G ARUN KUMAR MCOM MBA NET

ASST PROFESSOR IN COMMERCE

GDC MEN SRIKAKULAM
Every company has its own common seal, which act as the
official signature of the company.

The shares of a public company are transferable.

Shareholders are the true owners of a Company, but usually,

the number of shareholders is quite large, and as such it is
neither possible nor desirable for ach member to take part
in the day- to –day management of a Company.
S No. Basis Private Public
company company
1 Number of Minimum- 2 Minimum- 7
members Maximum- 200 Maximum- no limit

2 Invitation to the It cannot invite the public to It can invite the public to
Public subscribe to its shares subscribe to its shares

3 Transfer of Shares There is restrictions on the There is no restrictions on the

transfer of its shares transfer of its shares
1. : The shares which get
preferential right in respect of :
(a) Right of dividend
(b)Repayment of capital on winding up of
the company.
 : It is an invitation to
public for subscription of shares or
debentures.
: In case of company money
is contributed by public and people who
contributed money are called
shareholders.
3. : Capital raised by issue of shares is called
share capital.
4. : Also called as Nominal or
registered capital. It is the maximum amount of capital a
company can issue. It is stated in MOA.
5. : This is part of authorized capital which
is offered to public for subscription. It cannot exceed
authorized capital.
6. 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.
:

:
 AD Deli Ltd. invited applications for 20,000 Equity shares of Rs
10 each at the issue price of Rs. 10. The Amount payable along
with application is Rs. 10. This issue was fully subscribed. Show
the Balance sheet of the company.

Particulars Note Rs.

no.
I. Equity and Liabilities
1. Shareholder’s
funds Share capital 1 2,00,000
TOTAL
II. ASSETS 2,00,000
1. Curr
ent 2 2,00,000
Asse 2,00,000
ts
Cas
h
and
cas
h
Equi
vale
nts
TOTAL
 Notes to Accounts
1. Share Capital Rs.
Authorised Capital
… Equity Shares of
Rs. 10 each 2,00,000
Issued Capital
20,000 Equity Shares of Rs 10 each 2,00,000
Subscribed Capital
Subscribed and fully paid-up
20,000 Equity Shares of Rs. 10
each 2,00,000
2. Cash and Cash Equivalents
Cash at Bank
ISSUE OF SHARES AT PAR
 ISSUE OF SHARES AT PREMIUM
Shares are issued At premium to the public by well
managed and financially strong companies through
the IPO.
 Called Value > Face Value
Securities Premium Reserve A/C is made for
this purpose.
This Premium can be called with any
installment like (Application , Allotment,1st Call,2nd
Call .....)
In absence of information the amount of Premium
 USE OF SECURITY
PREMIUM
RESERVE
Under sec. 52 of co. Act 2013.,Amt.of sec. pre. Res.
Can be used for the following purposes
To issue fully paid up bonus shares to
the shareholders.
 To Buy-back its own shares as per section 68.
 To Write off:
•Preliminary expenses.
•Commission paid, Discount Allowed on issue
of shares or debentures
 It refers to the amount which has
not been paid up by the shareholders on allotment or
calls made by the company till the last day fixed by
the company for payments. Company can charge
interest @10% p.a from the due date to the date of
actual payment

Account is shown separately in the

balance sheet
It refers to the amount which has not called up by the
company but has been paid by some shareholder in
advance. Company is required to pay interest @ 12%
p.a
Shares issued for consideration other than
cash
 Sometimes a company purchases some assets from the vendor and
instead of paying the vendor in cash, the company may decide to issue
shares to vendors is known as issue of shares for consideration other
than cash shares can be issued to vendors at par, premium.
 The following entries will be pass
 SOME CHANGES IN CO. ACT 2013.
Issue of share at Discount

Prohibition on issue of shares at a discount

As per AS-26 Preliminary Expenses are
to be written off in the year in
they are incurred. They should be
which
written off first from Securities
Premium Reserve Account and in its
absence from Profits & Loss in the
same year.
 – Company act
2013 introduces a new type of entity to
existing list one person company means a
private ltd. Company with only person as its
members . Only natural person who is citizen
of India can be a member of OPC Its
minimum paid up capital is Rs. 1,00,000 it can
be formed for business as well as charitable
purpose.
NORMAL SUBSCRIPTION
 UNDER SUBSCRIPTION

 Shares applied < Shares offered

 The number of sha

Accounting entries are made on the basis of number

of shares applied for by the public rather than offered for.
OVER SUBSCRIPTION

.
OVER SUBSCRIPITION
 OVER SUBSCRIPITION
•Accounting Treatment in the case of Alternative 1:

Share Application A/C Dr.

To Share Capital A/C
To Bank A/C
 OVER SUBSCRIPTION
•Accounting treatment in case of
the Alternative 2:
Share Application A/C
Dr.
Share Allotment
To Share Capital A/C
A/C
To Calls in Advance A/C
•Due Application money is transferred to “Share
Capital A/C.”
•Excess money on application transferred to “Share
Allotment A/C” and the balance transferred to “Calls
in Advance A/C”.
 OVER SUBSCRIPTION
•Accounting Treatment in the case of
Alternative 3:
Share Application A/C Dr.
To Share Capital A/c

• Due Application money is transferred to “Share Capital A/C”.

•Excess money on application transferred to ‘Share Allotment
A/C” and the balance transferred to “Calls in Advance A/C”.
•Excess money of rejected applications is refund
 FORFEITURE OF SHARES

Shareholder fails to pay the Called up money on

allotment and further calls.

Shares can be cancelled and amount already paid

may be forfeited.
 FORFEITURE OF SHARES

PAR or at
 FORFEITURE OF SHARES

•Case 2 when shares are issued originally

at
PREMIMUM (NOT RECEIVED )
 RE-ISSUED OF FORFETED SHARES
•Case 1 when share are Re-Issued at PAR

Bank A/C Dr.

To Share Capital A/C
 RE-ISSUE FORFEITURE OF SHARES

•Case 2 when shares are Re-issued

at
RE-ISSUE OF FORFEITED SHARES

Share Forfeiture A/C

 R Ltd. Forfeited 200 equity shares Rs. 10 each issued at a
premium of Rs. 5 per share payable along with allotment, for
the non-payment of allotment money of Rs. 8 per share
(including premium). Applications money was Rs. 2 per share.
The forfeited shares were reissued for Rs. 2,000 as fully paid
up. Pass the necessary journal entries.
Date Particulars L.F Dr. (Rs.) Cr.(Rs.)
Equity Share Capital A/c Dr. 1,000
Securities Premium reserve A/c Dr. 1,000
To Share Allotment A/c 1,600
To Forfeited Shares A/c 400
(Forfeited of 200 shares)
Bank A/c Dr. 2,000
To Equity Share Capital A/c 2,000
(Reissue of 200 shares)
Forfeited Shares A/c Dr. 400
To Capital Reserve A/c 400
(Transfer of profit on reissue)
 CONCLUSION
• Equity shareholders are
Partly Owners of the
company.
• Premium received on the
issue of share is shown on
the Liabilities side of
the balance sheet.