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Page 1
Institute of Lifelong Learning, University of Delhi
Paper: Corporate Accounts
Lesson: Shares: Issue, Reissue and Forfeiture
Author: Ms.Yasha Bothra,
Assistant Professor in Commerce, Bharati College
University of Delhi
Page 2
Institute of Lifelong Learning, University of Delhi
Paper: Corporate Accounts
Lesson: Shares: Issue, Reissue and Forfeiture
Author: Ms.Yasha Bothra,
Assistant Professor in Commerce, Bharati College
University of Delhi
Institute of Lifelong Learning, University of Delhi
Lesson: Shares: Issue, Reissue and Forfeiture
Table of Contents:
1. Learning Outcomes
2. Introduction Shares
3. Kinds of Shares
3.1. Equity Shares
3.2. Preference Share Capital
4. Accounting Treatment of Share Capital
4.1. On Receipt of Application Money
4.2. On Acceptance of Share Application
4.3. On Allotment Money Becoming Due
4.4. On Receipt of Allotment Money
4.5. On Call Money Becoming Due
4.6. On Receipt of Call Money
5. Issue of Shares at Par
6. Issue of Shares at Premium
7. Calls in Advance
7.1. Interest on Calls in Advance
8. Calls in Arrear
8.1. Interest on Calls in Arrear
9. Over and Under Subscription of Shares
10. Forfeiture of Shares
11. Reissue of Share
12. Cash Book
13. Issue of Shares for Consideration other than Cash
Summary
Glossary
Exercises
References
Page 3
Institute of Lifelong Learning, University of Delhi
Paper: Corporate Accounts
Lesson: Shares: Issue, Reissue and Forfeiture
Author: Ms.Yasha Bothra,
Assistant Professor in Commerce, Bharati College
University of Delhi
Institute of Lifelong Learning, University of Delhi
Lesson: Shares: Issue, Reissue and Forfeiture
Table of Contents:
1. Learning Outcomes
2. Introduction Shares
3. Kinds of Shares
3.1. Equity Shares
3.2. Preference Share Capital
4. Accounting Treatment of Share Capital
4.1. On Receipt of Application Money
4.2. On Acceptance of Share Application
4.3. On Allotment Money Becoming Due
4.4. On Receipt of Allotment Money
4.5. On Call Money Becoming Due
4.6. On Receipt of Call Money
5. Issue of Shares at Par
6. Issue of Shares at Premium
7. Calls in Advance
7.1. Interest on Calls in Advance
8. Calls in Arrear
8.1. Interest on Calls in Arrear
9. Over and Under Subscription of Shares
10. Forfeiture of Shares
11. Reissue of Share
12. Cash Book
13. Issue of Shares for Consideration other than Cash
Summary
Glossary
Exercises
References
Institute of Lifelong Learning, University of Delhi
1. Learning Outcomes:
After studying this lesson, you should be able to;
? understand the concept of Shares;
? differentiate various types of shares;
? know the accounting procedure for the issue of shares;
? understand the concept of various installments on issue of shares;
? distinguish between calls in advance and calls in arrears;
? comprehend the difference between oversubscription and under subscription of shares;
? understand how to deal with oversubscription of shares;
? appreciate the reasons of forfeiture and reissue of shares;
? gain an insight into the accounting for issue of shares for consideration other than cash.
2. Share:
Every company needs a lot of funds to do business. It is not an easy thing for one person or
for a group of only two or three people to put all the money required for doing business
themselves on a large scale. It is necessary to take help from others for collecting a large
sum of money. For this purpose these people start a company and then ask public to
contribute money for doing business. The money that is collected for doing business forms
the capital of the company. But as we all know it is not possible for a single person or for a
group of persons to contribute entire money towards the capital of company. So, the total
capital of a company is divided into some small value of equal amounts. This is called as
Introduction:
We all know that capital is one of the most important part of any
business. A company means any company that is incorporated under
Companies Act 2013 or under any previous law. The company must have
sufficient amount of capital to start the business. A public company can
raise capital by inviting public to subscribe for its shares or they can
raise it privately as done by a private company. In this lesson we will
understand how shares and debentures are issued and redeemed by a
company. What are the different types of shares and debentures that a
company can issue?
Page 4
Institute of Lifelong Learning, University of Delhi
Paper: Corporate Accounts
Lesson: Shares: Issue, Reissue and Forfeiture
Author: Ms.Yasha Bothra,
Assistant Professor in Commerce, Bharati College
University of Delhi
Institute of Lifelong Learning, University of Delhi
Lesson: Shares: Issue, Reissue and Forfeiture
Table of Contents:
1. Learning Outcomes
2. Introduction Shares
3. Kinds of Shares
3.1. Equity Shares
3.2. Preference Share Capital
4. Accounting Treatment of Share Capital
4.1. On Receipt of Application Money
4.2. On Acceptance of Share Application
4.3. On Allotment Money Becoming Due
4.4. On Receipt of Allotment Money
4.5. On Call Money Becoming Due
4.6. On Receipt of Call Money
5. Issue of Shares at Par
6. Issue of Shares at Premium
7. Calls in Advance
7.1. Interest on Calls in Advance
8. Calls in Arrear
8.1. Interest on Calls in Arrear
9. Over and Under Subscription of Shares
10. Forfeiture of Shares
11. Reissue of Share
12. Cash Book
13. Issue of Shares for Consideration other than Cash
Summary
Glossary
Exercises
References
Institute of Lifelong Learning, University of Delhi
1. Learning Outcomes:
After studying this lesson, you should be able to;
? understand the concept of Shares;
? differentiate various types of shares;
? know the accounting procedure for the issue of shares;
? understand the concept of various installments on issue of shares;
? distinguish between calls in advance and calls in arrears;
? comprehend the difference between oversubscription and under subscription of shares;
? understand how to deal with oversubscription of shares;
? appreciate the reasons of forfeiture and reissue of shares;
? gain an insight into the accounting for issue of shares for consideration other than cash.
2. Share:
Every company needs a lot of funds to do business. It is not an easy thing for one person or
for a group of only two or three people to put all the money required for doing business
themselves on a large scale. It is necessary to take help from others for collecting a large
sum of money. For this purpose these people start a company and then ask public to
contribute money for doing business. The money that is collected for doing business forms
the capital of the company. But as we all know it is not possible for a single person or for a
group of persons to contribute entire money towards the capital of company. So, the total
capital of a company is divided into some small value of equal amounts. This is called as
Introduction:
We all know that capital is one of the most important part of any
business. A company means any company that is incorporated under
Companies Act 2013 or under any previous law. The company must have
sufficient amount of capital to start the business. A public company can
raise capital by inviting public to subscribe for its shares or they can
raise it privately as done by a private company. In this lesson we will
understand how shares and debentures are issued and redeemed by a
company. What are the different types of shares and debentures that a
company can issue?
Institute of Lifelong Learning, University of Delhi
share as they represent the portion of total amount shared by many people. The capital of a
company is divided into shares. Each share represents a unit of ownership of a company.
These shares are offered for sale to raise capital for the company. As per Section 2 (84) of
the Companies Act 2013 share refers to share in the total share capital of company and
includesstock.
When the shares are offered for sale directly by the company for the first time, they are
offered in the primary market, whereas the trading of shares takes place in the secondary
market. The capital of a company is divided into shares. Each share forms a unit of
ownership of a company and is offered for sale so as to raise capital for the company.
Figure 1: Shares
Source:http://en.wikipedia.org/wiki/Share_%28finance%29#mediaviewer/File:Vereinigte_O
stindische_Compagnie_bond.jpg
Value Addition 1: Know More
Primary and Secondary Market
Click on the link below to gain an insight into the primary and secondary market.
Source: http://www.investopedia.com/articles/02/101102.asp
3. Kinds of Shares:
Section 43 of the Companies Act 2013 explains that there are two kinds of shares issued by
companies:
Figure 2: Kinds of Shares
Page 5
Institute of Lifelong Learning, University of Delhi
Paper: Corporate Accounts
Lesson: Shares: Issue, Reissue and Forfeiture
Author: Ms.Yasha Bothra,
Assistant Professor in Commerce, Bharati College
University of Delhi
Institute of Lifelong Learning, University of Delhi
Lesson: Shares: Issue, Reissue and Forfeiture
Table of Contents:
1. Learning Outcomes
2. Introduction Shares
3. Kinds of Shares
3.1. Equity Shares
3.2. Preference Share Capital
4. Accounting Treatment of Share Capital
4.1. On Receipt of Application Money
4.2. On Acceptance of Share Application
4.3. On Allotment Money Becoming Due
4.4. On Receipt of Allotment Money
4.5. On Call Money Becoming Due
4.6. On Receipt of Call Money
5. Issue of Shares at Par
6. Issue of Shares at Premium
7. Calls in Advance
7.1. Interest on Calls in Advance
8. Calls in Arrear
8.1. Interest on Calls in Arrear
9. Over and Under Subscription of Shares
10. Forfeiture of Shares
11. Reissue of Share
12. Cash Book
13. Issue of Shares for Consideration other than Cash
Summary
Glossary
Exercises
References
Institute of Lifelong Learning, University of Delhi
1. Learning Outcomes:
After studying this lesson, you should be able to;
? understand the concept of Shares;
? differentiate various types of shares;
? know the accounting procedure for the issue of shares;
? understand the concept of various installments on issue of shares;
? distinguish between calls in advance and calls in arrears;
? comprehend the difference between oversubscription and under subscription of shares;
? understand how to deal with oversubscription of shares;
? appreciate the reasons of forfeiture and reissue of shares;
? gain an insight into the accounting for issue of shares for consideration other than cash.
2. Share:
Every company needs a lot of funds to do business. It is not an easy thing for one person or
for a group of only two or three people to put all the money required for doing business
themselves on a large scale. It is necessary to take help from others for collecting a large
sum of money. For this purpose these people start a company and then ask public to
contribute money for doing business. The money that is collected for doing business forms
the capital of the company. But as we all know it is not possible for a single person or for a
group of persons to contribute entire money towards the capital of company. So, the total
capital of a company is divided into some small value of equal amounts. This is called as
Introduction:
We all know that capital is one of the most important part of any
business. A company means any company that is incorporated under
Companies Act 2013 or under any previous law. The company must have
sufficient amount of capital to start the business. A public company can
raise capital by inviting public to subscribe for its shares or they can
raise it privately as done by a private company. In this lesson we will
understand how shares and debentures are issued and redeemed by a
company. What are the different types of shares and debentures that a
company can issue?
Institute of Lifelong Learning, University of Delhi
share as they represent the portion of total amount shared by many people. The capital of a
company is divided into shares. Each share represents a unit of ownership of a company.
These shares are offered for sale to raise capital for the company. As per Section 2 (84) of
the Companies Act 2013 share refers to share in the total share capital of company and
includesstock.
When the shares are offered for sale directly by the company for the first time, they are
offered in the primary market, whereas the trading of shares takes place in the secondary
market. The capital of a company is divided into shares. Each share forms a unit of
ownership of a company and is offered for sale so as to raise capital for the company.
Figure 1: Shares
Source:http://en.wikipedia.org/wiki/Share_%28finance%29#mediaviewer/File:Vereinigte_O
stindische_Compagnie_bond.jpg
Value Addition 1: Know More
Primary and Secondary Market
Click on the link below to gain an insight into the primary and secondary market.
Source: http://www.investopedia.com/articles/02/101102.asp
3. Kinds of Shares:
Section 43 of the Companies Act 2013 explains that there are two kinds of shares issued by
companies:
Figure 2: Kinds of Shares
Institute of Lifelong Learning, University of Delhi
3.1. Equity Shares:
The act defines equity shares for a company limited by shares to be shares which are not
preference shares. They are of following types;
Figure 3: Types of Equity Shares
These differential rights can be with respect to dividend, voting or in accordance with such
rules as may be prescribed.
Value Addition 2: Know More
Equity Shares vs. Preference Shares
Click on the link below to know the distinction between equity shares and preference
shares.
Source:http://accountlearning.blogspot.in/2011/04/distinction-between-equity-shares-
and.html
3.2. Preference Share Capital:
Preference share capital is that capital which carries preferential rights. These preferential
rights can be for following:
Read More
FAQs on Unit 1 Topic: Shares: Issue, Reissue and Forfeiture, B.Com Hons., IVth Sem, DU - B Com
| 1. What is the process of issuing shares? |  |
Ans. The process of issuing shares involves the following steps:
1. Determining the need for capital: The company assesses its financial requirements and decides on the number of shares to be issued.
2. Approval from the board of directors: The board of directors approves the decision to issue shares and sets the terms and conditions.
3. Filing of prospectus: A prospectus is prepared and filed with the regulatory authorities, providing information about the company and the shares being issued.
4. Promotion and marketing: The company promotes the shares to potential investors through various channels like advertisements, roadshows, and presentations.
5. Receiving applications and allotment: Interested investors submit their applications for shares, and the company reviews and allots the shares based on the criteria mentioned in the prospectus.
6. Listing on stock exchange: After the allotment, the company applies for listing on a stock exchange to enable trading of its shares.
| 2. What is the difference between issuing shares and reissuing shares? | |
Ans. Issuing shares refers to the initial offering of shares by a company to raise capital. It involves the creation and sale of new shares to investors. On the other hand, reissuing shares refers to the process of offering previously issued shares for sale again. These shares may have been bought back by the company through share buybacks or may be shares held by existing shareholders that they want to sell. Reissuing shares does not involve the creation of new shares, but rather the transfer of ownership of existing shares.
| 3. What are the reasons for share forfeiture? | |
Ans. Share forfeiture occurs when a shareholder fails to fulfill their obligations related to the shares they hold. The reasons for share forfeiture may include:
1. Non-payment of calls: If a shareholder fails to pay the amount due on a call made by the company, the company has the right to forfeit their shares.
2. Breach of terms: If a shareholder violates any terms or conditions mentioned in the company's articles of association or the share subscription agreement, their shares may be forfeited.
3. Non-compliance with regulations: If a shareholder fails to comply with the regulations set by the regulatory authorities or stock exchange, their shares may be forfeited.
4. Insolvency or bankruptcy: If a shareholder becomes insolvent or bankrupt, their shares may be forfeited to settle their outstanding debts.
| 4. What happens to forfeited shares? | |
Ans. When shares are forfeited, they become the property of the company. The company can choose to cancel the forfeited shares or reissue them to new shareholders. If the forfeited shares are canceled, the company's share capital and the total number of shares issued will be reduced. On the other hand, if the forfeited shares are reissued, the company can sell them to new investors and raise additional capital.
| 5. What are the consequences of share forfeiture for the shareholder? | |
Ans. Share forfeiture has several consequences for the shareholder, including:
1. Loss of ownership rights: Once the shares are forfeited, the shareholder loses all ownership rights and privileges associated with the shares, such as voting rights and dividend entitlements.
2. Loss of invested capital: If the shareholder has not paid the full amount on the shares, the forfeited shares are considered a loss of their invested capital.
3. No refund of previous payments: The shareholder is not entitled to receive any refund of the amount they have already paid on the forfeited shares.
4. Liability for unpaid amounts: If the forfeited shares were partly paid, the shareholder may still be liable to pay the remaining unpaid amount, as per the company's articles of association.
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