Patrician College of

Arts and Science

Department of Accounting & Finance
CORPORATE ACCOUNTING

Subject Code CPG3A

III Semester

Presented By
Dr. SUBHA S – Asst. Professor
https://www.patriciancollege.ac.in /
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Unit-I Syllabus
 Issue of Shares and Debenture.

 Various kinds of issue of Shares.

 Forfeiture of Shares.

 Re-issue of Shares.

Underwriting of Shares and Debentures.

Meaning of Redemption.

Redemption of Preference Shares.

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COMPANY
 Company is a voluntary association of persons. It is an artificial person created by law.
Kinds of companies

Formation Liability Investment Ownership

Chartered Limited Private Government

Statutory Guarantee
Public Holding

Registered Unlimited
Subsidiary

CPZ3A/CPG3A/ CPW3A/CPC3A - Corporate Accounting 3

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Salient features of a company

Limited Separate Perpetual Common Transfer of

Legal existence Ownership
liability property succession seal shares

Formation of a company:
Documents required to file with Registrar of companies:
1. Memorandum of Association
2. Articles of Association
3. A statement of the Nominal Capital
4. A list of directors
5. Notice of address of the Registered office.
6. A statutory declaration.
7. Payment of fees.

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Types of share capital

Authorized Issued Capital Un-Issued

Capital Capital

Subscribed Unsubscribed
Capital Capital

Called-Up Un-Called
Capital Capital

Paid-Up Calls in Arrears

Capital
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Cont ..

 Authorized or Registered Share Capital

Maximum amount of capital, which a company is allowed to raise during its lifetime.
 Issued Capital
The portion of authorized capital, which has been issued to all the investors including public
 Subscribed Capital
The portion of the issued capital, which has been subscribed by all the investors including the
public
 Called up Capital
The portion of the subscribed capital that has been called up by the company for payments is
the called up capital
 Paid-up Capital
That part of called up capital, which has been paid up by the subscribers of share capital

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Issue of Securities

Steps to Raise
Issue of
Prospectus

Receiving Applications with

Application Money
Capital
Allotment
of shares

Making Calls for payment of

balance money

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Share – Kinds of Shares

“Share” is defined as a unit in the share capital of the company.

 Stock –It is an aggregate of fully paid up shares consolidated.

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Kinds of Shares

Preference Shares
Equity Shares Shares with difference rights

Cumulative Non-cumulative Deferred i.Dividend

ii.Voting rights

Participating Redeemable

Guaranteed

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Cont.
 Issue of shares can be classified as :

1. for full consideration --- a. for cash b. Non- cash

2. for consideration receivable as calls :
a. Receiving applications for shares: 5% of share value or 25% of the issue
price is received as application money.
b. Allotment of shares: receiving Min. subscription shares are allotted.

 . Without consideration- bonus shares.

 . Rights issue, employee stock schemes, sweat equity.

 Under subscription : Applications received less than issue.

 Over subscription : Applications received more than issue.

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Cont..

 Full allotment : Board of Directors make allotment to Applicants.

 Partial allotment : Shares are partially allotted according to ratios.

 Pro-rata allotment : Shares may be allotted proportionate to the

applications received excess appl. Money adjusted towards allotment and calls.

 Calls of shares : Call money is collected for the balance amount

after application and allotment money.

 Calls-in-Arrears : When shareholder fails to pay the amount due

towards allotment/calls. 5% interest is charged.

 Calls-in-Advance :Shareholders pay in advance towards calls not yet made

by the company. 6% interest is paid

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•Issue at Par Value : Shares are issued at the face value

•Issue of Shares at Premium : Shares are issued at a price higher than

their face value. Excess amount is share
premium transferred to Securities Premium A/c.

•Issue of Shares at Discount : Shares are issued below their face

value. It is capital loss and to be shown in B/S under
Mis.Exp.

•Forfeiture of shares : A shareholder ceases to be member

because of default in payment of allotment/call money.
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Cont..
•Reissue of forfeited shares : They become property of the
company and can be reissued at par or at discount or at premium.
They are fully or partly reissued.

•Issue of Bonus shares : Shares are issued to the existing

shareholders in settlement of the bonus are ‘Bonus shares’-
process is Capitalisation of profits.

•Buy –back of shares : Repurchase of shares by the

company of its own shares .

•For Journal Entries follow the given link below.

•https://youtu.be/O4ajUPoOi-Y

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Underwriting of shares
 Meaning - It is a contract entered into by the company with persons or institutions for
undertaking shares or debentures to subscribe for public.
Underwriters

• They guarantee subscription for a company ‘s shares and

Underwriters debentures. He takes financial risks.

• An underwriter may appoint one or more sub-

Sub-underwriters underwriters to under take work under them.

• A broker brings his customers and the company

Brokers together for brokerage

Managers to the issue • Managers are appointed to issue and fees is paid.

• For shares it should not exceed 5% and for debentures 2.5% of

Underwriting commission the issue price.

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Types of Underwriting
o Pure underwriting - Public subscribes for entire issue.
a. Complete underwriting- Whole issue is underwritten.
b. Partial underwriting -Only a part of the issue is underwritten.

oFirm underwriting - Underwriter’s liability is partly definite and

partly contingent.

o Marked applications - Applications bearing the Marking or stamp of the

underwriter.

oUnmarked applications - Applications issued by the company to the

public directly.

oFirm underwriting applications- Underwriters in addition to the shares

underwritten take up firm’s shares.

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Redemption of Preference Shares

•Section 80 and 80A of the Companies act provide for the issue and redemption of redeemable preference
shares.

•Fully Paid up Shares only can be redeemed.

•Shares are redeemed out of profits or out of fresh issue of shares.

•Shares redeemed out of Profit, equal amount is to be transferred to ‘Capital Redemption Reserve Account’,
which can be used to pay bonus to the Equity share holders.

For Journal Entries follow the link given below.

•https://youtu.be/-qMb_DiXc-s

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Thank you
https://www.patriciancollege.ac.in /