NCERT Solutions Class 12 Accountancy Chapter 1 Accounting for Share Capital

e) Common seal: A Company being an artificial person cannot sign its name by itself. Therefore every company is required to have its own seal which acts as official signature of the company.

f) Transferability of shares: The shares of a public limited company are freely transferable. But the articles of the company can prescribe the manner in which the transfer of shares will be made.

Q2. Explain in brief the main categories in which the share capital of a company is divided.

Ans. The various terms used in connection with the

Share Capital of the company are the following:

(i) Authorized, Registered or Nominal Capital: It is the maximum capital which a company is authorized to issue shares during its lifetime. Authorized capital is stated in the Memorandum of Association.

(ii) Issued Capital: It is that part of Authorized Capital which is actually offered to the public for subscription.

(iii) Subscribed Capital: It is that part of the Issued Capital which has been subscribed for by the public. Subscribed Capital is shown in the Balance Sheet under two heads:

a) Subscribed and fully paidup and b) Subscribed but not fully paid up

Under subscription is a situation where number of shares applied is less than the number for which application has been invited for subscription. For example a company offered 1, 00,000 shares for subscription to the public but the applications were received for 96,000 shares only. In such a situation, the allotment will be confirmed to 96,000 shares and entries shall be made accordingly. The following entries are passed:

Journal Entries

Q8. Describe the purposes for which a company can use the amount of Securities Premium.

Ans. Section 52(2) of the Companies Act, 2013 restricts the use of the amounts received as premium on securities for the following purposes:

(i) Issuing fully paid bonus shares to the members; (ii) Writing off preliminary expenses of the company;

(iii) Writing off the expenses of, or the commission paid or discount allowed on any issue of securities or debentures of the company.

(iv) Providing for the premium payable on the redemption of any redeemable Preference Shares or any of the debentures of the company

(v) Buyback of shares

Q9. State clearly the conditions under which a company can issue shares at discount.

Ans. Section 79 of the Companies Act 1956 states that a company is permitted to issue shares at a discount provided the following conditions are satisfied 

(a) The issue of shares at a discount is authorized by an ordinary resolution passed by the company at its general meeting and sanctioned by the Company Law Board.

(b) The resolution must specify the maximum rate of discount at which the shares are to be issued but the rate

When issued at premium and premium money is not paid on forfeited shares then the following journal entry will

Be passed:

Journal Entry

Numerical Questions

Q1. Anish Limited issued 30,000 equity shares of Rs. 100 each payable at Rs. 30 on application, Rs. 50 on allotment and Rs. 20 on 1st and final call. All money was duly received.Record these transactions in the journal of the company.

Q7. Eastern Company Limited, with an authorised capital of 10,00,000 is divided into shares of Rs. 10 each, issued 50,000 shares at a premium of Rs. 3 share payable as follows:

On Application: Rs. 3 per share

On Allotment (including premium): Rs. 5 per share. On first call (due three months after allotment): Rs. 3 per share. And the balance as and when required.

Applications were received for 60,000 shares and the directors allotted shares as follows

Question 12. Kishna Ltd. issued 15,000 shares of Rs. 100 each at a premium of Rs. 10 per share, payable as follows:

On application: Rs. 30

On allotment: Rs. 50 (including premium)

Question 13. Arushi Computer Ltd. issued 10,000 equity shares of Rs. 100 each at 10% discount. The net amount payable as follows:

On application: Rs. 20

On allotment: Rs. 30 (40 – discount 10) On first call: Rs. 30

On final call: Rs. 10

Question 14. Raunak Cotton Ltd. issued a prospectus inviting applications for 6,000 equity shares of Rs. 100 each at a premium of Rs. 20 per shares, payable as follows:

On application: Rs. 20

On allotment: Rs. 50 (including premium) On first call: Rs. 30

On final call: Rs. 20

Applications were received for 10,000 shares and allotment was made pro-rata to the applicants of 8,000 shares, the remaining applications being refused. Money received in excess on the application was adjusted towards the amount due on allotment. Rohit, to whom 300 shares were allotted, failed to pay allotment and calls money his shares were forfeited, Itika who applied for 600 shares failed to pay two calls and her shares were also forfeited. All these shares were sold to ‘K’ as fully paid for Rs. 80 per share. Give journal entries in the books of the company.

Answer . 14

Number of shares applied by Rohit

= 8, 000/ 6, 000 x 300= 400  shares

Number of shares alloted to Itika - = 6,000/ 8, 000 x 600= 450  shares alloted

Question 15. Himalaya Company Limited issued for public subscription of 1,20,000 equally shares of Rs. 10 each at a premium of Rs. 2 share payable as under:  

With application: Rs. 3 per share.

On allotment (including premium): Rs. 5 per shar

Question 16. Prince Limited issued a prospectus inviting applications for 20,000 equity shares of Rs. 10 each at a premium of Rs. 3 per share payable as follows:  

With application: Rs. 2

On allotment (including premium): Rs. 5

On first call: Rs. 3

On second call: Rs. 3

Applications were received for 3,000 shares and allotment was made on pro rata basis. Money overpaid on applications was adjusted to the amount due allotment. Mr. Mohit whom 400 shares were allotted, failed to pay the allotment more and the first call and his shares were forfeited after the first call. Mr. Joly whom 600 shares were allotted, failed to pay for the two calls and hence, The shares were forfeited. Of the shares forfeited, 800 shares were reissued to Supriya as fully paid: Rs. 9 per share, the whole of Mr. Mohit’s shares being included. Record journal entries in the books of the company.

Ans. 16 

Capital reserve = Mohit’s capital reserve + Joly’s capital reserve

Question 18. The Orient Company Limited offered for public subscription 20,000 equity shares of Rs. 10 each at a premium of 10% payable at Rs. 2 on application; Rs. 4 on allotment including premium; Rs. 3 on first call and Rs. 2 on second and final call. Applications for 26,000 shares were received. Applications for 4,000 shares were rejected. Pro-rata allotment was made to the remaining applicants. Both the calls were made and all the money were received except the final call on 500 shares which were forfeited. 300 of the forfeited shares were later reissued as fully paid at Rs. 9 per share. Give journal entries.

Question 19. Alfa Limited invited applications for 4,00,000 of its equity shares of Rs. 10 each on the following terms:

Payable on application: Rs. 5 per share

Payable on allotment: Rs. 3 per share

Payable on first and final call: Rs. 2 per share

Applications for 5,00,000 shares were received. It was decided:

(a) To refuse allotment to the applicants for 20,000 shares;

(b) To allot in full to applicants for 80,000 shares;

(c)  To allot the balance of the available shares pro-rata among the other applicants; and

(d) To utilise excess application money in part as payment of allotment money.

Question 21. Amit holds 100 shares of Rs. 10 each on which he has paid Rs. 1 per share as application money. Bimal holds 200 shares of Rs. 10 each on which he has paid Rs. 1 and Rs. 2 per share as application and allotment money respectively. Chetan holds 300 shares of Rs. 10 each and has paid Rs. 1 on application, Rs. 2 on allotment and Rs. 3 for the first call. They all failed to pay their arrears at the second call of Rs. 2 per share and the directors, therefore forfeited the shares. The shares are reissued subsequently for Rs. 11 per share as fully paid. Journalise the transactions.

Answer. 21 

Question 22. Ajanta Company Limited having a normal capital of

Rs. 3,00,000, divided into shares of Rs. 10 each offered for public subscription of 20,000 shares payable at

Rs. 2 on application; Rs. 3 on allotment and the balance in two calls of Rs. 2.50 each. Applications were received by the company for 24,000 shares. Applications for 20,000 shares were accepted in full and the shares allotted. Applications for the remaining shares were rejected and the application money was refunded. All moneys due were received with the exception of the final call on 600 shares which were forfeited after legal formalities were fulfilled. 400 shares of the forfeited shares were reissued at Rs. 9 per share. Record necessary journal entries and prepare the balance sheet showing the amount transferred to capital reserve and the balance in share forfeiture account.

Answer. 22

Question 23. Journalise the following transactions in the books of Bhushan Oil Ltd:

(a) 200 shares of Rs. 100 each issued at a discount of Rs. 10 were forfeited for the non-payment of allotment money of Rs. 50 per share. The first and final call of Rs. 20 per share on these shares were not made. The forfeited shares were reissued at Rs. 70 per share as fully paid- up.

(b) 150 shares of Rs. 10 each issued at a premium of Rs. 4 per share payable with allotment were forfeited for non-payment of allotment money of Rs. 8 per share including premium. The first and final calls of Rs. 4 per share were not made. The forfeited shares were reissued at Rs. 15 per share fully paid up.

Question 24. Amisha Ltd. invited applications for 40,000 shares of Rs. 100 each at a premium of Rs. 20 per share payable on application Rs. 40: On allotment Rs. 40 (including premium): on first call Rs. 25 and second and final call Rs. 15. Applications were received for 50,000 shares and allotment was made on pro-rata basis. Excess money on application was adjusted against the sums due on allotment. Rohit to whom 600 shares were allotted failed to pay the allotment money and his shares were forfeited after allotment. Ashmita, who applied for 1,000 shares failed to pay the two calls and her shares were forfeited after the second call. Of the shares forfeited, 1200 shares were sold to Kapil for Rs. 85 per share as fully paid, the whole of Rohit’s shares being included. Record necessary journal entries.

Answer . 24