Accounting for share Capital Test - 68

At the time of forfeiture of shares, share capital account should be debited with the called up amount and not with the face value or paid up amount etc.(i.e. number of shares forfeited x called up amount per share)

Types of capital in order:

(a) Authorized Capital

(b) Issued Capital

(c) Subscribed Capital

(d) Called up capital

(e) Paid up capital

When the entire face value of a share is called by the company and is also paid by the shareholder, It is known as Subscribed and fully paid up capital.

There is no limit of securities premium on issue of shares. Share of a company whose face value is Rs.10 can be issued at a price of 300 Rupees (including premium 290).

A company cannot use securities premium reserve as working capital. It can use securities premium for the following purpose:

•Writing off preliminary expenses

•Issuing fully paid bonus shares to the shareholders

•Buy back of shares

Preference Shares are those shares on dividend to be paid as fixed amount. These shares are convertible and can be redeemed.

Authorised capital is to be stated in the Memorandum of association of a company. Authorized capital is also known as nominal capital of the company.

As per the Companies Act, 2013, (new guidelines) a company cannot issue its shares at discount. Company can issue its shares at par and premium.

Equity Shares are not convertible. Preference shares can be converted into equity shares depend upon the terms and conditions.

When the public company does not have its own Articles of Association, in such a case Table F will be applicable. For private company it is compulsory to have articles of association.