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KARNATAKA class 12 commerce Accountancy fast track revision notes

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 notes

Company­:It is

  1. AForm of business organization
  2. It is an Association of persons who provide capital
  3. Is an artificial, invisible and intangible
  4. Has separate legal identity
  5. Has Perpetual existence
  6. Has Common seal
  7. is not affected by death , insolvency or insanity of individual

Private company­: According to section 3(1)(iii)

  1. Has paid up capital of one lakh
  2. Maximum number ofmembersis 50
  3. It restricts the right to transfer ofshares
  4. Prohibits any invitation to public to subscribe for shares and Debentures
  5. 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)

  1. Is not a private company
  2. Has minimum paid up capital of 5 lakhs or higher as may be prescribed
  3. Is a private company which is subsidiary of a company which is not a private 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


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

  1. Promotion­ conceiving an idea of business
  2. Incorporation or registration
  3. Capital subscription ­ which means raising capital
  4. 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

  1.  Preference shares
  2. Equity share
  1. Preference shares : are shares which get preferential right in respect of
  • Right of dividend
  • Repayment of capital on winding up

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

  1. for cash
  2. for consideration other than cash

Terms of issue of share : shares can be issued in three ways

  1. Issue of shares at Par
  2. Issue of shares at Premium
  3. Issue of shares at Discount

Shares payable in Installments

  1. First installment paid along with application is called as application money.
  2. Second installment paid on allotment is called as allotment money.
  3. 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

  1. Issue of bonus shares
  2. Write off preliminary expenses, discount, commission on issue of shares
  3. Buy back of shares
  4. 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

  1. Shares must be of the class already issued.
  2. Ordinary resolution must be passed in the general meeting which should specify maximum  discount.
  3. Rate of discount should not be more than 10%
  4. Sanction from company Law board must be obtained and shares must be issued within  two months of permission.
  5. 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

  1. Either reject the excess applications
  2. make prorata allotment
  3. 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

Recommended Read:-KARNATAKA class 12 commerce Accountancy fast track revision notes

KARNATAKA class 12 commerce Accountancy fast track revision notes

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