• State which of the following statements are true
Do it Yourself I
Question 1. On January 01, 2006, a limited company was incorporated with an authorised capital of Rs.40,000 divided into shares of Rs.10 each. It offered to the public for subscription of 3,000 shares payable as follows
Do it Yourself II
1. A company issued 20,000 equity shares of Rs.10 each payable at Rs.3 on
2. Alfa company Ltd. issued 10,000 shares of Rs.10 each for cash payable at Rs.3
Test your Understanding – II
Choose the Correct Answer.
(b) Nominal share capital is :
Answer (iv) the amount actually paid by the shareholders.
(c) Interest on calls-in-arrears is charged according to “Table A” at :
(d) Money received in advance from shareholders before it is actually called-up by the directors is :
(e) Shares can be forfeited
(f) The balance of share forfeited account after the reissue of forfeited shares is transferred to
(g) Balance of share forfeiture account is shown in the balance sheet under the item :
Do it Yourself III
2. A company forfeited 800 equity shares of Rs.10 each issued at a discount of 10% for non-payment of two calls of Rs.2 each. Calculate the amount forfeited by the company and pass the journal entry for forefeiture of the shares.
Do it Yourself IV
Excell Company Limited made an issue of 1,00,000 Equity Shares of Rs.10 each,
Test your Understanding – III
(a) If a Share of Rs. 10 on which Rs. 8 is called-up and Rs. 6 is paid is forfeited. State with what amount the Share Capital account will be debited.
Do it Yourself V
Journalise the following :
Short Answer Type Questions
Question 1. What is public company?
Question 2. What is private limited company?
Question 3. Define Government Company.
Question 4. What do you mean by a listed company?
Question 5. What are the uses of securities premium?
Question 6. What is buy-back of shares?
Sources for Buy-back of Share
Question 7. Write a brief note on ‘Minimum Subscription’
Long Answer Type Questions
Question 1. What is meant by the word ‘Company’? Describe i characteristics.
In general, a company is an artificial person, created by law that has separate legal entity, perpetual succession, and common seal and t limited liability. It is a voluntary association of person who together contribu in the capital of the company to do business.
Generally, the capital of a company is divided into small parts known shares, the ownership of which is transferable subject to certain terms s conditions.
Question 2. Explain in brief the main categories in which the share capital of a company is divided.
Question 3. What do you mean by the term ‘share? Discuss the type of shares, which can be issued under the Companies Act, 1956 as amended to date.
Question 4. Discuss the process for the allotment of shares of a company in case of over subscription.
In practice, generally excess application money receive on these shares is adjusted towards the amount due on allotment or call. For this purpose the entry is made as follows
Question 5. What is a ‘Preference Share’? Describe the different types of preference shares.
Question 6. Describe the provisions of law relating to ‘Calls-in- Arrears’ and ‘Calls in Advance’
Question 7. Explain the terms ‘Over-subscription’ and ‘Under-subscription’. How are they dealt with in accounting records?
Under-Subscription: In case when share are issued by the company and the number of shares applied by the public is lesser than the number of shares issued this is called the situation of under-subscription.
Question 8. Describe the purposes for which a company can use ‘Securities Premium Account.
Question 9. State clearly the conditions under which a company can issue shares at a discount.
Question 10. Explain the term ‘Forfeiture of Shares’ and give the accounting treatment on forfeiture.
Accounting Treatment for Forfeiture of Shares
1. 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 Ist and final call. All money was duly received. Record these transactions in the journal of the company.
2. The Adersh Control Device Ltd was registered with the authorised capital of Rs.3,00,000 divided into 30,000 shares of Rs.10 each, which were offered to the public. Amount payable as Rs.3 per share on application, Rs.4 per share on
3. Software solution India Ltd inviting application for 20,000 equity share of Rs.100 each, payable Rs.40 on application, Rs.30 on allotment and Rs.30 on call. The company received applications for 32,000 shares.
4. Rupak Ltd. issued 10,000 shares of Rs.100 each payable Rs.20 per share on application, Rs.30 per share on allotment and balance in two calls of Rs.25 per share. The application and allotment money were duly received. On first call
5. Mohit Glass Ltd. issued 20,000 shares of Rs.100 each at Rs.110 per share, payable Rs.30 on application, Rs.40 on allotment (including Premium), Rs.20 on first call and Rs.20 on final call. The applications were received for 24,000
6. A limited company offered for subscription of 1,00,000 equity shares of Rs.10 each at a premium of Rs.2 per share. 2,00,000. 10% Preference shares of Rs.10 each at par.
7. Eastern Company Limited, having an authorised capital of Rs.10,00,000 in shares of Rs.10 each, issued 50,000 shares at a premium of Rs.3 per share payable as follows :
8. Sumit Machine Ltd issued 50,000 shares of Rs.100 each at discount of 5%. The shares were payable Rs.25 on application, Rs. 40 on allotment and Rs.30 on first and final call. The issue were fully subscribed and money were duly
9. Kumar Ltd purchases assets of Rs.6,30,000 from Bhanu Oil Ltd. Kumar Ltd. issued equity share of Rs.100 each fully paid in consideration. What journal entries will be made, if the share are issued, (a) at par, (b) at discount of 10 %
10. Bansal Heavy machine Ltd purchased machine worth Rs.3,20,000 from Handa Trader. Payment was made as Rs.50,000 cash and remaining amount by issue of equity share of the face value of Rs. 100 each fully paid at an issue
11. Naman Ltd issued 20,000 shares of Rs.100 each, payable Rs.25 on application, Rs.30 on allotment , Rs.25 on first call and The balance on final call. All money duly received except Anubha, who holding 200 shares did not pay allotment
12. Kishna Ltd issued 15,000 shares of Rs.100 each at a premium of Rs.10 per share, payable as follows:
13. Arushi Computers Ltd issued 10,000 equity shares of Rs.100 each at 10% discount. The net amount payable as follows:
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:
15. Himalaya Company Limited issued for public subscription of 1,20,000 equity shares of Rs.10 each at a premium of Rs.2 per share payable as under :
16. Prince Limited issued a prospectus inviting applications for 2,00,000 equity shares of Rs.10 each at a premium of Rs.3 per share payable as follows :
17. Life machine tools Limited, issued 50,000 equity shares of Rs.10 each at Rs.12 per share, payable at to Rs.5 on application (including premium), Rs.4 on allotment and the balance on the first and final call.
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
19.Alfa Limited invited applications for 4,00,000 of its equity shares of Rs.10 each on the following terms :
20. Ashoka Limited Company which had issued equity shares of Rs.20 each at a discount of Rs. 4 per share, forfeited 1,000 shares for non-payment of final call of Rs.4 per share. 400 of the forfeited shares are reissued at Rs.14 per share
21. Amit holds 100 shares of Rs.10 each on which he has paid Re.1 per share as application money. Bimal holds 200 shares of Rs.10 each on which he has paid Re.1 and Rs.2 per share as application and allotment money, respectively.
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
23. Journalise the following transaction in the books Bhushan Oil Ltd:
24. Amisha Ltd inviting application 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.