ISSUE OF SHARES

SUNIL PANDA COMMERCE CLASSES

EXPECTED QUESTIONS
# Utilisation of Securities Premium Reserve
# Minimum Maximum Members/Directors/OPC
# Sweat equity Shares (to Promoters)
# Capital Reserve and Reserve Capital
# Applied and Alloted Calculation
# Calls in Arrear and Calls in Advance (How much
amount Received)
# Over subscription Pro rata (How much amount
Received on Allotment)
# Other than cash/ No. of shares to Vendor
(Goodwill/ Capital Reserve and SPR Amount)
# Subscribed Share capital (₹)
# Maximum Discount and Minimum Price on Reissue
of Shares
# Capital Reserve
# Balance in share Forfeited Account
# Debited to Share capital or Credited to share
capital
# Reissue for ₹________
# Case Study
# (Pro rata) Forfeiture of shares
A company is an artificial person, created by law having separate
legal entity with a perpetual succession and a common seal.
(prof. Haney)
Share is the smallest unit of share capital of a company

Applicable : companies act 2013

Person holding company shares are called shareholders (or)
members.
 JOURNAL

Nature of Share Application A/c: Personal A/c

Difference between partnership and company (joint stock company)
Basis partnership company
1. Mode of It is set up by an agreement It is a set up by registration under
formation among the partners. the companies act 2013 or under
Registration is not compulsory any previous companies acts
under the Indian partnership
act 1932
2. Act Partnership act 1932 applies Companies act 2013 applies
Basis partnership company

3. No. of Minimum partners 2 & Private company:- minimum 2 &

members maximum 50 maximum 200
Public company :- minimum 7 &
maximum no limit
4. Liability Unlimited liability of partners Limited liability of members
Basis partnership company

5. Audit Audit of books is not Audit of books is mandatory

mandatory
6. Transfer A partners can’t transfer his Except is case of private company
of share shares to any other without normally transfer of shares is not
the consent of other restricted
partners
7. Winding A partnership firm may be A company can be wound up only
up wound in different ways by carrying out process prescribed
in the companies act 2013
8. Stability Partners death retirement or Shareholders death and solvency
insolvency affects the firm do not affect the firm continuity
Under and Over Subscription (Concept and Types of Question)
Calculation of Number of Applied or Alloted shares
Q.1) Sun Ltd, issued a prospectus inviting applications
for 2,000 shares. Applications were received for 3,000
shares and pro- rata allotment was made to the
applicants of 2,400 shares. If Ram has been allotted 40
shares, how many shares he must have applied for?

(A) 40
(B) 44
(C) 48
(D) 52
One person company (OPC) :- it means a company which has only
one person as member section 2 (62) of companies act 2013.

Its paid up share capital is not more than 50 lakh

Its average annual turnover of three years should not exceed 2 crore.
It should have at least 1 director but not more than 15 directors
It can not be formed for charitable purposes
It can’t issue of shares to public
It has a special articles of association
Basis private company Public company
1. Number of Minimum 2, maximum 200 ( minimum 7 & maximum no
members excluding present / past limit
employees)
2. Transfer of Not allowed Freely transferable
shares
3. Prospectus Prospectus need not be Prospectus must be issued
issued
4. no. of Minimum 2 director Minimum 3 director
directors Maximum 15 director Maximum 15 director
Basis private company Public company
5. Subscribed Shares can not be offered to Shares can be offered to public
of shares public
6. AOA Article of association are Table F given in the companies
necessary act may be adopted it articles
of asocial is silent or absent
7.Name The word private limited are The word limited is used as
used as part of the name part of the name
Minimum subscribed should be 90%
In case minimum subscribed is not received within the specified
period, application money shall be refunded within 15 days from the
closure of issue .
Till date the whole application money saved in Escrow account
preliminary expenses:- these are the expenses incurred for
incorporating the company such as registration fee, legal expenses,
share issue expenses ( other)
It is written off either from securities premium reserve or statement
of PL ( if money is not repaid in case of minimum subscription not
full filled then 15% p.a. interest shall be paid)
Share capital of a company broadly can be of two types
i) Equity shares
ii) Preference shares
Classes of preference shares
i) Cumulative & non cumulative preference shares.
Cumulative preference shares carry the right to receive arrears of
dividend before dividend is paid to equity shareholders.
Non cumulative preference shares do not carry the right to receive
arrears of dividend only for the year in which profit are earned
dividend is distributed
ii) Participating and non participating preference shares the articles
of association of a company may provide that after dividend has
been paid to the equity shareholders, holders of preference shares
will also have a right to participate in the remaining profit. The
preference share carrying the right are called participating
preference shares

Preference shares which do not carry the right to participate in the

profit remaining after equity shareholders have been paid dividend
are non participating preference shares
iii) Convertible and non convertible preference shares
Convertible preference shares carry a right to be converted
into equity shares
Non convertible preference shares do not carry a right to be
converted into equity shares
iv) Redeemable and Irredeemable preference shares
Redeemable preference shares are redeemed by the company with in a
specific period not exceeding 20 years from issue
Irredeemable preference shares are those the amount of which can be
returned by the companies to the holders of such shares when the
company is winding up but the companies act 2013 does not permit issue
of irredeemable preference shares

Over subscription of shares :- when number of shares applied are more

than number of shares offered for subscription
Shares can be allotted by any of the following three alternatives
1st alternative :- rejection of excess applicants
2nd alternative :- full allotment
3rd alternative :- pro rata allotment
Calls in Arrear and Calls in Advance
Q.2) Ambrish Ltd offered 2,00,000 Equity Shares of ₹10
each, of these 1,98,000 shares were subscribed. The amount
was payable as ₹3 on application, ₹4 an allotment and
balance on first call. If a shareholder holding 3,000 shares
has defaulted on first call, what is the amount of money
received on first call?

(A)₹9,000.
(B) ₹5,85,000.
(C) ₹5,91,000.
(D) ₹6,09,000.
Q.3) The subscribed capital of a company is `80,00,000 and the
nominal value of the share is `100 each. There were no calls-in-
arrears till the final call was made. The final call money was
received made on 77,500 shares only. The balance in the calls in
arrear amounted to `62,500. The final call on share will be:
(A) 7
(B) 20
(C) 22
(D) 25

SUNIL SIR (SPCC)

Difference between preference shares and equity shares
Basis preference shares equity shares
1. Right to Dividend is paid before the Dividend is paid to equity
dividend payment of dividend to shareholders after making
equity shareholders payment to preference
shareholders
2. Role of Rate of dividend is fixed Rate of dividend is proposed by
dividend the directors
3. Arrears of If preference share are Dividend is declared every year in
dividend cumulative preference case it is not declared during the
shares arrears of dividend year it is not accumulated to be
is paid before dividend is paid in the coming years
paid on equity shares
Basis preference shares equity shares
4.convertibility It may be converted into It can’t be converted
equity shares
5. Redemption These are redeemed A company may buy back its
equity shares
6.Voting rights They have voting right Equity shares have voting rights in
only in special all the cicrumstances
circumstances
Basis preference shares equity shares
7. Right of They have no right to They have right to participate in
participation participate in management
management
8. Redemption of On winding up the On winding up equity shares
capital preference share capital is repaid after the
capital is repaid before preference share capital is paid
the equity shares
capital is paid
Issue of Shares Consideration Other than Cash
Concept
Q.4) STAR Ltd. purchased machinery costing ₹ 8,00,000 from
Raja Ltd. Raja Ltd. paid 20% of the amount by cheque and for
the balance amount issued Equity Shares of ₹ 100 each at a
premium of 25% . Pass necessary Journal entries for the above
transactions in the books of Apex Ltd .Show your working notes
clearly.
Q.5) X Ltd. Purchased a building from Y Ltd. Consideration paid as
follow
issued Equity shares of ₹1,00,000 face value of ₹10 each at Par
2,000 9% Preference shares of 100 each at 10% Premium
cheque ₹2,00,000 and
3 months bill payable of ₹90,000
find out the value of machinery & pass the necessary journal
entries.
Q.6) Sure Ltd. Purchased a running business from M/s. Rai bothers for
a sum of 15,00,000 payable 12,00,000 in fully paid shares of 10 each
and balance through cheque.
The assets and liabilities consisted of the following
Plant and machinery 4,00,000 Stock 4,00,000
Building 4,00,000 Cash 3,00,000
Sundry debtors 3,00,000 Sundry creditors 2,00,000
you required to pass the necessary journal entries in the company
books
(Must Considered Agreed Value if Book Value and Agreed Value Both
are given)
Share issued to Underwriters and Promoters
FOREFITURE & REISSUE OF SHARES (Par)
Q.7) Basak Ltd. forfeited 20 shares of ₹ 10 each, ₹ 7 called-up on
which the shareholder had paid application and allotment money
of ₹ 5 per share. Out of these, 15 shares were reissued to Naresh as
₹ 7 per share paid-up for ₹ 8 per share.
FOREFITURE & REISSUE OF SHARES (Premium)
Q.8) JCV Ltd., forfeited 200 shares of ₹ 10 each issued at a premium
of ₹ 2 per share for the non-payment of allotment money of ₹ 3 per
share (including premium). The first and final call of ₹ 4 per share has
not been made as yet . 50% of the forfeited shares were reissued at
₹ 8 per share as fully paid-up . Pass necessary Journal entries for the
forfeiture and reissue of shares.
Q.9) Apaar Ltd forfeited 4,000 shares of ₹20 each, fully called
up, on which only application money of ₹6 has been paid. Out
of these 2,000 shares were reissued and ₹8,000 has been
transferred to capital reserve. Calculate the rate at which these
shares were reissued.
A) ₹20 Per share
(B) ₹18 Per share
(C) ₹22 Per share
(D) ₹8 Per share
Q.10) Vishnu Ltd. forfeited 20 shares of ₹10 each, ₹8 called up,
on which John had paid application and allotment money of ₹5
per share, of these, 15 shares were reissued to Parker as fully
paid up for ₹6 per share. What is the balance in the share
Forfeiture Account after the relevant amount has been
transferred to Capital Reserve Account?

(A) ₹0
(B) ₹5
(C) ₹25
(D) ₹100
FOREFITURE & REISSUE OF SHARES (Pro- rata)
Q.11) X ltd. Forfeited 600 shares of Mohan of ₹10 each. For non
payment of Allotment money of ₹3 per share and final call money
of ₹2 per share Mohan applied for 800 shares. His shares were
forfeited and reissued for ₹9 per share.
Capital reserve will be

a) 2400
b) 3400
c) 2000
d) 4000
Q.12) Gaurav applied for 5000 shares of ₹10 each at par. But he was
allotted only 2500 shares on pro rata basis. After having paid ₹3 per
share on application he did not pay allotment money of ₹5 per share
and on his subsequent failure to pay the final call of ₹2 per share his
share, his shares were forfeited. These shares were reissued @8 per
share fully paid.
Find out capital reserve

a) 2500
b) 5000
c) 7500
d) 10000
 Extract of Company Balance sheet

Presentation of share capital In Company Balance sheet.

Part I of schedule III of Indian Companies Act 2013.
Authorised share Capital
Issued share Capital
Subscribed share Capital
Q.13) Krishan Ltd has Issued Capital of 20, 00,000 Equity shares
of ₹10 each. Till Date ₹8 per share have been called up and the
entire amount received except calls of ₹4 per share on 800
shares and ₹3 per share from another holder who held 500
shares. What will be amount appearing as ‘Subscribed but not
fully paid capital’ in the balance sheet of the company?
(A) ₹ 2,00,00,000
(B) ₹ 1,95,99,000
(C) ₹ 1,59,95,300
(D) ₹ 1,99,95,300
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