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ACCCOUNTING FOR SHARE CAPITAL PowerPoint Presentation
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ACCCOUNTING FOR SHARE CAPITAL

ACCCOUNTING FOR SHARE CAPITAL

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ACCCOUNTING FOR SHARE CAPITAL

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  1. ACCCOUNTING FOR SHARECAPITAL

  2. Promotion Incorporation Private Company Capital Subscription Certificate of Commencement Public Company

  3. TYPES OF COMPANY Click on the Tabs PRIVATE COMPANY PUBLIC COMPANY

  4. Click on Points Number of members Paid up capital Number of directors Commencement of business Name Transferability of shares

  5. Minimum Member – 2 Maximum Member - 50 Minimum Member – 7 Maximum Member – no limit. Number of members Click on Points Paid up capital Number of directors Commencement of business Name Transferability of shares

  6. Minimum Member – 2 Maximum Member - 50 Minimum Member – 7 Maximum Member – no limit. Number of members Minimum paid up capital – 1,00,000 Minimum paid up capital – 5,00,000 Paid up capital Click on Points Number of directors Commencement of business Name Transferability of shares

  7. Minimum Member – 2 Maximum Member - 50 Minimum Member – 7 Maximum Member – no limit. Number of members Minimum paid up capital – 1,00,000 Minimum paid up capital – 5,00,000 Paid up capital Must have at least two directors Must have at least three directors Number of directors Click on Points Commencement of business Name Transferability of shares

  8. Minimum Member – 2 Maximum Member - 50 Minimum Member – 7 Maximum Member – no limit. Number of members Minimum paid up capital – 1,00,000 Minimum paid up capital – 5,00,000 Paid up capital Must have at least two directors Must have at least three directors Number of directors Can commence business after getting certificate of incorporation Can commence business after getting certificate of commencement Commencement of business Click on Points Name Transferability of shares

  9. Minimum Member – 2 Maximum Member - 50 Minimum Member – 7 Maximum Member – no limit. Number of members Minimum paid up capital – 1,00,000 Minimum paid up capital – 5,00,000 Paid up capital Must have at least two directors Must have at least three directors Number of directors Can commence business after getting certificate of incorporation Can commence business after getting certificate of commencement Commencement of business Must add Private Limited as part of their name. Must add Limited as part of their name. Name Click on Points Transferability of shares

  10. Minimum Member – 2 Maximum Member - 50 Minimum Member – 7 Maximum Member – no limit. Number of members Minimum paid up capital – 1,00,000 Minimum paid up capital – 5,00,000 Paid up capital Must have at least two directors Must have at least three directors Number of directors Can commence business after getting certificate of incorporation Can commence business after getting certificate of commencement Commencement of business Must add Private Limited as part of their name. Must add Limited as part of their name. Name Can transfer shares only at the consent of the director. Can freely transfer the shares. Transferability of shares

  11. SHARES A company divides its capital into units of equal denomination. Each unit is called a share. Types of Share Capital Click Here

  12. TYPES OF SHARE CAPITAL Authorized Share Capital Issued Share Capital Subscribed Share Capital Called-up Share Capital Paid-up Share Capital

  13. Authorized Share Capital Based on the Memorandum of Association the maximum capital which a company can issue.

  14. Issued Share Capital The part of capital which is issued for subscription by company.

  15. Subscribed Share Capital The part of share capital which is applied for the subscription.

  16. Called-up Share Capital The part of capital that has been called up by the company for payments.

  17. Paid-up Share Capital The part of capital that the members have paid, Out of the money called up.

  18. ACCCOUNTING TREATMENT For Cash For consideration other than Cash

  19. FOR CASH • Shares are said to be issued for cash when company receive cash against the shares issued. • They can be issued at Par. • They can be issued at Premium. • They can be issued at discount. NOTES CLICK HERE CLICK HERE CLICK HERE CLICK HERE CLICK HERE CLICK HERE CLICK HERE CLICK HERE CLICK HERE CLICK HERE CLICK HERE CLICK HERE CLICK HERE

  20. FOR CONSIDERATION OTHER THAN CASH Shares can also be issued against the purchase of any asset such as Plant, Machinery etc.

  21. AT PAR When the face value and issue price of the share is same it is said to be issued at par ISSUE PRICE = FACE VALUE ` 100 PER SHARE = ` 100 PER SHARE

  22. AT PREMIUM When the issue price of the share is more than the face value it is said to be issued at premium. ISSUE PRICE > FACE VALUE ` 120 PER SHARE > ` 100 PER SHARE PREMIUM ` 20 PER SHARE

  23. AT DISCOUNT When the issue price of the share is less than the face value it is said to be issued at discount. ISSUE PRICE < FACE VALUE ` 90 PER SHARE < ` 100 PER SHARE DISCOUNT ` 10 PER SHARE

  24. ILLUSTRATION • Question - ABC Ltd. forfeited 2000 shares of ` 10 each originally issued at a premium of ` 4 per share, the holder of which paid ` 3 per share on application but did not pay the allotment money of ` 7 per share (including ` 4 as premium) and call of ` 4 per share. Make necessary journal entries for the forfeiture and for reissue of theseshares if: • Reissued at ` 10 per share i.e. at par. • Reissued at ` 8 per share i.e. at discount. • Reissued at ` 12 per share i.e. at premium.

  25. Reissued at ` 10 per share i.e. at par FORFEITURE REISSUE Click on the Tabs

  26. Reissued at ` 10 per share i.e. at par FORFEITURE

  27. Reissued at ` 10 per share i.e. at par REISSUE

  28. Reissued at ` 8 per share i.e at discount FORFEITURE REISSUE Click on the Tabs

  29. Reissued at ` 8 per share i.e at discount FORFEITURE

  30. Reissued at ` 8 per share i.e at discount REISSUE

  31. Reissued at ` 12 per share i.e at premium FORFEITURE REISSUE Click on the Tabs

  32. Reissued at ` 12 per share i.e at premium FORFEITURE

  33. Reissued at ` 12 per share i.e at premium REISSUE HOME

  34. ILLUSTRATION • M/s Tirupati Ltd. was registered with a capital of ` 1 crore divided into equity shares of ` 100 each. The company offered to public 4,000 shares at a premium of ` 20 per share. The amount on shares was payable as: • ` 20 on application. • ` 50 on allotment (including` 20 premium). • ` 20 on first call. • ` 30 on final call. • Applications were received for 7,500 shares. Shares were allotted • Prorata to the applicants of 6,000 shares and the remaining applicants • were rejected. Chaman who was allotted 300 shares did not pay the • call money with the allotment money. He also failed to pay the first • call. His shares were forfeited. Sheetal who applied for 300 shares • paid the call money with the allotment money. Make journal entries in the books of the M/s Tirupati Ltd.

  35. Private Placement Preferential Allotment Over-Subscription of shares Sweat Equity Right Issue Employee Stock Option Plan Pro rata Allotment Buy – Back Under-Subscription Click on the respective tabs

  36. Private Placement Preferential Allotment Over-Subscription of shares Sweat Equity Right Issue Employee Stock Option Plan Pro rata Allotment Buy – Back Under-Subscription Right Issue: The rights given to the existing shareholders to subscribe for new shares issued by a company in proportion to their existing shareholding.

  37. Private Placement Preferential Allotment Over-Subscription of shares Sweat Equity Right Issue Employee Stock Option Plan Pro rata Allotment Buy – Back Under-Subscription Private Placement: When the shares are issued to a selected group of persons instead of general public.

  38. Private Placement Preferential Allotment Over-Subscription of shares Sweat Equity Right Issue Employee Stock Option Plan Pro rata Allotment Buy – Back Under-Subscription Preferential Allotment: When the allotment of shares is made with a strategic motive, at a predetermined rate to the predetermined people.

  39. Private Placement Preferential Allotment Over-Subscription of shares Sweat Equity Right Issue Employee Stock Option Plan Pro rata Allotment Buy – Back Under-Subscription Employee Stock Option Plan: Option given to the employee to subscribe for shares issued by the company at a given price.

  40. Private Placement Preferential Allotment Over-Subscription of shares Sweat Equity Right Issue Employee Stock Option Plan Pro rata Allotment Buy – Back Under-Subscription Buy – Back: The process of purchasing its own shares by a company.

  41. Private Placement Preferential Allotment Over-Subscription of shares Sweat Equity Right Issue Employee Stock Option Plan Pro rata Allotment Buy – Back Under-Subscription Over-Subscription of shares: When demand for a particular share is more than its supply, it is said to be oversubscribed.

  42. Private Placement Preferential Allotment Over-Subscription of shares Sweat Equity Right Issue Employee Stock Option Plan Pro rata Allotment Buy – Back Under-Subscription Under-Subscription: When demand for a particular share is less than its supply, it is said to be undersubscribed.

  43. Private Placement Preferential Allotment Over-Subscription of shares Sweat Equity Right Issue Employee Stock Option Plan Pro rata Allotment Buy – Back Under-Subscription Pro rata Allotment: When the shares are allotted on a proportionate basis. Prorata allotment is done in case of oversubscription of shares.

  44. Private Placement Preferential Allotment Over-Subscription of shares Sweat Equity Right Issue Employee Stock Option Plan Pro rata Allotment Buy – Back Under-Subscription Sweat Equity Shares: Shares issued by a company to its employee at a discount or for consideration other than cash.

  45. Search for a prospectus of any company on net, books or journals. And find out how companies issue its shares in the market and how the balance sheet of a company looks after segregation of various heads under Share Capital. Hints – http://www.sebi.gov.in/dp/foursoft.pdf