Chapter accounting-for-share-capital: Accounting for Share Capital Case Study Questions | accountancy Class 12 CBSE

Chapter accounting-for-share-capital: Accounting for Share Capital Case Study Questions | accountancy Class 12 CBSE | ByteNotes.in

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Sunrise Technologies Ltd. was incorporated under the Companies Act, 2013 with an authorised capital of Rs. 50,00,000 divided into 5,00,000 equity shares of Rs. 10 each. The company issued 2,00,000 shares to the public at par, payable as Rs. 3 on application, Rs. 4 on allotment and Rs. 3 on first and final call. Applications were received for 2,50,000 shares. The directors allotted shares to 2,00,000 applicants and refunded money to the remaining 50,000 applicants. All allotment and call money was duly received. The company needed to present its share capital in the balance sheet notes to accounts.

Question 1: What is the Authorised Capital of Sunrise Technologies Ltd.?

The Authorised Capital is Rs. 50,00,000
It is divided into 5,00,000 equity shares of Rs. 10 each
It is also called Nominal or Registered Capital

Question 2: What amount of application money was refunded and to whom? Pass the journal entry for the same.

Applications were received for 2,50,000 shares but only 2,00,000 were allotted
Money on 50,000 excess applications was refunded
Journal Entry: Share Application A/c Dr. 1,50,000 | To Bank A/c 1,50,000 (Application money on 50,000 shares @ Rs.3 refunded)

Question 3: Prepare the Notes to Accounts showing Share Capital as it would appear in the Balance Sheet of Sunrise Technologies Ltd.

Authorised Capital: 5,00,000 shares of Rs.10 each = Rs. 50,00,000
Issued Capital: 2,00,000 shares of Rs.10 each = Rs. 20,00,000
Subscribed and Fully Paid-up: 2,00,000 shares of Rs.10 each = Rs. 20,00,000
Since all calls were received, paid-up capital equals subscribed capital at Rs. 20,00,000

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Omega Pharma Ltd. issued 10,000 equity shares of Rs. 100 each at a premium of Rs. 20 per share. The amount was payable as: Rs. 30 on application, Rs. 50 on allotment (including Rs. 20 premium), and Rs. 40 on first and final call. The issue was fully subscribed. All money was received except from Mr. Kapoor who held 200 shares and failed to pay the first and final call. The directors forfeited his shares after due notice.

Question 1: What is Securities Premium Reserve and under which head is it shown in the Balance Sheet?

Securities Premium Reserve is the amount collected over and above the face value of shares
It is shown under 'Reserves and Surpluses' under the head 'Equity and Liabilities' in the Balance Sheet

Question 2: Pass the journal entry for forfeiture of Mr. Kapoor's 200 shares.

Share Capital A/c Dr. 20,000 (200 × Rs.100)
To Share First and Final Call A/c 8,000 (200 × Rs.40)
To Share Forfeiture A/c 12,000 (200 × Rs.60 already received)
Securities Premium was already credited at allotment and need not be reversed as it was received

Question 3: State five purposes for which Securities Premium Reserve can be used as per the Companies Act, 2013.

To issue fully paid bonus shares to the extent not exceeding unissued share capital
To write off preliminary expenses of the company
To write off expenses of, or commission paid, or discount allowed on any securities
To pay premium on the redemption of preference shares or debentures
To purchase its own shares i.e., buy-back of shares

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Delta Constructions Ltd. invited applications for 20,000 equity shares of Rs. 10 each. Applications were received for 30,000 shares. The directors decided to reject applications for 5,000 shares outright, and allot shares on pro-rata basis to applicants of 25,000 shares. Excess application money from pro-rata allottees was adjusted towards allotment money. Allotment money was Rs. 4 per share. One applicant to whom 800 shares were allotted failed to pay the allotment money and his shares were later forfeited.

Question 1: What is over-subscription? How did Delta Constructions Ltd. handle the over-subscription?

Over-subscription occurs when applications received exceed the number of shares offered
Delta adopted the third alternative: rejected applications for 5,000 shares outright, and made pro-rata allotment to remaining applicants of 25,000 shares

Question 2: Calculate the pro-rata ratio of allotment and find out how many shares the allottee who received 800 shares must have applied for.

Pro-rata ratio = 20,000 : 25,000 = 4 : 5
For 800 shares allotted, applicant must have applied for 800 × (5/4) = 1,000 shares

Question 3: Pass the journal entry for forfeiture of the 800 shares of the defaulting allottee (application money Rs. 3 per share, allotment money Rs. 4 per share). Show working note for amount in Share Forfeiture Account.

Allottee applied for 1,000 shares, allotted 800 shares
Excess application money = (1,000 - 800) × Rs.3 = Rs. 600, adjusted against allotment
Amount actually due on allotment from him = 800×4 - 600 = Rs. 2,600
Amount already received = 1,000 × 3 = Rs. 3,000 (app); net received = app Rs.3,000 - allotted shares Rs.2,400 = Rs.600 excess adjusted; so forfeiture credit = Rs.2,400
Journal: Share Capital A/c Dr. 8,000 | To Share Allotment A/c 2,600 | To Share Forfeiture A/c 5,400

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Green Valley Ltd. forfeited 500 equity shares of Rs. 100 each on which Rs. 60 per share had been paid (application Rs. 20, allotment Rs. 40). The shares were forfeited for non-payment of first call of Rs. 25 and second and final call of Rs. 15 per share. After forfeiture, the directors reissued 300 of these shares as fully paid at Rs. 70 per share to Ms. Anita.

Question 1: What is the minimum price at which forfeited shares can be reissued? What is that price for Green Valley Ltd.'s forfeited shares?

Forfeited shares can be reissued at a discount, but the discount cannot exceed the amount already received (credited to Share Forfeiture Account)
Amount received per share = Rs. 60, so minimum reissue price = Rs. 100 - Rs. 60 = Rs. 40 per share

Question 2: Pass the journal entry for reissue of 300 forfeited shares at Rs. 70 per share as fully paid.

Bank A/c Dr. 21,000 (300 × 70)
Share Forfeiture A/c Dr. 9,000 (300 × 30 discount)
To Share Capital A/c 30,000 (300 × 100)
Discount = Rs.100 - Rs.70 = Rs.30 per share, debited to Share Forfeiture A/c

Question 3: Calculate the amount to be transferred to Capital Reserve after reissue of 300 shares, and show the balance remaining in Share Forfeiture Account for the remaining 200 shares.

Total amount forfeited = 500 × Rs.60 = Rs. 30,000
Amount forfeited on 300 reissued shares = 300 × Rs.60 = Rs. 18,000
Discount on reissue of 300 shares = 300 × Rs.30 = Rs. 9,000
Capital Profit = Rs.18,000 - Rs.9,000 = Rs. 9,000 transferred to Capital Reserve
Balance in Share Forfeiture A/c = Rs.30,000 - Rs.18,000 = Rs. 12,000 (for 200 shares not yet reissued)

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Aakash Textiles Ltd. issued 15,000 equity shares of Rs. 10 each payable Rs. 3 on application, Rs. 3 on allotment and Rs. 4 on first and final call. All 15,000 shares were fully subscribed. Mr. Rohan holding 300 shares paid his first and final call money along with the allotment money (calls in advance). However, Ms. Seema holding 200 shares did not pay the first and final call money when due.

Question 1: Define 'Calls in Advance'. How is it treated in the Balance Sheet?

Calls in Advance is the amount received from shareholders before the call is actually made by the company
It is shown as a separate item under 'Current Liabilities' as sub-head 'Other Current Liabilities' in the Balance Sheet
It is not added to paid-up capital

Question 2: Pass the journal entry to record calls in advance received from Mr. Rohan and calls in arrears for Ms. Seema at the time of first and final call.

Share First and Final Call A/c Dr. 1,500 | To Share Capital A/c 1,500 (Call due on 300+200=... total shares)
For Rohan: Bank A/c Dr. 1,200 | Calls in Arrears A/c Dr. 800 | To Share First and Final Call A/c 2,000 | To Calls in Advance A/c 1,200 (Rohan's advance for 300 × 4)

Question 3: Explain the interest provisions under Table F of the Companies Act for both Calls in Arrears and Calls in Advance. How do these differ?

Calls in Arrears: Company may charge interest at a rate not exceeding 10% per annum on the unpaid amount for the period from due date to actual payment date (Table F)
Calls in Advance: Company is obligated to pay interest at a rate not exceeding 12% per annum from the date of receipt up to the date when the appropriate call becomes due
Key difference: Interest on calls in arrears is income for the company; interest on calls in advance is an expense/liability for the company
Rate for calls in arrears (max 10%) is lower than for calls in advance (max 12%)

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Chapter accounting-for-share-capital: Accounting for Share Capital | Case Study Questions

Passage

Question 1: What is the Authorised Capital of Sunrise Technologies Ltd.?

Question 2: What amount of application money was refunded and to whom? Pass the journal entry for the same.

Question 3: Prepare the Notes to Accounts showing Share Capital as it would appear in the Balance Sheet of Sunrise Technologies Ltd.

Passage

Question 1: What is Securities Premium Reserve and under which head is it shown in the Balance Sheet?

Question 2: Pass the journal entry for forfeiture of Mr. Kapoor's 200 shares.

Question 3: State five purposes for which Securities Premium Reserve can be used as per the Companies Act, 2013.

Passage

Question 1: What is over-subscription? How did Delta Constructions Ltd. handle the over-subscription?

Question 2: Calculate the pro-rata ratio of allotment and find out how many shares the allottee who received 800 shares must have applied for.

Question 3: Pass the journal entry for forfeiture of the 800 shares of the defaulting allottee (application money Rs. 3 per share, allotment money Rs. 4 per share). Show working note for amount in Share Forfeiture Account.

Passage

Question 1: What is the minimum price at which forfeited shares can be reissued? What is that price for Green Valley Ltd.'s forfeited shares?

Question 2: Pass the journal entry for reissue of 300 forfeited shares at Rs. 70 per share as fully paid.

Question 3: Calculate the amount to be transferred to Capital Reserve after reissue of 300 shares, and show the balance remaining in Share Forfeiture Account for the remaining 200 shares.

Passage

Question 1: Define 'Calls in Advance'. How is it treated in the Balance Sheet?

Question 2: Pass the journal entry to record calls in advance received from Mr. Rohan and calls in arrears for Ms. Seema at the time of first and final call.

Question 3: Explain the interest provisions under Table F of the Companies Act for both Calls in Arrears and Calls in Advance. How do these differ?

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