Accounting for share Capital Test - 67

When a company receives excess applications i.e. more applications than the shares offered for subscription, is called oversubscription of shares.

A company can sell its shares only through stock exchange. Company should be listed in the stock exchange to sell its shares.

A company is not a natural person. Following three points are correct about a company:

1.Company is an Artificial Person

2.Company has separate entity

3.Company has a common seal

The amount of Calls in Arrears should be deducted from Subscribe but not fully paid up under share capital, while preparing notes to accounts for share capital.

As per the Companies Act, 2013, when Table F is followed by the company, rate of interest on calls in arrear should be 10% p.a.When any shareholder fails to pay the amount due on allotment or on any of the calls, such amount is known as 'Calls-in-Arrears'/'Unpaid Calls'. Interest at a rate 10% shall have to be paid on Calls-in-arrears for the period from the day fixed for payment and the time of actual payment thereon.

Company may issue shares to the vendor as a consideration for amount payable on purchase of fixed asset or running business. Company may issue such shares at par, premium or discount.

A company can reissue its shares (forfeited shares) at a discount but discount should not exceed the forfeited amount.

Calls in arrears is shown by way of deduction from subscribed capital while preparing notes to account. At the time of preparation of Balance Sheet of a company, while ascertaining the amount of share capital by preparing notes to accounts, the amount of calls in arrears should be deducted from the subscribed capital (subscribed but not fully paid up).

Situations at the time over subscriptions are:

1.Rejecting Excess Applications

2.Pro-rata allotment

3.Both Rejecting some applications and pro-rata allotment to remaining applicants

Note: Under subscription is a different situation, it is not concerned with over subscription

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’.

Bank account is debited because money comes in the company and share application account is credited, it is a temporary account opened to know how many applications received.

Share Application Account and Share Allotment Account is personal account.

As the share is capital for business received by the owner of business or any other person. So the person investing in the business in The form of share is giver. Rule of Personal A/c : "Debit the receiver, credit the giver" is applicable.

A company cannot issue its shares at discount.It can only issue shares at par and premium.

Authorised capital is also known as nominal capital. It refers to that amount which is stated in the Memorandum of Association.