Accounting for share Capital Test - 4

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

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.

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).

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’.

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.

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

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.

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

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.

All accounts which are prepared for the calculation of profit or loss are nominal accounts. All assets accounts are real and liabilities are personal accounts.

When a company makes an offer or invites the public in general to subscribe its shares, it is known as Initial public offer (IPO).

Reserve Capital: It is uncalled capital which can be called up by the company in case of an emergency i.e. winding up. It is a part of Authorized Capital.

The Statement given as ‘Company is managed by all the members’ is not correct because it is not mandatory for all the members to run the company.

As per the section 52 of the Companies Act, 2013 restricts the use of securities premium received, it can be used for the following purposes:

(i) To write off the preliminary expenses

(ii) To issue fully paid bonus shares to promoters

(iii) To purchase own shares

(iv) To write off the expenses

Dividend is paid to the shareholders.

Interest is paid to the Debenture holders

There are two types of preference shares in context to the redemption i.e. Redeemable and Non-redeemable preference shares. As per the Companies Act, 2013, companies cannot issue Irredeemable Preference Shares. Redeemable preference shares are those which can be redeemed by the company.

A Public company should have at least 3 Directors and a private company must have at least 2 Directors.

When a company issues its shares at a price which is more than the actual face value, it is known as shares issued at premium.