KARNATAKA class 12 commerce Accountancy fast track revision notes
KARNATAKA class 12 commerce Accountancy fast track revision notes:- we will provide complete details of KARNATAKA class 12 commerce Accountancy fast track revision notes in this article.
KARNATAKA class 12 commerce Accountancy fast track revision notes
Accounting for Share Capital
KARNATAKA class 12 commerce Accountancy fast track revision notesCompany:It is
- AForm of business organization
- It is an Association of persons who provide capital
- Is an artificial, invisible and intangible
- Has separate legal identity
- Has Perpetual existence
- Has Common seal
- is not affected by death , insolvency or insanity of individual
Private company: According to section 3(1)(iii)
- Has paid up capital of one lakh
- Maximum number ofmembersis 50
- It restricts the right to transfer ofshares
- Prohibits any invitation to public to subscribe for shares and Debentures
- Prohibits any invitation or acceptance of deposits from persons other than its members , directors or their relatives
PUBLIC COMPANY: According to section 3(1)(iv)
- Is not a private company
- Has minimum paid up capital of 5 lakhs or higher as may be prescribed
- Is a private company which is subsidiary of a company which is not a private company
GOVERNMENT COMPANY
As per section 617 is a company in which more than 50% of paid up capital is held by Central or State Government or both
FOREIGN COMPANY
Section 591 of Act states this type of company is incorporated outside India but has established business in India.
KARNATAKA class 12 commerce Accountancy fast track revision notes:-Incorporation of company
There are 4 stages
- Promotion conceiving an idea of business
- Incorporation or registration
- Capital subscription which means raising capital
- Commencement of business for which certificate of Commencement of business is to be obtained.
KARNATAKA class 12 commerce Accountancy fast track revision notes:-Some important definitions(theory questions)
MINIMUM SUBSCRIPTION :It is number of shares on which amount received is sufficient to commence business .
PROSPECTUS :It is an invitation to public for subscription of shares or debentures.
PRELIMINARY EXPENSES : are expenses incurred for incorporating the company are carried in balance sheet unless these are written off. CAPITAL means amount invested in the business for the purpose of earning revenue. In case of company money is contributed by public and people who contribute money are called shareholders.
SHARE CAPITAL: capital raised by issue of shares is called share capital.
AUTHORISED CAPITAL: Also Called as Nominal or registered capital. It is the maximum amount of capital a company can issue . It is stated in Memorandum of Association.
ISSUED CAPITAL: this is part of authorized capital which is offered to public for subscription. It cannot exceed authorized capital .
SUBSCRIBED CAPITAL: It is part of issued capital subscribed or applied by public.
CALLED UP CAPITAL: It is the amount of nominal value of shares that has been called up by the company for payment by the subscriber towards the share.
PAID UP CAPITAL: It is part of called up capital that the members of company or shareholders have paid.
Example : X Ltd. is registered with the following share capital 1,25,000 equity shares of Rs. 10 each, payable in the following manner 10% on application,20% on allotment ,30% on first call the balance on final call .
The company offered for subscription 80,000 equity shares.The public applied for 75,000 share The company duly allotted these shares.It made only first call by 31st March 2010.The first call was received on all shares except 300 equity shares. Prepare Balance Sheet of Company Disclosure of share capital in Company’s Balance Sheet
RESERVE CAPITAL : It is that part of uncalled capital which the company reserve to be called only upon winding up of company. For this a special resolution has to be passed
CAPITAL RESERVE : It is capital profit not available for distribution as dividend. It is represented in balance sheet of company as Reserves and Surplus under the heading Shareholders’ Funds
CLASSES OF SHARES : There are two classes of shares
- Preference shares
- Equity share
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Equity shares: The shares which are not preference shares are called equity shares and do not get preference in above respect.
ISSUE OF SHARES Shares can be issued in two ways
- for cash
- for consideration other than cash
Terms of issue of share : shares can be issued in three ways
- Issue of shares at Par
- Issue of shares at Premium
- Issue of shares at Discount
Shares payable in Installments
- First installment paid along with application is called as application money.
- Second installment paid on allotment is called as allotment money.
- Subsequent installment paid are called as call money calls can be more than one and called First call, second call or as the case may be
ISSUES OF SHARES AT PREMIUM : It is issue of share at more than face value. (Section 78)
This premium can be utillised for
- Issue of bonus shares
- Write off preliminary expenses, discount, commission on issue of shares
- Buy back of shares
- Redemption of debentures o preference shares
ISSUE OF SHARES AT DISCOUNT : When a company issues shares at price less than its face value it is issue of shares at discount.
Section 79 imposes restrictions on issue at discount According to this
- Shares must be of the class already issued.
- Ordinary resolution must be passed in the general meeting which should specify maximum discount.
- Rate of discount should not be more than 10%
- Sanction from company Law board must be obtained and shares must be issued within two months of permission.
- At least one year should have passed since commencement of business has begun
KARNATAKA class 12 commerce Accountancy fast track revision notes:-SHARES ISSUE FOR CONSIDERATION OTHER THAN CASH
When a company purchase any fixed asset or business and makes the payment to the vendor in form of issue of shares in place of cash it is called the issue of shares for consideration other than cash. Share can be issued at par, at premium or discount
Sweat equity Shares : [section 79 A] These are the shares which are issued by the companies to its employees or directors at a discount or for consideration other than cash for providing know how or intellectual property rights or value addition
These can be issued only after one year of commencement of business and is reward for their hard work.
Private placement of shares : [section 81 (1A) This is an issue of shares of securities to a relatively small selected group of persons not to the public.
This is governed by SEBI guidlines and requires special resolution to be passed in General Body meeting.
Under subscription : When the number of received is less than the number of shares offered to public it is under subscription
Over subscription : When the number of received is more than the number of shares offered to public it is over subscription.
In such cases we
- Either reject the excess applications
- make prorata allotment
- pratially refund amount on other prorata allotment is made
Right issue : The existing share holders have a right under section 81 to subscribe for fresh capital of shares of company for consideration decided by the company in proportion to existing shareholdings. This is called right issue.
Preferential Allotment : It is way of infusing fresh capital (out of public issue) in business by issuing shares or warrants to the specified entities at specified price. These entities are those who want to have stake in company like promoters, financial institutions, venture capitalists etc.
ESCROW ACCOUNTS : Funds placed in trust with a third party by a borrower for a specific purpose and to be delivered to the borrower only upon the fulfillment of certain conditions.
Employees stock option plan (ESOP) : This is employee compensation scheme through which companies want to introduce a sense of belongingess among the employees. Under this scheme a certain number of shares are reserved for purchase and issue to key permanent employees at a price much lower than the market price. Such shares have lock in period.
Buy back of shares : The repurchase of stock by the company that issued it, as to reduce holdings of a single investor or increase the value of sahres by reducing their number
This can be done out of free reserves, security premium or proceeds of securities
Employees stock Purchase Scheme (ESPS) : About Employee Stock Purchase Plans Companies offer Employess Stock Purchase Plans to employees to allow them the opportunity to share the success of the firm. A stock purchase plan enables employees to purchase their company’s common stock, often at a discount from the market price.
KARNATAKA class 12 commerce Accountancy fast track revision notes
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KARNATAKA class 12 commerce Accountancy fast track revision notes
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