|
Introduction
To Company Accounts
|
|
|
Concept of Share
Capital
|
|
|
Issue of Shares
|
|
|
Forfeiture and
Reissue of Shares
|
|
|
Issue of Bonus
Shares
|
|
|
Underwriting
|
|
|
Debenture — Issue
And Redemption
|
|
|
Special Points in
Respect of Certain Items
|
|
|
Company Final
Accounts
|
|
|
Specimen
Questions with Answers
|
|
INTRODUCTIONTO COMPANY ACCOUNTS
Money required by a
company to commence and carry on its operations is raised by issuing shares and
debentures. Although there are other sources of raising funds (like acceptance
of public deposits, taking bank loans, etc.), issue of shares is the bulk of
fund requirement by a company.
The term ‘Share
Capital of a company’ can be used in the following concepts :–
1.
Authorised Capital: This presents the value of shares with which a company is registered.
2.
Issued Capital : This means the portion of authorised capital that is being
offered for public subscription.
3.
Subscribed Capital: This presents that portion of issued Capital that is being taken
up by public.
4.
Called up Capital: This represents that part of subscribed capital that the
directors have decided to call up from the subscriber to satisfy the
monetary needs of the company.
5.
Paid up Capital : That portion of called up capital that is being actually paid in
cash by the shareholders.
A company can issue
two types of shares :–
1. Preference shares :
Preference shares carry a
fixed rate of dividend which is to be paid before distribution of Equity
Dividend. At the time of winding up of the company the claim of preference
shares towards repayment of capital has to be satisfied before satisfying claim
of Equity Shareholders. Preference share holders can neither get the Notice of
A.G.M nor they are able to take part in deliberation of the meeting except when
their dividend has remained unpaid for a specified number of years.
Preference shares can be
cumulative or noncumulative. In the first case the unpaid preference dividend
accumulates over the years and has to be paid in later years when there is
adequate profit. This condition does not exists in case of noncumulative
preference shares.
Under the Companies
(Amendment) Act, 1988 , preference shares issued by a company has to be
redeemed within 10 years from the date of issue.
2. Equity shares:
Equity shares are those
which are not preference shares. They do not carry any specific rate of
dividend; i.e. the rate of dividend can vary over the years depending on the
sufficiency of profit. They are allowed to get notice and attend the A.G.M. of
the company.
According to
Section 209 of the Companies Act, 1956 :
— Every
Company shall keep at its registered Office proper books of account with
respect to :
(a) all sums of money received and expended by the Company and the
matters in respect of which the receipt and expenditure take place;
(b)
all sales and purchases of goods by the Company;
(c)
the Assets and Liabilities of the Company;
(d) in the case of a Company pertaining to any class of Companies
engaged in production, processing, manufacturing or mining activities, such
particulars relating to utilisation of materials or labour or to other items of
cost as may be prescribed, if such class of Companies is required by the
Central Government to include such particulars, in the books of account.
Provided that all or any
of the books of account aforesaid may be kept at such other place in India as
the Board of Directors may decide and the company shall, within 7 days of the
decision, file with the Registrar a Notice
in writing giving the full address of that other place.
— If
proper books of account relating to the transactions effected at the branch
office are kept at that Office and proper summarised returns, made up to date
at intervals of not more than 3 months are sent by the branch office or the
other place as decided upon.
— Proper
books of account shall not be deemed to be kept with respect to the matters
specified therein :
(a) if there are not kept such books as are necessary to give a true
and fair view of the state of affairs of the Company or branch office, as the
case may be and to explain its transactions.
(b) if such books are not kept on accrual basis and according to the
double entry system of accounting.
— The
books of account and other papers shall be open to inspection by any director
during business hours.
— The
books of account of every Company relating to a period of not less than 8 years
immediately preceding the current year together with the vouchers shall be
preserved in good order.
Issue of shares involves the following steps :
1.
Issue of prospectus including people to take up shares
2.
Receiving applications along with application money.
3.
Allotment of shares
4.
Making calls on shares as decided by the Board of Directors.
5.
Issue and despatch of share certificate.
Journal Entries for
issue of Shares
Particulars Dr. (reason) Cr.
1) on receipt of application
money :
Bank A/c Dr. To Share Application A/c [No. of
shares applied ‘×’ Rate]
2) on allotment of shares:
Share Application A/c [No. of shares applied ‘×’ Rate] Dr.
To Share capital A/c
3) For rejection of some
applications:
Share
Application A/c Dr.
To Share Capital A/c [No. of
shares rejected ‘×’ Rate]
Note: Shares
can be issued at premium which may
be receivable either at
the time of application or
allotment; the Journal
Entries then will be :
a) When Premium is receivable
along with application :
i) Bank A/c [Total receipt including premium] Dr.
To Share Application
ii) Share Application A/c [No. of shares
issued '×’ Rate] Dr.
To Share Capital [No. of
shares issued '×’ Rate towards face value]
To Share Premium [premium /
share ‘×’ No. of shares issued]
b) When premium is receivable at
the time of allotment.
i) Share Allotment A/c Dr.
To Share Capital
To Share Premium.
ii) Bank A/c Dr.
To Share Allotment
5) Making and Receipt of Calls : The
Balance due towards face value of shares after receiving application and
allotment money can be recovered by making as many calls as the directors
decide. The entries should be :
1) For Call Money due:
Share Call A/c [No. of shares Issued '[No. of
shares issued ‘×’ Rate]’ Rate.] Dr. To Share Capital.
2) For Call money received
Bank A/c Dr.
To Share Call A/c
6) Treatment of calls-in-arrear : The
terms denotes failure on part of some shareholders to make payment of
any call due on the shares taken up by him. The following entry should be
passed in every case of such default.
Call-in-arrear A/c [No. of defaulted shares ‘×’
Rate] Dr. To (Respective) Call A/c.
In case shares are not forfeited the Total balance of
call-in-arrear A/c should be deducted from Share Capital A/c in the Balance
Sheet.
When some shareholders
make excess payment in respect of any instalment due on his shares the excess
amount may be retained by the company and adjusted against subsequent calls.
The Journal Entries would be :
Particulars Dr. (reason) Cr.
1)
Share
Call (1) [No. of shares Issued '[No. of shares applied ‘×’ Rate]' Amount due
on call/share]
|
Dr.
|
||
To Share Capital (original call
made).
|
|||
2)
|
Bank A/c Dr. (Total receipt)
|
||
To Share Call (1) A/c [No.
of shares '[No. of shares ‘×’ Due on call/per share]
|
|||
To Calls-in-advance [Excess
amount received]
|
|||
3)
|
Share Call (2) A/c
|
Dr.
|
|
[No. of shares issued '[No.
of shares applied ‘×’ Rate]' Amount due on call /per share]
|
|||
To Share Capital
|
|||
4)
|
Bank A/c (Balance)
|
Dr.
|
|
Calls-in-advance A/c [Excess
amount received on prior call]
|
Dr.
|
||
To share call (2) A/c [No.
of shares issued '×' amount due/per Share.]
|
|||
Unadjusted calls in
advance should be shown on Liability side of Balance Sheet.
For issuing shares at discount the following conditions are to
be satisfied : (u/s 79 of Companies Act)
1)
Discount should be given on such classes of shares already
issued by the Company.
2)
The decision to issue
shares at discount will be taken by passing a resolution at the A.G.M.
3)
The company must be at least one year of age.
4)
Without approval of CLB
the maximum rate of discount must not exceed 10% of face value.
5)
Sanction of CLB to such discounted
issue must be obtained within two months after such issue or within two months
after such issue or within such extended period as may be granted by the CLB.
Share Allotment
A/c Dr.
Discount on
Issue of Share A/c Dr.
To Share Capital
Note
: The above entry assumes the adjustment of discount at the time
of allotment.
Bat and Ball Ltd. issued
50,000 Equity Shares of Rs. 100 each. These were payable as to Rs. 20 on
Application, Rs. 30 on Allotment and the balance will be paid as and when
called for by Directors. Applications were received for 70,000 shares. The
Directors made the allotment as follows :
To applicants of 30,000 shares — Full allotment To applicants of
30,000 shares — 20,000 shares
To applicants of
10,000 shares — Application money refunded
Give journal entries for the above assuming all the money due on
allotment has been received and no call has been made.
Solution :
Particulars
|
Dr.(Rs.)
|
Cr.(Rs.)
|
||||
Bank Account
|
Dr.
|
14,00,000
|
||||
To Share Application A/c
|
14,00,000
|
|||||
(Being Application
money received on 70,000 shares
|
||||||
@ Rs. 20 per share)
|
||||||
Share Application A/c
|
Dr.
|
10,00,000
|
||||
To Share Capital A/c
|
10,00,000
|
|||||
(Being Application
money transferred to Share
|
||||||
Capital Account as
per Board’s Resolution
|
||||||
Dated..........)
|
||||||
Share Application A/c
|
Dr.
|
2,00,000
|
||||
To Bank Account
|
2,00,000
|
|||||
(Being the
application money on 10,000 shares @
|
||||||
Rs. 20 per Share
refunded as Shares were not allotted
|
||||||
as per Board’s
Resolution No. Dated..........)
|
||||||
Share Allotment Account
|
Dr.
|
15,00,000
|
||||
To Share Capital Account
|
15,00,000
|
|||||
(Being the Capital
Account money due on 50,000
|
||||||
shares @ Rs.30 per
share as per Board’s Resolution
|
||||||
dated..........)
|
||||||
Share Application Account
|
Dr.
|
2,00,000
|
||||
To Share Allotment A/c
|
2,00,000
|
|||||
(Being surplus
Application money on 10,000 shares
|
||||||
transferred to Share
Allotment A/c as per Board’s
|
||||||
Resolution
dated..........)
|
||||||
Bank A/c
|
Dr.
|
13,00,000
|
||||
To Share Allotment A/c
|
13,00,000
|
|||||
(Being the receipt of
the amount due on allotment
|
||||||
Rs. 15,00,000 –
2,00,000)
|
||||||
0 comments:
Post a Comment