Notes > REVISION TEST NO – 1(2013)- ISSUE OF SHARE CAPITAL - Accountancy, class 12, CBSE
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PUNEET COLLEGE PKL|CHD 98155 – 00062 www.facebook.com/puneetcollege
PUNEET COLLEGE
REVISION TEST NO – 1 (2013 – 14)
ISSUE OF SHARE CAPITAL
22
ND
NOV, 13
TIME – 1 Hr. 30 Min SET – 1 MM ? 28
Q 1: State two effects of Forfeiture of Shares. 1
Q 2: X Ltd. paid up share capital of Rs. 60, 00, 000 has a balance of Rs. 15, 00, 000 in Securities premium
Account. The company management does not want to carry over this balance. You are required to
suggest the method for utilizing this premium money that would achieve the objective of the
management and maximize the return to shareholders. 1
Q 3: Distinction between Reserve Capital and Capital Reserve on the basis of Disclosure. 1
Q 4: What is Initial Public Offer (IPO)? 1
Q 5: X Ltd. forfeited 200 shared of Rs. 10, Rs. 6 called up issued at a discount of 10% to Nimmi on which
she had paid Rs. 2 per share. Out of these, 160 shares were reissued to Simmi as Rs. 8 paid up for Rs.
6 per share. Give journal entries for the forfeiture and reissue of shares. 4
Q 6: Janta Ltd. had an authorized capital of Rs. 2, 00, 000 divided into equity shares of Rs. 10 each. The
company offered for subscription Rs. 1, 00, 000 shares. The issue was fully subscribed. The amount
payable on application was Rs. 2 per share. Rs. 4 per share were payable each on allotment and first
and final call. A shareholder holding 100 shares failed to pay the allotment money. His shares were
forfeited. The company did not make the final call.
Show how the ‘Share Capital’ will be shown in the Company’s Balance Sheet.
Also prepare ‘Notes to Accounts’ for the same. 4
Q 7: Star ltd. issued a prospectus inviting applications for 2, 000 shares of Rs. 10 each at a premium of Rs.
2 per share payable as follows:
On application Rs. 2; On allotment Rs. 5 (including premium); On first call Rs. 3; On second and
final call Rs. 2 Applications were received for 3, 000 shares and allotment made pro – rata to the
applicants for 2, 400 shares, the remaining applications being refused. Money overpaid on
applications was employed on account of sums due on allotment. X, to whom 40 shares were allotted,
failed to pay the allotment money and on his subsequent failure to pay the first call, his shares were
forfeited. Y, the holder of 60 shares failed to pay two calls and his shares were forfeited after the
second call. Of the forfeited shares, 80 shares were sold to Z, credited as fully paid for Rs. 9 per
share, the whole of X’s shares being included.
Show Journal and Cash – Book entries. 8
Page 2
PUNEET COLLEGE PKL|CHD 98155 – 00062 www.facebook.com/puneetcollege
PUNEET COLLEGE
REVISION TEST NO – 1 (2013 – 14)
ISSUE OF SHARE CAPITAL
22
ND
NOV, 13
TIME – 1 Hr. 30 Min SET – 1 MM ? 28
Q 1: State two effects of Forfeiture of Shares. 1
Q 2: X Ltd. paid up share capital of Rs. 60, 00, 000 has a balance of Rs. 15, 00, 000 in Securities premium
Account. The company management does not want to carry over this balance. You are required to
suggest the method for utilizing this premium money that would achieve the objective of the
management and maximize the return to shareholders. 1
Q 3: Distinction between Reserve Capital and Capital Reserve on the basis of Disclosure. 1
Q 4: What is Initial Public Offer (IPO)? 1
Q 5: X Ltd. forfeited 200 shared of Rs. 10, Rs. 6 called up issued at a discount of 10% to Nimmi on which
she had paid Rs. 2 per share. Out of these, 160 shares were reissued to Simmi as Rs. 8 paid up for Rs.
6 per share. Give journal entries for the forfeiture and reissue of shares. 4
Q 6: Janta Ltd. had an authorized capital of Rs. 2, 00, 000 divided into equity shares of Rs. 10 each. The
company offered for subscription Rs. 1, 00, 000 shares. The issue was fully subscribed. The amount
payable on application was Rs. 2 per share. Rs. 4 per share were payable each on allotment and first
and final call. A shareholder holding 100 shares failed to pay the allotment money. His shares were
forfeited. The company did not make the final call.
Show how the ‘Share Capital’ will be shown in the Company’s Balance Sheet.
Also prepare ‘Notes to Accounts’ for the same. 4
Q 7: Star ltd. issued a prospectus inviting applications for 2, 000 shares of Rs. 10 each at a premium of Rs.
2 per share payable as follows:
On application Rs. 2; On allotment Rs. 5 (including premium); On first call Rs. 3; On second and
final call Rs. 2 Applications were received for 3, 000 shares and allotment made pro – rata to the
applicants for 2, 400 shares, the remaining applications being refused. Money overpaid on
applications was employed on account of sums due on allotment. X, to whom 40 shares were allotted,
failed to pay the allotment money and on his subsequent failure to pay the first call, his shares were
forfeited. Y, the holder of 60 shares failed to pay two calls and his shares were forfeited after the
second call. Of the forfeited shares, 80 shares were sold to Z, credited as fully paid for Rs. 9 per
share, the whole of X’s shares being included.
Show Journal and Cash – Book entries. 8
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Q 8: Srijan Ltd. issued Rs. 10, 00, 000 new capital divided into Rs. 100 shares at a premium of Rs. 20 per
share, payable as under:
On Application Rs. 10 per share
On Allotment Rs. 40 per share (including premium of Rs. 10 per share)
On First and Final call Balance
Over – payments on application were to be applied towards sums due on allotment and first and final
call. Where no allotment was made, money was to be refunded in full. The issue was oversubscribed
to the extent of 13, 000 shares. Applicants for 12, 000 shares were allotted only 2, 000 shares and
applicants for 3, 000 shares were sent letters of regret. Shares were allotted in full to the remaining
applicants. All the money due was duly received.
1. Which value has been affected by rejecting the applications of the applicants who had applied
for 3, 000 shares? Suggest a better alternative for the same.
2. Give journal entries to record the above transactions (including cash transactions) in the books
of the company. 8
Page 3
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PUNEET COLLEGE
REVISION TEST NO – 1 (2013 – 14)
ISSUE OF SHARE CAPITAL
22
ND
NOV, 13
TIME – 1 Hr. 30 Min SET – 1 MM ? 28
Q 1: State two effects of Forfeiture of Shares. 1
Q 2: X Ltd. paid up share capital of Rs. 60, 00, 000 has a balance of Rs. 15, 00, 000 in Securities premium
Account. The company management does not want to carry over this balance. You are required to
suggest the method for utilizing this premium money that would achieve the objective of the
management and maximize the return to shareholders. 1
Q 3: Distinction between Reserve Capital and Capital Reserve on the basis of Disclosure. 1
Q 4: What is Initial Public Offer (IPO)? 1
Q 5: X Ltd. forfeited 200 shared of Rs. 10, Rs. 6 called up issued at a discount of 10% to Nimmi on which
she had paid Rs. 2 per share. Out of these, 160 shares were reissued to Simmi as Rs. 8 paid up for Rs.
6 per share. Give journal entries for the forfeiture and reissue of shares. 4
Q 6: Janta Ltd. had an authorized capital of Rs. 2, 00, 000 divided into equity shares of Rs. 10 each. The
company offered for subscription Rs. 1, 00, 000 shares. The issue was fully subscribed. The amount
payable on application was Rs. 2 per share. Rs. 4 per share were payable each on allotment and first
and final call. A shareholder holding 100 shares failed to pay the allotment money. His shares were
forfeited. The company did not make the final call.
Show how the ‘Share Capital’ will be shown in the Company’s Balance Sheet.
Also prepare ‘Notes to Accounts’ for the same. 4
Q 7: Star ltd. issued a prospectus inviting applications for 2, 000 shares of Rs. 10 each at a premium of Rs.
2 per share payable as follows:
On application Rs. 2; On allotment Rs. 5 (including premium); On first call Rs. 3; On second and
final call Rs. 2 Applications were received for 3, 000 shares and allotment made pro – rata to the
applicants for 2, 400 shares, the remaining applications being refused. Money overpaid on
applications was employed on account of sums due on allotment. X, to whom 40 shares were allotted,
failed to pay the allotment money and on his subsequent failure to pay the first call, his shares were
forfeited. Y, the holder of 60 shares failed to pay two calls and his shares were forfeited after the
second call. Of the forfeited shares, 80 shares were sold to Z, credited as fully paid for Rs. 9 per
share, the whole of X’s shares being included.
Show Journal and Cash – Book entries. 8
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Q 8: Srijan Ltd. issued Rs. 10, 00, 000 new capital divided into Rs. 100 shares at a premium of Rs. 20 per
share, payable as under:
On Application Rs. 10 per share
On Allotment Rs. 40 per share (including premium of Rs. 10 per share)
On First and Final call Balance
Over – payments on application were to be applied towards sums due on allotment and first and final
call. Where no allotment was made, money was to be refunded in full. The issue was oversubscribed
to the extent of 13, 000 shares. Applicants for 12, 000 shares were allotted only 2, 000 shares and
applicants for 3, 000 shares were sent letters of regret. Shares were allotted in full to the remaining
applicants. All the money due was duly received.
1. Which value has been affected by rejecting the applications of the applicants who had applied
for 3, 000 shares? Suggest a better alternative for the same.
2. Give journal entries to record the above transactions (including cash transactions) in the books
of the company. 8
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PUNEET COLLEGE
REVISION TEST NO – 1 (2013 – 14)
ISSUE OF SHARE CAPITAL
22
ND
NOV, 13
TIME – 1 Hr. 30 Min SET – 2 MM ? 28
Q 1: Can Securities Premium Reserve be distributed as dividend? 1
Q 2: Ekta Ltd. has Rs. 10, 000 debit balance in Calls – in – Arrear Account and also Rs. 10, 000 credit
balance in Calls – in – Advance Account. The Accountant has prepared a Balance Sheet and not
shown the two balances on the ground that the two accounts relate to share capital and have thus
been set – off against each other. Do you think the approach is correct? Give your reasons. 1
Q 3: Distinction between Reserve Capital and Capital Reserve on the basis of the meaning. 1
Q 4: Distinction between Oversubscription and Under – subscription of shares on the basis of the
Minimum Subscription? 1
Q 5: X Ltd. received first call on 19,2 00 equity shares @ Rs. 3 per share which was due on 1.4.2007. Mr.
Raju holding 800 equity shares, however, did not pay the first call on the due date. This amount was
received on 1.5.2007 together with interest @ 5% p.a. Open calls in arrears account and record the
above transactions in the books of company on 1.4.2007 and 1.5.2007. 4
Q 6: On 1
st
April, 2011, new Ideas Ltd. was formed with an authorized capital of Rs. 20, 00, 000 divided
into 2, 00, 000 equity shares of Rs. 10 each. The company issued prospectus inviting applications for
1, 50, 000 shares. The share price was payable as under 3 + 4 + 3:
The issue was fully subscribed and the company allotted shares to all the applicants. The company
did not make the call during the year.
The company also issued 5, 000 shares of Rs. 10 each fully paid up to the vendor for purchase of building.
Show how the ‘Share Capital’ will be shown in the Company’s Balance Sheet as at 31
st
March, 2012.
Also prepare ‘Notes to Accounts’ for the same. 4
Q 7: X Ltd. issued a prospectus offering 10, 000 equity share of Rs. 20 each at Rs. 22 per share payable as
follows:
On Application Rs. 3
On Allotment Rs. 8 (including premium)
On First Call Rs. 6
On Final Call Rs. 5 per share
The public applied for 15, 000 equity shares. The directors rejected application for 3, 000 shares and
made pro – rata allotment to remaining shares. Money overpaid on application is to be adjusted to
allotment. On first call being made, all the shareholders, except one holding 400 shares, duty paid
their respective amount. These 400 shares were forfeited by the Board of Directors and 300 of these
shares were subsequently reissued credited Rs. 15 paid for Rs. 13 per share. The directors did not
make final call. Pass Journal entries for the above transactions. 8
Page 4
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PUNEET COLLEGE
REVISION TEST NO – 1 (2013 – 14)
ISSUE OF SHARE CAPITAL
22
ND
NOV, 13
TIME – 1 Hr. 30 Min SET – 1 MM ? 28
Q 1: State two effects of Forfeiture of Shares. 1
Q 2: X Ltd. paid up share capital of Rs. 60, 00, 000 has a balance of Rs. 15, 00, 000 in Securities premium
Account. The company management does not want to carry over this balance. You are required to
suggest the method for utilizing this premium money that would achieve the objective of the
management and maximize the return to shareholders. 1
Q 3: Distinction between Reserve Capital and Capital Reserve on the basis of Disclosure. 1
Q 4: What is Initial Public Offer (IPO)? 1
Q 5: X Ltd. forfeited 200 shared of Rs. 10, Rs. 6 called up issued at a discount of 10% to Nimmi on which
she had paid Rs. 2 per share. Out of these, 160 shares were reissued to Simmi as Rs. 8 paid up for Rs.
6 per share. Give journal entries for the forfeiture and reissue of shares. 4
Q 6: Janta Ltd. had an authorized capital of Rs. 2, 00, 000 divided into equity shares of Rs. 10 each. The
company offered for subscription Rs. 1, 00, 000 shares. The issue was fully subscribed. The amount
payable on application was Rs. 2 per share. Rs. 4 per share were payable each on allotment and first
and final call. A shareholder holding 100 shares failed to pay the allotment money. His shares were
forfeited. The company did not make the final call.
Show how the ‘Share Capital’ will be shown in the Company’s Balance Sheet.
Also prepare ‘Notes to Accounts’ for the same. 4
Q 7: Star ltd. issued a prospectus inviting applications for 2, 000 shares of Rs. 10 each at a premium of Rs.
2 per share payable as follows:
On application Rs. 2; On allotment Rs. 5 (including premium); On first call Rs. 3; On second and
final call Rs. 2 Applications were received for 3, 000 shares and allotment made pro – rata to the
applicants for 2, 400 shares, the remaining applications being refused. Money overpaid on
applications was employed on account of sums due on allotment. X, to whom 40 shares were allotted,
failed to pay the allotment money and on his subsequent failure to pay the first call, his shares were
forfeited. Y, the holder of 60 shares failed to pay two calls and his shares were forfeited after the
second call. Of the forfeited shares, 80 shares were sold to Z, credited as fully paid for Rs. 9 per
share, the whole of X’s shares being included.
Show Journal and Cash – Book entries. 8
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Q 8: Srijan Ltd. issued Rs. 10, 00, 000 new capital divided into Rs. 100 shares at a premium of Rs. 20 per
share, payable as under:
On Application Rs. 10 per share
On Allotment Rs. 40 per share (including premium of Rs. 10 per share)
On First and Final call Balance
Over – payments on application were to be applied towards sums due on allotment and first and final
call. Where no allotment was made, money was to be refunded in full. The issue was oversubscribed
to the extent of 13, 000 shares. Applicants for 12, 000 shares were allotted only 2, 000 shares and
applicants for 3, 000 shares were sent letters of regret. Shares were allotted in full to the remaining
applicants. All the money due was duly received.
1. Which value has been affected by rejecting the applications of the applicants who had applied
for 3, 000 shares? Suggest a better alternative for the same.
2. Give journal entries to record the above transactions (including cash transactions) in the books
of the company. 8
PUNEET COLLEGE PKL|CHD 98155 – 00062 www.facebook.com/puneetcollege
PUNEET COLLEGE
REVISION TEST NO – 1 (2013 – 14)
ISSUE OF SHARE CAPITAL
22
ND
NOV, 13
TIME – 1 Hr. 30 Min SET – 2 MM ? 28
Q 1: Can Securities Premium Reserve be distributed as dividend? 1
Q 2: Ekta Ltd. has Rs. 10, 000 debit balance in Calls – in – Arrear Account and also Rs. 10, 000 credit
balance in Calls – in – Advance Account. The Accountant has prepared a Balance Sheet and not
shown the two balances on the ground that the two accounts relate to share capital and have thus
been set – off against each other. Do you think the approach is correct? Give your reasons. 1
Q 3: Distinction between Reserve Capital and Capital Reserve on the basis of the meaning. 1
Q 4: Distinction between Oversubscription and Under – subscription of shares on the basis of the
Minimum Subscription? 1
Q 5: X Ltd. received first call on 19,2 00 equity shares @ Rs. 3 per share which was due on 1.4.2007. Mr.
Raju holding 800 equity shares, however, did not pay the first call on the due date. This amount was
received on 1.5.2007 together with interest @ 5% p.a. Open calls in arrears account and record the
above transactions in the books of company on 1.4.2007 and 1.5.2007. 4
Q 6: On 1
st
April, 2011, new Ideas Ltd. was formed with an authorized capital of Rs. 20, 00, 000 divided
into 2, 00, 000 equity shares of Rs. 10 each. The company issued prospectus inviting applications for
1, 50, 000 shares. The share price was payable as under 3 + 4 + 3:
The issue was fully subscribed and the company allotted shares to all the applicants. The company
did not make the call during the year.
The company also issued 5, 000 shares of Rs. 10 each fully paid up to the vendor for purchase of building.
Show how the ‘Share Capital’ will be shown in the Company’s Balance Sheet as at 31
st
March, 2012.
Also prepare ‘Notes to Accounts’ for the same. 4
Q 7: X Ltd. issued a prospectus offering 10, 000 equity share of Rs. 20 each at Rs. 22 per share payable as
follows:
On Application Rs. 3
On Allotment Rs. 8 (including premium)
On First Call Rs. 6
On Final Call Rs. 5 per share
The public applied for 15, 000 equity shares. The directors rejected application for 3, 000 shares and
made pro – rata allotment to remaining shares. Money overpaid on application is to be adjusted to
allotment. On first call being made, all the shareholders, except one holding 400 shares, duty paid
their respective amount. These 400 shares were forfeited by the Board of Directors and 300 of these
shares were subsequently reissued credited Rs. 15 paid for Rs. 13 per share. The directors did not
make final call. Pass Journal entries for the above transactions. 8
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Q 8: Sangita Ltd. invited applications for issuing 60, 000 shares of Rs. 10 each at par. The amount was
payable as follows:
On Application Rs. 2 per share
On Allotment Rs. 3 per share
On First and Final call Rs. 5 per share
Applications were received for 92, 000 shares. Allotment was made on the following basis:
1. To applications for 40, 000 shares - Full
2. To applicants for 50, 000 shares - 40%
3. To applications for 2, 000 shares - Nil (Most of this category had applied for less than
5 shares each) Rs. 1, 08, 000 was realised on account of allotment (excluding the amount carried
from application money) and Rs. 2, 50, 000 on account of call. The directors decided to forfeit
shares of those applicants to whom full allotment was made and on which allotment money was
overdue.
a. Which value has been affected by the rejection of applications of category (iii) Applicants?
Suggest a better alternative for the same.
b. Pass journal entries in the books of Sangita Ltd. to record the above transactions. 8
Page 5
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PUNEET COLLEGE
REVISION TEST NO – 1 (2013 – 14)
ISSUE OF SHARE CAPITAL
22
ND
NOV, 13
TIME – 1 Hr. 30 Min SET – 1 MM ? 28
Q 1: State two effects of Forfeiture of Shares. 1
Q 2: X Ltd. paid up share capital of Rs. 60, 00, 000 has a balance of Rs. 15, 00, 000 in Securities premium
Account. The company management does not want to carry over this balance. You are required to
suggest the method for utilizing this premium money that would achieve the objective of the
management and maximize the return to shareholders. 1
Q 3: Distinction between Reserve Capital and Capital Reserve on the basis of Disclosure. 1
Q 4: What is Initial Public Offer (IPO)? 1
Q 5: X Ltd. forfeited 200 shared of Rs. 10, Rs. 6 called up issued at a discount of 10% to Nimmi on which
she had paid Rs. 2 per share. Out of these, 160 shares were reissued to Simmi as Rs. 8 paid up for Rs.
6 per share. Give journal entries for the forfeiture and reissue of shares. 4
Q 6: Janta Ltd. had an authorized capital of Rs. 2, 00, 000 divided into equity shares of Rs. 10 each. The
company offered for subscription Rs. 1, 00, 000 shares. The issue was fully subscribed. The amount
payable on application was Rs. 2 per share. Rs. 4 per share were payable each on allotment and first
and final call. A shareholder holding 100 shares failed to pay the allotment money. His shares were
forfeited. The company did not make the final call.
Show how the ‘Share Capital’ will be shown in the Company’s Balance Sheet.
Also prepare ‘Notes to Accounts’ for the same. 4
Q 7: Star ltd. issued a prospectus inviting applications for 2, 000 shares of Rs. 10 each at a premium of Rs.
2 per share payable as follows:
On application Rs. 2; On allotment Rs. 5 (including premium); On first call Rs. 3; On second and
final call Rs. 2 Applications were received for 3, 000 shares and allotment made pro – rata to the
applicants for 2, 400 shares, the remaining applications being refused. Money overpaid on
applications was employed on account of sums due on allotment. X, to whom 40 shares were allotted,
failed to pay the allotment money and on his subsequent failure to pay the first call, his shares were
forfeited. Y, the holder of 60 shares failed to pay two calls and his shares were forfeited after the
second call. Of the forfeited shares, 80 shares were sold to Z, credited as fully paid for Rs. 9 per
share, the whole of X’s shares being included.
Show Journal and Cash – Book entries. 8
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Q 8: Srijan Ltd. issued Rs. 10, 00, 000 new capital divided into Rs. 100 shares at a premium of Rs. 20 per
share, payable as under:
On Application Rs. 10 per share
On Allotment Rs. 40 per share (including premium of Rs. 10 per share)
On First and Final call Balance
Over – payments on application were to be applied towards sums due on allotment and first and final
call. Where no allotment was made, money was to be refunded in full. The issue was oversubscribed
to the extent of 13, 000 shares. Applicants for 12, 000 shares were allotted only 2, 000 shares and
applicants for 3, 000 shares were sent letters of regret. Shares were allotted in full to the remaining
applicants. All the money due was duly received.
1. Which value has been affected by rejecting the applications of the applicants who had applied
for 3, 000 shares? Suggest a better alternative for the same.
2. Give journal entries to record the above transactions (including cash transactions) in the books
of the company. 8
PUNEET COLLEGE PKL|CHD 98155 – 00062 www.facebook.com/puneetcollege
PUNEET COLLEGE
REVISION TEST NO – 1 (2013 – 14)
ISSUE OF SHARE CAPITAL
22
ND
NOV, 13
TIME – 1 Hr. 30 Min SET – 2 MM ? 28
Q 1: Can Securities Premium Reserve be distributed as dividend? 1
Q 2: Ekta Ltd. has Rs. 10, 000 debit balance in Calls – in – Arrear Account and also Rs. 10, 000 credit
balance in Calls – in – Advance Account. The Accountant has prepared a Balance Sheet and not
shown the two balances on the ground that the two accounts relate to share capital and have thus
been set – off against each other. Do you think the approach is correct? Give your reasons. 1
Q 3: Distinction between Reserve Capital and Capital Reserve on the basis of the meaning. 1
Q 4: Distinction between Oversubscription and Under – subscription of shares on the basis of the
Minimum Subscription? 1
Q 5: X Ltd. received first call on 19,2 00 equity shares @ Rs. 3 per share which was due on 1.4.2007. Mr.
Raju holding 800 equity shares, however, did not pay the first call on the due date. This amount was
received on 1.5.2007 together with interest @ 5% p.a. Open calls in arrears account and record the
above transactions in the books of company on 1.4.2007 and 1.5.2007. 4
Q 6: On 1
st
April, 2011, new Ideas Ltd. was formed with an authorized capital of Rs. 20, 00, 000 divided
into 2, 00, 000 equity shares of Rs. 10 each. The company issued prospectus inviting applications for
1, 50, 000 shares. The share price was payable as under 3 + 4 + 3:
The issue was fully subscribed and the company allotted shares to all the applicants. The company
did not make the call during the year.
The company also issued 5, 000 shares of Rs. 10 each fully paid up to the vendor for purchase of building.
Show how the ‘Share Capital’ will be shown in the Company’s Balance Sheet as at 31
st
March, 2012.
Also prepare ‘Notes to Accounts’ for the same. 4
Q 7: X Ltd. issued a prospectus offering 10, 000 equity share of Rs. 20 each at Rs. 22 per share payable as
follows:
On Application Rs. 3
On Allotment Rs. 8 (including premium)
On First Call Rs. 6
On Final Call Rs. 5 per share
The public applied for 15, 000 equity shares. The directors rejected application for 3, 000 shares and
made pro – rata allotment to remaining shares. Money overpaid on application is to be adjusted to
allotment. On first call being made, all the shareholders, except one holding 400 shares, duty paid
their respective amount. These 400 shares were forfeited by the Board of Directors and 300 of these
shares were subsequently reissued credited Rs. 15 paid for Rs. 13 per share. The directors did not
make final call. Pass Journal entries for the above transactions. 8
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Q 8: Sangita Ltd. invited applications for issuing 60, 000 shares of Rs. 10 each at par. The amount was
payable as follows:
On Application Rs. 2 per share
On Allotment Rs. 3 per share
On First and Final call Rs. 5 per share
Applications were received for 92, 000 shares. Allotment was made on the following basis:
1. To applications for 40, 000 shares - Full
2. To applicants for 50, 000 shares - 40%
3. To applications for 2, 000 shares - Nil (Most of this category had applied for less than
5 shares each) Rs. 1, 08, 000 was realised on account of allotment (excluding the amount carried
from application money) and Rs. 2, 50, 000 on account of call. The directors decided to forfeit
shares of those applicants to whom full allotment was made and on which allotment money was
overdue.
a. Which value has been affected by the rejection of applications of category (iii) Applicants?
Suggest a better alternative for the same.
b. Pass journal entries in the books of Sangita Ltd. to record the above transactions. 8
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+2 ACC RT – 1(2013 – 2014) ISSUE OF SHARES Set 1 (Solution)
Ans 1:
1. The name of the defaulting shareholder is removed from the register of members. It means he is
no more a shareholder of the company.
2. The amount already paid by the defaulting shareholder is forfeited and such amount is
transferred to Forfeited Shares Account.
Ans 2: As per sec 78 of the Companies Act Securities premium money can be utilized to issue fully paid Bonus
Shares to members. Hence the management should utilize the securities premium of Rs. 15, 00, 000 by
issue of bonus shares to the shareholders in the ratio of 1:4 (i.e. one bonus share for every four share held).
Ans 3: Reserve Capital: It is not disclosed in the company’s Balance Sheet.
Capital Reserve: It is disclosed under the head ‘Reserves and Surplus’ on the liabilities side of the Balance Sheet.
Ans 4: IPO means inviting the public in general to subscribe for its shares. IPO may be at par, at premium or at discount.
Ans 5: JOURNAL
Date Particulars LF Dr. Rs. Cr. Rs.
Share Capital A/c Dr.
To Discount A/c
To Call in Arrears
To Share Forfeiture
1, 200
960
160
160
160
200
600
400
1, 280
160
Bank A/c Dr.
Discount A/c Dr.
Share forfeiture A/c Dr.
To Share reissued
Share Forfeiture A/c Dr.
To Capital Reserve
Ans 6: BALANCE SHEET (an extract)
Particulars Note No. 31.3.12 Rs. 31.3.11 Rs.
1. EQUITY AND LIABILITIES
1. Shareholder’s Funds
a. Share Capital
1
59, 600
59, 600
Note of Accounts:
1. Share Capital
Authorised Capital
(20, 000 Eq. shares @ Rs. 10 each) 2, 00, 000
Issued Capital
(10, 000 eq. shares @ Rs. 10 each) 1, 00, 000
Subscribed, called & Paid up Capital
(9, 900 eq. shares of Rs. 10 each, @ Rs. 6 called up) 59, 400
+ Share Forfeiture 200
59, 600
Ans 7: Apply = Allot
3, 000 = 2, 000
2, 400 = 2, 000
600 = NIL
Surplus = 800
X = 40 X = 6/5 X 40 = 48
Surplus = 16
Allot due = 200
All money not paid = 184
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FAQs on REVISION TEST NO – 1(2013)- ISSUE OF SHARE CAPITAL - Accountancy, class 12, CBSE
| 1. What is the meaning of share capital? |  |
Ans. Share capital refers to the total value of the funds raised by a company through the issuance of shares. It represents the ownership interest of shareholders in the company and is an important component of a company's capital structure.
| 2. How is share capital issued? | |
Ans. Share capital can be issued through various methods such as:
- Initial Public Offering (IPO): A company can issue shares to the public for the first time through an IPO.
- Rights Issue: Existing shareholders are given the right to purchase additional shares at a discounted price.
- Private Placement: Shares are offered to a select group of investors, such as institutional investors or private equity firms.
- Bonus Issue: Additional shares are issued to existing shareholders without any cost.
| 3. What are the different types of share capital? | |
Ans. The different types of share capital include:
- Authorized Share Capital: The maximum amount of share capital that a company is authorized to issue as per its Memorandum of Association.
- Issued Share Capital: The portion of authorized share capital that is actually issued to shareholders.
- Subscribed Share Capital: The portion of issued share capital that is subscribed by shareholders.
- Paid-up Share Capital: The portion of subscribed share capital that has been paid by shareholders.
| 4. What is the difference between equity share capital and preference share capital? | |
Ans. The main differences between equity share capital and preference share capital are:
- Equity Share Capital: Equity shares represent ownership in the company and carry voting rights. The dividend paid on equity shares is not fixed and is dependent on the company's profitability.
- Preference Share Capital: Preference shares carry a fixed rate of dividend and have preference over equity shares in terms of dividend payment and repayment of capital in case of liquidation. However, preference shareholders do not have voting rights.
| 5. What is the significance of share capital for a company? | |
Ans. Share capital is significant for a company in the following ways:
- Source of Funds: Share capital provides a company with the necessary funds for its operations, expansion, and investment in assets.
- Ownership and Control: Share capital represents the ownership interest of shareholders and determines their voting rights in the company.
- Capital Structure: Share capital is a key component of a company's capital structure and influences its financial position and risk profile.
- Investor Confidence: The amount of share capital and the composition of shareholders can affect the perception of investors and stakeholders about the company's financial strength and future prospects.
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