Accounting for share Capital Class 12 Accountancy

Important Questions Answers at the Bottom

Ch-7 Accounting for share Capital

1. Which of the following is not true about a private company?

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1. Restriction on the right to transfer its shares
2. Private company ends with the words ‘Private Limited’.

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3. Minimum paid up share capital Rs.1,00,000
4. Minimum paid up capital is 5,00,000
2. _______ Shares are not convertible.
1. Equity Shares
2. Convertible Preference Shares
3. Both Preference Shares and Convertible Preference Shares
4. Preference Shares
3. In the situation of _________, a company do not reject any application
1. Oversubscription
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2. Uncalled share capital
3. Under subscription
4. Both Oversubscription and Uncalled share capital
4. What type of shares can be issued at discount?
1. Both Preference Shares and Equity Shares
2. Sweat Equity Shares
3. Equity Shares
4. Preference Shares
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5. What amount of profit on reissue will be transferred to Capital Reserve under the
following situations?

1. Z Ltd. forfeited 800 equity shares of Rs. 10 each issued at a discount of 10% for
the non-payment of first and final call of Rs. 3 per share. The forfeited shares
were reissued at Rs. 12 per share as fully paid-up.
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2. 3,000 shares of Rs. 10 each of Rakesh was forfeited by crediting Rs 5,000 to

Forfeited Shares Account. Out of these, 1,800 shares were reissued to Mohan for
Rs. 9 per share fully paid-up.
3. Z Ltd. forfeited 20 shares of Rs 100 each 60 called-up issued at par to Shiv on
which he paid Rs. 20 per share. Out of these, 15 shares were reissued to Rajesh as
Rs. 60 paid-up for Rs. 45 per share.
6. What do you mean by Forfeiture of shares?

7. What is Preferential Allotment?

8. Give the definition of a company as contained in the companies act,1956.

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 9. Can a company issue share of discount? What conditions must a company comply with
before the issue of such shares.

10. DN Ltd issued 50,000 shares of Rs. 10 each payable as Rs. 2 per share on application,
Rs. 3 per share on allotment and Rs. 5 on first and final call. Applications were received
for 70,000
shares. It was decided that

1. Refuse allotment to the applicants of 10,000 shares.

2. Allot 20,000 shares to Mohan who had applied for similar number.

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3. Allot the remaining shares on pro-rata basis.
Mohan failed to pay the allotment money and Sohan who belonged to the category (iii)

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and was allotted 3,000 shares paid both the calls with allotment. Calculate the amount
received on allotment.

11. The authorised capital of Suhani Ltd is Rs. 45,00,000 divided into 30,000 shares of Rs.
150 each. Out of these, company issued 15,000 shares of Rs. 150 each at a premium of
Rs. 10 per share. The amount was payable as follows: Rs. 50 per share on application,
Rs. 40 per share on allotment (including premium), Rs. 30 per share on first call and
balance on final call. Public applied for 14,000 shares. All the money was duly received.
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Prepare an extract of balance sheet of Suhani Ltd as per Revised Schedule III, Part I of
the Companies Act, 2013 disclosing the above information. Also prepare ‘notes to
accounts’ for the same.

12. Y Ltd. forfeited 1,500 shares of Rs. 10 each (Rs. 7 called-up) for non-payment of the
allot money of Rs. 4 per share including Rs. 1 as premium. Of these 1,000 shares were
reissue M at per share as Rs. 7 called-up. Journalise the above transactions in the books
of Y.
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13. Kayafab Ltd. issued 1,00,000 equity shares of Rs. 10 each payable as Rs. 2 on
application; Rs. 4 on allotment and Rs. 2 each on first and final call. Applications were
received for 1,50,000 shares. Applicants of 50,000 shares were sent letters of regret
and application money was refunded Madhur, a holder of 3,000 shares failed to pay
allotment money which he paid along with the first call. Rohan, a shareholder holding
700 shares paid both the calls along with allotment. Sohan, a holder of 1,000 shares did
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not pay the first call and the final call. His shares were forfeited. The forfeited shares
were reissued at Rs. 11 per share as fully paid-up.
Pass necessary journal entries for the above transactions in the books of the company.

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 14. AB Ltd. invited applications for issuing 75,000 equity shares of Rs. 100 each at a
premium of t 30 per share. The amount was payable as follows
On application and allotment — Rs. 85 per share
On first and final call — The balance amount.
Applications for 1,27,500 shares were received. Applications for 27,500 shares were
rejected and shares were allotted on pro-rata basis to the remaining applicants. Excess
money received on application and allotment was adjusted towards sums due on first
and final call. The calls were made. A shareholder,who applied for 1,000 shares, failed
to pay the first and final call money. His shares were forfeited. All the forfeited shares
were reissued at Rs. 150 per share fully paid up.

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Pass necessary journal entries for the above transactions in the books of AB Ltd.

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Ch-7 Accounting for share Capital

Answer

1.
a. Bank A/c Dr.
Share Forfeiture A/c Dr.
To Share Capital A/c
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Explanation: Bank account is debited with the amount received on reissue.
Share capital is credited with face value of shares reissued and share forfeiture
account is debited with the amount of loss on reissue.
d. Minimum paid up capital is 5,00,000
Explanation: Minimum paid up capital of a private company is 1,00,000. A
private company cannot transfer its shares and all private companies’ ends with
the words ‘Private Limited’.
a. Equity Shares, Explanation: Equity Shares are not convertible. Preference
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shares can be converted into equity shares depend upon the terms and
conditions.
c. Under subscription, Explanation: Under subscription is a situation where
number of shares applied are less than the shares offered for the subscription. In
this case normally companies do not reject any application.
b. Sweat Equity Shares, Explanation: As per the Companies Act, 2013, A company
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cannot issue its shares at discount except sweat equity shares.

1. Amount to be transferred to share forfeiture A/c= 7,200(800 x 9) – 2,400(800 x
3)= Rs. 4,800
Amount to be transferred to Capital Reserve A/c= 9,600(12 x 800) –
4,800(Amount of share forfeiture)= Rs. 4,800
2. Amount to be transferred to share forfeiture A/c= Rs. 3,000(5,000 ÷ 3,000 x
1,800)
Amount to be transferred to Capital Reserve A/c= 16,200(1,800 x 9) –
3,000(Amount of share forfeiture)= Rs. 13,200.
3. Amount to be transferred to Capital Reserve A/c= 75

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 2. A fortified share in a company that the owner loses (forfeits) by failing to meet the
purchase requirements. Requirements may include paying an allotment or call money
owed, or avoid selling or transferring shares during a restricted period.
3. Preferential allotment is a process in which shares are allotted to specific group of
people or companies which are interested in it on preferential basis.
4. A company is a body corporate or an incorporated business organization registered
under the company’s act 1956. It can be limited or unlimited company, private or public
company, company limited by guarantee or company having share capital, or a
community interest company.
5. Section 79 of the Companies Act, 1956 permits a company to issue shares at a discount

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only if the following conditions are fulfilled :

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1. The shares are of a class already issued.
2. Discount rate should not be more than 10%.
3. At least one year must have been passed since the company become entitled to
commence business.
4. The issue of such shares must take place with in two months after the date of
court’s sanction or within such extended time as the court may allow.
5. The issue of shares at discount is authorised by a revolution passed by the
company in its general meeting and sanctioned by the central Government.
The resolution specifies the maximum rate of discount at which the shares are to
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be issued. The rate must not exceed 10% unless sanctioned by the Central
Government.
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 6. Table Showing Allotment of Shares :

Shares Applied Shares Allotted

(i) 10,000 Nil

(ii) 20,000 20,000

(iii) 40,000 30,000 (Pro-rata Allotment)

70,000 50,000

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Table Showing Amount Received on Allotment :

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Calculation of Amount Received on Allotment Amt (₹)

Total Allotment money due on 50,000 shares (50,000 ×× 3) 1,50,000

Less : Excess money received with application (40,000-30,000) ×× 2 ( 20,000)

1,30,000

Less : Money not paid by Mohan (20,000 ×× 3) (60,000)

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(+) Calls-in-advance (Sohan) (3,000 ×× 5) 15,000

Amount received on allotment ₹85,000

7. In the books of Suhani Ltd.Balance Sheet

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Particulars Note No. Rs.

I. Equities & Liabilities

1. Shareholder’s Fund

(a) Share Capital 1 21,00,000

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(b) Reserve & Surplus 2 1,40,000

Note to Account

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 8. In this question first shares are forfeited than reissued where Forfeiture of shares
means the process where the company forfeits the shares of a member or shareholder
who fails to pay the call on shares or installments of the issue price of his shares within
a certain period of time after they fall due.In the Books of Y Ltd.
Journal

Date Particulars L.F. Dr.(Rs.) Cr.(Rs.)

Share Capital A/c (1,500××7) Dr. 10,500

Securities Premium Reserve A/c (1,500××1) Dr. 1,500

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To Forfeited Shares A/c (1,500××4) 6,000

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Bank A/c (1,000××6) Dr. 6,000

Forfeited Shares A/c (1,000××1) Dr. 1,000

Forfeited Shares A/c Dr. 3,000

To Capital Reserve A/c (Note) 3,000

(Being the transfer of gain (profit) on
reissue)
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 9. JOURNAL

Amt Amt
Date Particulars L.F (Dr) (Cr)

Bank A/c (1,50,000 ×× 2) Dr. 3,00,000 …

To Equity Share Application A/c … 3,00,000

(Being application money received) … …

Equity Share Application A/c Dr. 3,00,000 …

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To Share Capital A/c (1,00,000 ×× 2) … 2,00,000

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To Bank A/c (50,000 ×× 2) … 1,00,000

(Being application money transferred to share … …

capital account)

Equity Share Allotment A/c (1,00,000 ×× 4) Dr. 4,00,000 …

To Share Capital A/c … 4,00,000

(Being allotment money due) …… …

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Bank A/c Dr. 3,90,800 …

To Equity Share Allotment A/c (97,000 ×× 4) … 3,88,000

To Calls-in-advance A/c (700 ×× 2) + (700 ××2) … 2,800

(Being allotment money received) … …

Equity Share First Call A/c (1,00,000 ×× 2) Dr. 2,00,000 …

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To Share Capital A/c … 2,00,000

(Being first call money due) … …

Bank A/c Dr. 2,08,600 …

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Calls-in-advance A/c (700 ×× 2) Dr. 1,400 …

To Equity Share First Call A/c (99,000 ×× 2) … 1,98,000

To Equity Share Allotment A/c (3,000 ×× 4) … 12,000

(Being first call money received) … …

Equity Share Second and Final Call A/c 2,00,000 …

(1,00,000 ×× 2) Dr.

To Share Capital A/c … 2,00,000

(Being final call money due) … …

Bank A/c (98,300 ×× 2) Dr. 1,96,600 …

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 Amt Amt
Date Particulars L.F (Dr) (Cr)

Call-in-advance (700 ×× 2) Dr. 1,400 …

To Share Second and Final Call A/c … 1,98,000

(Being amount received on second and final call) … …

Equity Share Capital A/c (1,000 ×× 10) Dr. 10,000 …

To Share Forfeiture A/c (1,000 ×× 6) … 6,000

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To Equity Share First Call A/c (1,000 ×× 2) … 2,000

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To Equity Share Second Call A/c(1,000 ×× 2) … 2,000

(Being shares forfeited) … …

Bank A/c (1,000 ×× 11) Dr. 11,000 …

To Share Capital A/c (1,000 ×× 10) … 10,000

To Securities Premium Reserve (1,000 ×× 1) … 1,000

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Share Forfeiture A/c Dr. 6,000 …

To Capital Reserve A/c … 6,000

(Being gain on reissue transferred to capital … …

reserve)

category applied alloted share share share bank

application capital allotment
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A 1,00,000 1,00,000 3,00,000 3,00,000 ————–

B 50,000 ——- 1,00,000 ———— 1,00,000

Total 1,50,000 1,00,000 4,00,000 3,00,000 ——————- 1,00,000

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share/call application allotment 1st call 2nd call

Due 1,00,000 x 1,00,000 x 1,00,000 x 1,00,000 x

2=2,00,000 4=4,00,000 2=2,00,000 2=2,00,000

Received 1,50,000 x 4,00,000- 2,00,000-(1,000 x 2,00,000-

2=3,00,000 (3000 x 4)calls 2)calls in arrears (1,000 x
-1,00,000(Rejected) in arrears + +12000(3000 x 2)calls in
(700 x 4) calls 4)allotment arrear arrears
in advances received with first =1,98,000
=3,90,800 call

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 10. Working Note 1.

Category No of No of Excess Amount to Amount Amount

Shares shares amount be received to be Refunded
Applied Allotted received on On First & adjusted
Application Final Call on First &
Final Call

I 1,00,000 75,000 25,000 75,000 21,25,000 –

Shares××85 shares ××45
=21,25,000 =33,75,,000

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II 27,500 Nil – – – 27500

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Share ××Rs.
85 =
23,3,7500

Total 1,27,500 75,000 21,25,000 23,37,500

Journal

Date Particulars L.F. Debit ( Rs. Credit (

1.
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Bank A/c Dr.
)

1,08,37,500
Rs. )

To Equity Share Application A/c 1,08,37,500

2. Equity Share Application A/c Dr. 1,08,37,500

To Equity Share Capital A/c 41,25,000

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To Security Premium Reserve A/c 22,50,000

To Equity shares First & Final A/c 21,25,000

To Bank A/c 23,37,500

( Being amount transfer to capital

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a/c and adjustment of pro-rata

made.)

3. Equity Share First & Final call A/c Dr. 33,75,000

To Equity share Capital A/c 33,75,000

( Being amount Due on 1st & Final

Call Recorded )

4. Bank A/c Dr. 12,50,000

To Equity Share First & Final call 12,50,000

A/c ( 33,75,000 – 21,25,000 )

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 ( Being Amount received on First
and Final calls )

7. Equity Share Capital A/c Dr. 75,000

To Equity Share Forfeited A/c 62,500

To Equity Share First & Final Call 12,500

A/c

( Being shares forfeited on which

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amount of call not received )

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8. Bank A/c Dr. 1,12,500

To Equity Share Capital A/c 75,000

To Security Premium Reserve A/c 37500

( Being shares Forfeited on which

amount of call not received )

10.
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Equity Share Forfeited A/c Dr. 62500

To Capital Reserve A/c 62500

( Being amount of share forfeited

transfer to Capital Reserve
transfer A/c )
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