Accounting for share Capital Test - 9

If the Articles of the Company are silent about the rate of interest on calls-in-advance, then rate of interest is 6% p.a. Such an interest is a charge on profits and has to be paid to the concerned shareholder even if there is no profit. 

Securities Premium Account is Personal Account. It is shown under in the balance sheet under the heading Reserves and Surplus.

Subscribed share capital is a part of issued share capital that is subscribed.

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.

When shares are issued, it will be a better choice to record all cash transactions in the cash book and other non-cash transaction in journal.

If nothing is mentioned in the question about the adjustment of excess money received on applications, in such a case excess money should be adjusted on the allotment and remaining amount (if any) should be refunded.

When a shareholder returns back his shares to the company, it is known as surrender of shares and not forfeiture of shares.

Only preference shares have right of dividend to be paid as fixed amount or an amount calculated at a fixed rate. Preference shares can be of two types in this category i.e. cumulative preference shares and non-cumulative preference shares.

Irredeemable preference shares are little different from other types of preference shares. It does not have any maturity date which makes this instrument very similar to equity except that the dividend of these shares is fixed and they enjoy priority in payment of both dividend and capital over the equity shares. Since there is an absence of maturity, they are also known as perpetual preference share capital. Companies are not allowed to issue such type of shares as per Indian companies Act 2013.