital.
Codes:

Assertion (A): Forfeited shares may be reissued by the company at a discount also.
Reason (R): Amount of discount on reissue of forfeited shares cannot exceed the amount forfeited on reissued shares.
Codes:

Assertion (A): Calls in arrears are deducted from Subscribed but not fully paid Capital.
Reason (R): Calls in advance are added to Subscribed but not fully paid Capital.
Codes:

Assertion (A): X Ltd. issued 50,000 Equity shares of ₹100 each. It received the full amount on shares except first & final of ₹25 on 200 shares. These 200 shares will be shown as ‘Subscribed but not fully paid Capital’.
Reason (R): The shares on which calls are in arrears are not fully paid. Hence, they will be shown as Subscribed but not fully paid Capital’
Codes:

Assertion (A): In case of shares issued on Pro-rata basis, excess money received at the time of application can be utilized till allotment only.
Reason (R): Company has to pay interest on calls in advance for amount adjusted towards call (if any).
Codes:

You are required to answer the following questions:
1.

Gagan Ltd. invited applications for 1,00,000 Equity Shares @ 10 each at a premium of 40%. Payable as: Application Rs.4 along with full premium; Allotment Rs.4 and balance on First & Final call.

Applications were received and shares were allotted as follows:

Category 1 Applied for 10000 Shares Full Allotment Category 2 Applied for 70000 Shares 50000 Allotted Category 3 Applied for 50000 Shares 40000 Allotted

Excess money was to be adjusted on allotment.

One shareholder Yash belongs to Category-2 to whom 1500 shares were allotted failed to pay allotment and final call.

One shareholder Ankush from Category-3 applied for 1000 shares did not pay the call amount.

Shares of both Yash and Ankush were forfeited after the call. Out of the forfeited shares 1500 were reissued (including 75% shares of Ankush) at a discount of 50% from the permissible amount.

How much application money received?

(A) 10,00,000
(B) 10,10,000
(C) 10,20,000
(D) 10,40,000
2. How much excess amount is adjusted towards allotment?
(A) 2,10,000
(B) 2,20,000
(C) 2,30,000
(D) 2,40,000
3. Amount credited to Securities Premium Reserve at the time of application money adjustment:
(A) 4,00,000
(B) 5,20,000
(C) 8,00,000
(D) 4,80,000
4. Amount received on allotment:
(A) 1,60,000
(B) 1,58,800
(C) 4,00,000
(D) 2,00,000
5. Shares Applied by Yash:
(A) 2100
(B) 1800
(C) 2000
(D) 1500
6. Amount not received on First and Final Call:
(A) 5,000
(B) 4,500
(C) 4,600
(D) 4,000
7. Total amount of share forfeiture (at the time of forfeiture) while passing entry for forfeiture:
(A) 18,800
(B) 16,800
(C) 24,800
(D) 17,200
8. Amount transferred to Capital Reserve:
(A) 5,640
(B) 6,000
(C) 7,200
(D) 5,500

You are required to Answer the following question
1.

Vinod Ltd. issued 10,000 Equity Shares of Rs.10 each at a premium of Rs.3 per share payable as:

On Application.........................................................Rs.4

On Allotment............................................................Rs.5 (including premium)

On First Call.............................................................Rs.2

Balance................................................................... as and when required.

The public applied for 12,000 shares. The company made pro-rata allotment to all the applicants. One shareholder who was allotted 900 shares paid the entire amount with allotment while another shareholder who had applied for.

1200 shares, failed to pay the allotment money and on his subsequent failure to pay the first call his shares were forfeited.

Of the forfeited shares, 800 were reissued at Rs.7 per share.

Balance of Share Allotment Account will be:

(A) 39,600
(B) 50,000
(C) 12,200
(D) Nil
2. Balance of Securities Premium Reserve Account will be:
(A) 27,000
(B) 28,000
(C) 30,000
(D) 29,000
3. Balance of Share Forfeiture Account will be:
(A) 3,800
(B) 960
(C) 3,000
(D) 800
4. Balance of Calls-in-Arrears Account:
(A) 6,200
(B) Nil
(C) 4,200
(D) 2,000

You are required to answer the following questions
1.

M Ltd. offered 1,05,000 equity shares of Rs.10 each payable as:

Rs.3 on application; Rs.4 on allotment and Balance on 1st & final call.

Applications were received in excess and allotment was made as follows:

(a) Applicants of 30,000 shares..................................................Nil

(b) Applicants of 12,000 shares..................................................Full Allotment

(c) Applicants of 9,000 shares....................................................Allotted 6,000 Shares

(d) Applicants of 60,000 shares..................................................Allotted 15,000 Shares

(e) Applicants of 90,000 shares..................................................Allotted 18,000 Shares

(f) Applicants of 1,50,000 shares ...............................................Allotted 24,000 Shares

(g) Applicants of 1,80,000 shares ..............................................Allotted 30,000 Shares

Excess application money received on application was adjusted towards allotment and call.

Application money received by the company:.

(A) 15,93,000
(B) 16,00,000
(C) 15,00,000
(D) 16,93,000
2. Amount refunded by the company:
(A) 90,000
(B) 5,00,000
(C) 6,60,000
(D) 4,60,000
3. Excess amount adjusted towards allotment:
(A) 3,55,000
(B) 3,56,000
(C) 3,58,000
(D) 3,57,000
4. Excess amount adjusted on Call:
(A) 2,60,000
(B) 2,61,000
(C) 2,62,000
(D) 2,63,000

Statement I: Called up capital means the share capital called up by the company on the subscribed shares.
Statement II: Calls not yet made by the shareholders but received in advance is shown as Paid up capital.

Statement I: A public company must have at least 7 members and there is no limit for maximum members.
Statement II: A private company must have atleast 2 members and there is no limit for maximum members.

Statement I: Table F of Companies Act 2013 states that there must be a fortnight break between two calls.
Statement II: Application money as per SEBI should not be less than 25% of issue price.

Statement I: Balance left in Forfeited shares Account is shown in Note to Account on share capital.
Statement II: The excess amount of forfeited shares account is transferred to capital reserve Account.

Statement I: Securities Premium Reserve can be used for issue of fully paid bonus shares and for distribution of dividend in cash.
Statement II: Balance of securities premium Reserve may be transferred to General Reserve Account.