A company is an artificial legal entity created under law with perpetual succession. It has key features such as separate legal entity, limited liability, transferability of shares, management separation from ownership, and a common seal. A company is formed through incorporation under the Companies Act and has an independent existence from its shareholders in the eyes of the law. It can own property, enter into contracts, sue and be sued. A company's existence is unaffected by the death or insolvency of its shareholders and can be wound up only according to law.

1. Prepared by Ms Mamta Narula 1

2. Meaning of a company
A Company is an artificial person ,created by law
,having separate legal entity with perpetual
succession and common seal.
Prepared by Ms Mamta Narula 2

3. Features of a company
1. Incorporation
Created through Process of law
(Companies Act ,2013 or under any previous
companies Acts)
2. Separate legal entity
In eyes of law
Shareholders and company are different
Prepared by Ms Mamta Narula 3

4. Features of a company
3. Artificial person
It can own property ,enter in to contract ,sue ,can
be sued.
4. Perpetual existence
It not affected by the death, lunancy or insolvency
of its shareholders. It can be wounded up only by
the law Prepared by Ms Mamta Narula 4

5. Features of a company
5. Limited Liability
The liability of a shareholder is limited upto the
nominal price of shares subscribed by one.
6.Transferability of shares
The shares of a company is transferable ,except
for private company
Prepared by Ms Mamta Narula 5

6. Features of a company
7. Management and Ownership
The company is managed by the ‘Board of
Directors’, So, management and ownership are
separate in company organization.
8. Common Seal
Company has it own common seal, which act as
the official signature of the company.
Prepared by Ms Mamta Narula 6

7. Difference
Basis Partnership Company
Regulatory
Act
Indian Partnership Act
1932
Companies Act
,2013
Minimum : 2
Maximum : 50
Number
Of
members
Public Co : Min(7) Max : Unlimited
Private Co: Min(2) Max :200
OPC : Min(1) Max :1
Profit
distribution
Unlimited Liability Limited LiabilityLiability
According to AOA or
Board of directors
According to
Partnership deed
Prepared by Ms Mamta Narula 7

8. Types of a company
Private
Company
Public
Company
One
Person
Company
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9. Difference
Basis Private Company Public company
Transfer of
shares
Not allowed Allowed
Minimum : 2
Maximum : 200
Number
Of
members
Min : 7
Max : Unlimited
Name ends
with
Minimum : 1
Maximum : 15
Minimum : 2
Maximum : 15
Number of
directors
Ltd.Pvt. Ltd
Prepared by Ms Mamta Narula 9

10. Types of a Private
and Public company
Limited Liability
Company
Unlimited Liability
Company
Company limited
by
guarantee
Prepared by Ms Mamta Narula 10

11. What are shares
The capital of company is divided in small parts
called as shares.
Each share has some a nominal value /face value
which can be Rupee 1, 5 ,10, 50 ,100 or any
ammount
Prepared by Ms Mamta Narula 11

12. Types /classes
of shares
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13. Types Shares
Equity
shares
Preference
Shares
Prepared by Ms Mamta Narula 13

14. Difference
Basis Equity shares Preference shares
Right to
dividend
After dividend is paid to
Preference shares
Before dividend is paid
to Equity shares
Not fixed
Decided by BOD every year
Rate of
dividend
Fixed
Repayment
Of capital
They have voting
rights
No voting rights
except under some
circumstances
Voting
rights
Paid before the payment
is made to equity shares
On winding up of
company at the end
Prepared by Ms Mamta Narula 14

15. Minimum Subscription
 The minimum amount that, in the opinion of directors, must
be raised to meet the needs of business operations of the
company
 It is to be noted that ‘minimum subscription’ of capital
cannot be less than 90% of the issued amount according to
SEBI
 If this condition is not satisfied, the company shall forthwith
refund the entire subscription amount received. If a delay
occurs beyond 8 days from the date of closure of subscription
list, the company shall be liable to pay the amount with
interest at the rate of 15%
Prepared by Ms Mamta Narula 15

16. Prospectus
 Prospectus is an invitation to the public that a new company has
come into existence and it needs funds for doing business.
 It contains complete information about the company and the
manner in which the money is to be collected from the
prospective investors.
Prepared by Ms Mamta Narula 16

17. Issue of shares
Issue of
Shares
For Cash For Consideration other
Than cash
Prepared by Ms Mamta Narula 17

18. Issue of shares
Issue of Shares
For Cash
For Consideration other Than cash
Purchase of Asset or Purchase of Business
Issue of shares to promoters
Issue of shares to Underwriters
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19. Issue of shares For Cash
Issue price may be
payable
In
Lump sum
In Instalments
at different stages
Prepared by Ms Mamta Narula 19

20. Issue of shares For Cash
1. X Ltd. has issued 10,000 equity shares of Rupee
10 each and whole amount is payable on
application
2. X Ltd. has issued 10,000 equity shares of Rupee
10 each and the amount is payable as follows:
 Application : Rupee 3
 Allotment : Rupee 2
 First & final Call : Rupee 5Prepared by Ms Mamta Narula 20

21. Issue of shares For Cash
3. X Ltd. has issued 10,000 equity shares of Rupee 10
each and the amount is payable as follows:
 Application : Rupee 3
 Allotment : Rupee 2
 First Call : Rupee 3
 Second & final Call : Rupee 2
Prepared by Ms Mamta Narula 21

22. Types of
Share Capital
Authorised
Capital
Issued
Capital
Subscribed
Capital
Prepared by Ms Mamta Narula 22

23. Types of share Capital
1. Authorised capital
Maximum amount of share capital of company as
per Memorandum of association(MOA)
Also called as Nominal Capital
Also Called as Registered Capital
It is stated separately for each class of share
(Equity or Preference )
Prepared by Ms Mamta Narula 23

24. Types of share Capital
2. Issued capital
This is part of authorized capital which is offered
to public for subscription.
It cannot exceed authorised capital.
Prepared by Ms Mamta Narula 24

25. Types of share Capital
3. Subscribed capital
It is that part of the issued capital which has been
actually subscribed.
Shares Offered 10,000 Shares Applied 9,500
Issued Capital Subscribed Capital
Prepared by Ms Mamta Narula 25

26. Types of share Capital
3. Subscribed capital
It is that part of the issued capital which has been
actually subscribed.
Shares Offered 10,000 Shares Applied 10,000
Issued Capital Subscribed Capital
Prepared by Ms Mamta Narula 26

27. Types of share Capital
3. Subscribed capital
It is that part of the issued capital which has been
actually subscribed.
Shares Offered 10,000 Shares Applied 30,000
Issued Capital
Subscribed Capital
Is 10,000
Prepared by Ms Mamta Narula 27

28. Example
Sunrise Company Ltd., New Delhi, has registered its capital as Rs.
40,00,000, divided into 4,00,000 shares of Rs. 10 each. The company
offered to the public for subscription of 2,00,000 shares of Rs. 10 each,
as Rs. 2 on application, Rs.3 on allotment, Rs.3 on first call and the
balance on final call. The company received applications for 1,90,000
shares and shares were allotted and all money was received
Authorised Capital
Issued Capital
Subscribed Capital
4,00,000 shares of Rs. 10 each = 40,00,000
2,00,000 shares of Rs. 10 each = 20,00,000
1,90,000 shares of Rs. 10 each = 19,00,000
Prepared by Ms Mamta Narula 28

29. Types of
Subscribed Capital
Subscribed and
Fully Paid
Subscribed and
Not Fully Paid
Prepared by Ms Mamta Narula 29

30. Types of subscribed Capital
1. Subscribed and Fully paid
 The Company has called up the total nominal or
Face value of share
And
 Company has also received it
Example:
X Ltd. has issued 10,000 equity shares of Rupee 10
each and has received the amount calledPrepared by Ms Mamta Narula 30

31. Types of subscribed Capital
2. Subscribed and NOT Fully paid
 The Company has called up the total nominal or
Face value of share but has not received it
And/OR
 Company has not called–up the total nominal or
Face value of share
Prepared by Ms Mamta Narula 31

32. Types of subscribed Capital
2. Subscribed and NOT Fully paid
 Example : X Ltd. has issued 10,000 equity
shares of Rupee 10 each and has received the
amount called except Rupee 3 on 100 shares
 Example : X Ltd. has issued 10,000 equity
shares of Face value of Rupee 10 each and
company has not called final call of Rupees 2
per share Prepared by Ms Mamta Narula 32

33. Identify the type of subscribed Capital
I. X Ltd. has issued 20,000 equity shares of Rupee 100 each and has received the
amount called except Rupee 30 on 1000 shares
II. X Ltd. has issued 1,00,000 equity shares of Face value of Rupee 10 each and company
has received the full amount on all shares
III. X Ltd. has issued 50,000 equity shares of Face value of Rupee 10 each and has called
only Rupee 8/share
IV. X Ltd. has issued 80,000 equity shares of Face value of Rupee 100 each and has called
only Rupee 80/share and all shareholders paid the money called
V. X Ltd. has issued 10,000 equity shares of Face value of Rupee 10 each and has received
all money except one shareholder holding 50 share who did not pay final call of Rupee
3 per share
Prepared by Ms Mamta Narula 33

34. Reserve Capital
A company may reserve a portion of its uncalled
capital to be called only in the event of winding up of
the company. Such uncalled amount is called ‘Reserve
Capital’ of the company. It is available only for the
creditors on winding up of the company
Prepared by Ms Mamta Narula 34

35. Types of
Share Capital
Authorised
Capital
Issued
Capital
Subscribed
Capital
Subscribed and fully paid
Subscribed and NOT fully paid
Prepared by Ms Mamta Narula 35

36. Accounting entry
for
Issue of shares
Prepared by Ms Mamta Narula 36

37. Accounting entry for
Issue of shares
In Lump sum
Share Application & allotment A/c Dr.
To Share Capital A/c
Bank A/c Dr.
To Share Application & allotment A/c
Prepared by Ms Mamta Narula 37

38. Example
May 15 Share Application 2,00,000
& allotment A/c Dr.
To Share Capital A/c 2,00,000
April 30 Bank A/c Dr. 2,00,000
To Share Application 2,00,000
and allotment A/c
X Ltd. has issued 20,000 equity shares of Rupee 10 each payable along
with application . Applications were received for all the shares by 30th
April,2019 and the shares were allotted on 15th of May ,2019
Prepared by Ms Mamta Narula 38

39. Accounting entry for
Issue of shares
In Instalments
Equity shares of Rupee 10 each and the amount is payable
as follows:
 Application : Rupee 3
 Allotment : Rupee 2
 First Call : Rupee 3
 Second & final Call : Rupee 2Prepared by Ms Mamta Narula 39

40. Accounting entry for Issue of shares
In Instalments
Share Application A/c Dr.
To Share Capital A/c
Bank A/c Dr.
To Share Application A/c
1.On receiving application money
2.On allotment (Share money transferred to Share
Capital)
Prepared by Ms Mamta Narula 40

41. Accounting entry for Issue of shares
In Instalments
Share Allotment A/c Dr.
To Share Capital A/c
Bank A/c Dr.
To Share Allotment A/c
3.Allotment money due
4.Allotment money received
Prepared by Ms Mamta Narula 41

42. Accounting entry for Issue of shares
In Instalments
Share First Call A/c Dr.
To Share Capital A/c
Bank A/c Dr.
To Share First Call A/c
5. First call money due
6. First call money received
Prepared by Ms Mamta Narula 42

43. Accounting entry for Issue of shares
In Instalments
Share Second & final Call A/c Dr.
To Share Capital A/c
Bank A/c Dr.
To Share Second & final Call A/c
7. Second & final Call money due
8. Second & final Call money received
Prepared by Ms Mamta Narula 43

44. Example
X Ltd . Issued 50,000 Equity shares of Rupee 10 each and
the amount is payable as follows:
 Application : Rupee 3
 Allotment : Rupee 2
 First Call : Rupee 3
 Second & final Call : Rupee 2
Public applied for the shares and paid the money due
Give journal entries
Prepared by Ms Mamta Narula 44

45. Date Particulars L.F Debit
Amount( )
Credit
amount( )
Date of
application
Bank A/c Dr.
To share application A/c
( Being application money received on
10,000 shares)
30,000
30,000
Date of
allotment
Share Application A/c Dr.
To Share Capital A/c
(Being share application money transferred
to share capital)
30,000
30,000
Date of
allotment
Share Allotment A/c Dr.
To Share Capital A/c
( Being share allotment money due on
10,000 shares)
20,000
20,000
application 3
allotment 2
I call 3
II Call 2
10,000 shares
Prepared by Ms Mamta Narula 45

46. Date Particulars L.F Debit
Amount( )
Credit
amount( )
Date of receipt
of share allotment
money
Bank A/c Dr.
To share allotment A/c
( Being allotment money received on 10,000
shares)
20,000
20,000
Date of I call Share First call A/c Dr.
To Share Capital A/c
(Being share first call money due on 10,000
shares)
30,000
30,000
Date of
receipt
of I call
Bank A/c Dr.
To Share First call A/c
( Being share first call money received)
30,000
30,000
application 3
allotment 2
I call 3
II Call 2
10,000 shares
Prepared by Ms Mamta Narula 46

47. Date Particulars L.F Debit
Amount( )
Credit
amount( )
Date of II call Share Second & final call A/c Dr.
To Share Capital A/c
(Being share second & final call money due
on 10,000 shares)
20,000
20,000
Date of
receipt
of II call
Bank A/c Dr.
To Share Second & final call A/c
( Being share second & final call money
received)
30,000
30,000
application 3
allotment 2
I call 3
II Call 2
10,000 shares
One shareholder holding 500 share did not pay II Call
Date of
receipt
of II call
Bank A/c Dr.
Call in arrear A/c Dr.
To Share Second & final call A/c
( Being share second & final call money
received except for 500 shares)
29,000
1000
30,000
Prepared by Ms Mamta Narula 47

48. Example
X Ltd . Issued 50,000 Equity shares of Rupee 10 each and
the amount is payable as follows:
 Application : Rupee 3
 Allotment : Rupee 2
 First Call : Rupee 3
 Second & final Call : Rupee 2
Public applied for the shares and paid the money due
Prepare Cash book and Give journal entries
Remember
All bank entries will be
done in cash book and
not in Journal
Prepared by Ms Mamta Narula 48

49. Date Particulars L.F Debit
Amount( )
Credit
amount( )
Date of
application
Bank A/c Dr.
To share application A/c
( Being application money received on
10,000 shares)
30,000
30,000
Date of
allotment
Share Application A/c Dr.
To Share Capital A/c
(Being share application money transferred
to share capital)
30,000
30,000
Date of
allotment
Share Allotment A/c Dr.
To Share Capital A/c
( Being share allotment money due on
10,000 shares)
20,000
20,000
application 3
allotment 2
I call 3
II Call 2
10,000 shares
Prepared by Ms Mamta Narula 49

50. Date Particulars L.F Debit
Amount( )
Credit
amount( )
Date of receipt
of share allotment
money
Bank A/c Dr.
To share allotment A/c
( Being allotment money received on 10,000
shares)
20,000
20,000
Date of I call Share First call A/c Dr.
To Share Capital A/c
(Being share first call money due on 10,000
shares)
30,000
30,000
Date of
receipt
of I call
Bank A/c Dr.
To Share First call A/c
( Being share first call money received)
30,000
30,000
application 3
allotment 2
I call 3
II Call 2
10,000 shares
Prepared by Ms Mamta Narula 50

51. Date Particulars L.F Debit
Amount( )
Credit
amount( )
Date of II call Share Second & final call A/c Dr.
To Share Capital A/c
(Being share second & final call money due
on 10,000 shares)
20,000
20,000
Date of
receipt
of II call
Bank A/c Dr.
To Share Second & final call A/c
( Being share second & final call money
received)
30,000
30,000
application 3
allotment 2
I call 3
II Call 2
10,000 shares
Prepared by Ms Mamta Narula 51

52. Provisions relating to application and Call
1. Calls are to be made as per the provisions of the Articles of
Association(AOA)
2. Where there is no articles of association of its own, the
following provisions of Table F will apply:
(a) A period of two month must elapse between two calls;
(b) The amount of call should not exceed 25% of the face value of
the share
(c) A minimum of 14 days’ notice is given to the shareholders to
pay the amount;
(d) Calls must be made on a uniform basis on all shares within
the same class. Prepared by Ms Mamta Narula 52

53. Types of subscription
 Full /Normal
Subscription
 Under subscription
 Over Subscription
Shares
Offered
Shares
Applied=
Shares
Offered
Shares
Applied>
Shares
Offered
Shares
Applied
<
10,000 9,000
10,000 40,000
Prepared by Ms Mamta Narula
53

54. Over Subscription
February 1,
2013
Oil India share
sale got
over-subscribed
even before the
closure of
market hours
Company received
Applications for
over 7.50 Crore
shares by noon
against an offer of
over 6.01 Crore as
per data on
National Stock
Exchange.
Prepared by Ms Mamta Narula
54

55. Ways to deal with
oversubscription
Combination
of first two
methods
Rejection of
Excess
Applications
and Money
Returned
Pro – rata
Allotment
Excess
application
money
adjusted
towards sums
due on
allotmentPrepared by Ms Mamta Narula
55

56. Ways to deal with
oversubscription
Rejection of
Excess
Applications
and Money
Returned
A Company offered 40,000
shares
Applications received 60,000
sharesFull shares are allotted to
applicants of 40,000 shares
Application money on 20,000
shares returned.
Prepared by Ms Mamta Narula
56

57. Ways to deal with
oversubscription
Pro – rata
Allotment
Excess
application
money
adjusted
towards sums
due on
allotment
A Company offered 40,000
shares
Applications received 60,000
shares 40,000 shares are allotted to
applicants of 60,000 shares in ratio
4:6
 Excess Application money is adjusted
towards Allotment
 Balance ,if any returned to applicants.
Prepared by Ms Mamta Narula
57

58. Dealing with oversubscription
Combination of
first two
methods
A Company offered 40,000
shares
Applications received 60,000
shares 40,000 shares are allotted to applicants
of 50,000 shares in ratio 4:5
 Excess Application money is adjusted
towards Allotment .Balance ,if any
returned to applicants.
 Application money on 10,000 shares
returned
Important:
Sometimes question
requires extra money
to be adjusted
towards allotment and
calls also
Prepared by Ms Mamta Narula
58

59. Table
Example-1
Shares
Applied
Shares
Allotted
Application
money received
Share
Capital
Excess Share
Allotment
Return
(Bank)
3 1 2 4
60,000 40,000
10,000 0
50,000 40,000
30,000 30,000
1,50,000 1,20,000 30,000 30,000
1,80,000 1,20,000 30,000 30,000
Bank A/c Dr 1,80,000
To Share Application A/c 1,80,000
Share Application A/c Dr 1,80,000
To Share Capital A/c 1,20,0000
To Share Allotment A/c 30,000
To Bank A/c 30,000
Prepared by Ms Mamta Narula
59

60. Preparation of Pro-rata Table
Example-2
Shares
Applied
Shares
Allotted
Application
money received
Share
Capital
Excess Share
Allotment
Return
(Bank)
4 2 3 1
1,10,000 40,000
20,000 0
90,000 40,000
80,000 80,000
3,60,000 1,60,000 2,00,000 80,000
4,40,000 1,60,000 80,000 2,00,000
Bank A/c Dr 4,40,000
To Share Application A/c 4,40,000
Share Application A/c Dr 4,40,000
To Share Capital A/c 1,60,0000
To Share Allotment A/c 80,000
To Bank A/c 2,00,000
1,20,000
Prepared by Ms Mamta Narula
60

61. Preparation of Pro-rata Table
Example-3
Shares
Applied
Shares
Allotted
Application
money received
Share
Capital
Excess Share
Allotment
Return
(Bank)
4 2 3 1
1,10,000 40,000
30,000 0
60,000 20,000
1,20,000 1,20,000
2,40,000 80,000 1,60,000 40,000
4,40,000 1,60,000 40,000 2,40,000
Bank A/c Dr 4,40,000
To Share Application A/c 4,40,000
Share Application A/c Dr 4,40,000
To Share Capital A/c 1,60,0000
To Share Allotment A/c 40,000
To Bank A/c 2,40,000
1,20,000
20,000 20,000 80,000 80,000
Prepared by Ms Mamta Narula
61

62. Terms of
Issue of Shares
Shares can be
issues
At
PAR
AT
PREMIUM
Share of Face value Rupee 10 is issued
at 10
Share of Face value Rupee 10 is issued
at 12
Prepared by Ms Mamta Narula62

63. Shares can be
issues
At
PAR
AT
PREMIUM
Share of Face value
Rupee 10 is issued at 12
 Here premium money is Rupee
2
 It is called as
Securities Premium Reserve
Prepared by Ms Mamta Narula63

64. Provisions relating to utilisation of Securities
Premium Reserve account
1. Issue fully paid bonus shares
2. Write-off preliminary expenses of the company
3. Write-off the expenses of, or commission paid, or discount
allowed on any securities of the company
4. Pay premium on the redemption of preference shares or
debentures of the company.
5. Purchase of its own shares (i.e., buy back of shares).
Section 52(2) of Companies Act 2013
Prepared by Ms Mamta Narula 64

65. ISSUE OF SHARESAT PREMIUM
Shares are issued At premium to the public by well
managed and financially strong companies
through the IPO.
Called Value > Face Value
This Premium can be called with any
installment like (Application , Allotment,1st Call,2nd
Call ..... Or partially at different stages)
In absence of information the amount of Premium
is to be recorded at the time Allotment
Prepared by Ms Mamta Narula 65

66. Example
X Ltd . Issued 50,000 Equity shares of Rupee 10 each at a
premium of Rs. 3 and the amount is payable as follows:
 Application : Rupee 3
 Allotment : Rupee 5(including premium)
 First Call : Rupee 3
 Second & final Call : Rupee 2
Public applied for the shares and paid the money due
Give journal entries
Premium with allotment
money
Prepared by Ms Mamta Narula 66

67. Date Particulars L.F Debit
Amount( )
Credit
amount( )
Date of
application
Bank A/c Dr.
To share application A/c
( Being application money received on
10,000 shares)
30,000
30,000
Date of
allotment
Share Application A/c Dr.
To Share Capital A/c
(Being share application money transferred
to share capital)
30,000
30,000
Date of
allotment
Share Allotment A/c Dr.
To Share Capital A/c
To Securities Premium Reserve A/c
( Being share allotment money due on
10,000 shares)
50,000
20,000
30,000
application 3
allotment 2+3
I call 3
II Call 2
10,000 shares
Prepared by Ms Mamta Narula 67

68. Date Particulars L.F Debit
Amount( )
Credit
amount( )
Date of receipt
of share allotment
money
Bank A/c Dr.
To share allotment A/c
( Being allotment money received on 10,000
shares)
50,000
50,000
Date of I call Share First call A/c Dr.
To Share Capital A/c
(Being share first call money due on 10,000
shares)
30,000
30,000
Date of
receipt
of I call
Bank A/c Dr.
To Share First call A/c
( Being share first call money received)
30,000
30,000
application 3
allotment 2 +1
I call 3 +2
II Call 2
10,000 shares
Prepared by Ms Mamta Narula 68

69. Example
X Ltd . Issued 50,000 Equity shares of Rupee 10 each at a
premium of Rs. 3 and the amount is payable as follows:
 Application : Rupee 3
 Allotment : Rupee 3 (including premium Rs. 1)
 First Call : Rupee 5 (including premium Rs. 2)
 Second & final Call : Rupee 2
Public applied for the shares and paid the money due
Give journal entries
Premium with allotment
& First call
Prepared by Ms Mamta Narula 69

70. Date Particulars L.F Debit
Amount( )
Credit
amount( )
Date of
application
Bank A/c Dr.
To share application A/c
( Being application money received on
10,000 shares)
30,000
30,000
Date of
allotment
Share Application A/c Dr.
To Share Capital A/c
(Being share application money transferred
to share capital)
30,000
30,000
Date of
allotment
Share Allotment A/c Dr.
To Share Capital A/c
To Securities Premium Reserve A/c
( Being share allotment money due on
10,000 shares)
30,000
20,000
10,000
application 3
allotment 2+1
I call 3 +2
II Call 2
10,000 shares
Prepared by Ms Mamta Narula 70

71. Date Particulars L.F Debit
Amount( )
Credit
amount( )
Date of receipt
of share allotment
money
Bank A/c Dr.
To share allotment A/c
( Being allotment money received on 10,000
shares)
30,000
30,000
Date of I call Share First call A/c Dr.
To Share Capital A/c
To Securities Premium Reserve A/c
(Being share first call money due on 10,000
shares)
50,000
30,000
20,000
Date of
receipt
of I call
Bank A/c Dr.
To Share First call A/c
( Being share first call money received)
50,000
50,000
application 3
allotment 2 +1
I call 3 +2
II Call 2
10,000 shares
Prepared by Ms Mamta Narula 71

72. Example
X Ltd . Issued 50,000 Equity shares of Rupee 10 each at a
premium of Rs. 3 and the amount is payable as follows:
 Application : Rupee 6(including premium Rs. 3)
 Allotment : Rupee 2
 First Call : Rupee 3
 Second & final Call : Rupee 2
Public applied for the shares and paid the money due
Give journal entries
Premium with application
money
Prepared by Ms Mamta Narula 72

73. Date Particulars L.F Debit
Amount( )
Credit
amount( )
Date of
application
Bank A/c Dr.
To share application A/c
( Being application money received on
10,000 shares)
60,000
30,000
Date of
allotment
Share Application A/c Dr.
To Share Capital A/c
To Securities Premium Reserve A/c
(Being share application money transferred
to share capital)
60,000
30,000
30,000
Date of
allotment
Share Allotment A/c Dr.
To Share Capital A/c
( Being share allotment money due on
10,000 shares)
20,000
20,000
application 3+3
allotment 2
I call 3
II Call 2
10,000 shares
Prepared by Ms Mamta Narula 73

74. Calls in Arrear
Calls in advance
Prepared by Ms Mamta Narula 74

75. Difference
Basis Calls in Arrear Calls in advance
Meaning
Amount called up by
company but not paid by
shareholders
Amount not called by
company but paid by
shareholders
Charged by companyInterest Allowed by company
Disclosure in
Balance sheet
As per Table F
10%
As per Table F
12 %
Rate of
Interest
Current Liability
Subtracted from
Subscribed and not
fully paid CapitalPrepared by Ms Mamta Narula 75

76. Example
X Ltd . Issued 10,000 Equity shares of Rupee 10 each and
the amount is payable as follows:
 Application : Rupee 3
 Allotment : Rupee 4
 First & final Call : Rupee 1
Public applied for the shares and paid the money due
except one shareholder who did not pay final call on 500
shares held by him .Give journal entries
Prepared by Ms Mamta Narula 76

77. Date Particulars L.F Debit
Amount( )
Credit
amount( )
Date of
application
Bank A/c Dr.
To share application A/c
( Being application money received on
10,000 shares)
30,000
30,000
Date of
allotment
Share Application A/c Dr.
To Share Capital A/c
(Being share application money transferred
to share capital)
30,000
30,000
Date of
allotment
Share Allotment A/c Dr.
To Share Capital A/c
( Being share allotment money due on
10,000 shares)
40,000
40,000
application 3
allotment 4
I call 1
500
10,000 shares
Prepared by Ms Mamta Narula 77

78. Date Particulars L.F Debit
Amount( )
Credit
amount( )
Date of receipt
of share allotment
money
Bank A/c Dr.
To share allotment A/c
( Being allotment money received on 10,000
shares)
40,000
40,000
Date of I call Share First call A/c Dr.
To Share Capital A/c
(Being share first call money due on 10,000
shares)
10,000
10,000
Date of
receipt
of I call
Bank A/c Dr.
Calls in arrear Dr.
To Share First call A/c
( Being share first call money received
except on 500 shares)
9500
500
30,000
10,000 shares
application 3
allotment 4
I call 1
500
Prepared by Ms Mamta Narula 78

79. Example
X Ltd . Issued 10,000 Equity shares of Rupee 10 each and
the amount is payable as follows:
 Application : Rupee 3
 Allotment : Rupee 4
 First & final Call : Rupee 1
Public applied for the shares and paid the money due
except one shareholder paid final call on 500 shares with
allotment. Give journal entries
Prepared by Ms Mamta Narula 79

80. Date Particulars L.F Debit
Amount( )
Credit
amount( )
Date of
application
Bank A/c Dr.
To share application A/c
( Being application money received on
10,000 shares)
30,000
30,000
Date of
allotment
Share Application A/c Dr.
To Share Capital A/c
(Being share application money transferred
to share capital)
30,000
30,000
Date of
allotment
Share Allotment A/c Dr.
To Share Capital A/c
( Being share allotment money due on
10,000 shares)
40,000
40,000
10,000 shares
application 3
allotment 4
I call 1
500
Prepared by Ms Mamta Narula 80

81. Date Particulars L.F Debit
Amount( )
Credit
amount( )
Date of receipt
of share allotment
money
Bank A/c Dr.
To share allotment A/c
To Calls in advance
( Being allotment money received on 10,000
shares along with advance)
40,500
40,000
500
Date of I call Share First call A/c Dr.
To Share Capital A/c
(Being share first call money due on 10,000
shares)
10,000
10,000
Date of
receipt
of I call
Bank A/c Dr.
Calls in advance Dr.
To Share First call A/c
( Being share first call money received)
9500
500
10,000
10,000 shares
application 3
allotment 4
I call 1
500
Prepared by Ms Mamta Narula 81

82. Forfeiture Of shares
If a shareholder fails to pay allotment money or a call or a part thereof by
the last date fixed for payment
The Board of Directors, if Articles of Association of the company empower it
to do so, proceed to forfeit (cancel) the shares
 A notice has to be served on the defaulter requiring him to pay the unpaid
amount together with interest accrued by a certain date.
 When shares are forfeited, the shareholder’s name is removed from the
register of members and the amount already paid by him on shares is not
returned by the company.
 These forfeited share may later be reissued
Prepared by Ms Mamta Narula 82

83. Forfeiture of Shares
Shares can be issued
At
PAR
AT
PREMIUM
Premium money received
Premium money NOT received
Prepared by Ms Mamta Narula83

84. Share Capital A/c Dr
To Share Forfeiture A/c
To calls in arrear A/c
Forfeiture of Shares
At
PAR
(Number of shares forfeited X Called up
amount )
(Number of shares forfeited X amount
already received )
(Number of shares forfeited X amount
NOT received )
Prepared by Ms Mamta Narula84

85. Example -A1
X Ltd . Issued 50,000 Equity shares of Rupee 10 each
payable as follows:
 Application : Rupee 4
 Allotment : Rupee 2
 First Call : Rupee 1
 Second & final Call : Rupee 3
Public applied for the shares and paid the money due except
one shareholder holding 100 shares failed to pay first and
second call .His shares were forfeited .
Cancelle
d after
Second
and final
call
Called
up
amount
10
Prepared by Ms Mamta Narula85

86. Share Capital A/c Dr
To Share Forfeiture A/c
To calls in arrear A/c
Journal entry
Forfeiture of Shares
100 X 10
100 X 6
100 X 4
4 2 1 3
1000
600
400
To Share I call A/c 100
To share II & final call A/c 300Prepared by Ms Mamta Narula86

87. Example-A2
X Ltd . Issued 50,000 Equity shares of Rupee 10 each
payable as follows:
 Application : Rupee 4
 Allotment : Rupee 2
 First Call : Rupee 1
 Second & final Call : Rupee 3
Public applied for the shares and paid the money due except
one shareholder holding 100 shares failed to pay allotment
and first call .His shares were forfeited .
Cancelle
d after
First call
Called
up
amount
7
Prepared by Ms Mamta Narula87

88. Share Capital A/c Dr
To Share Forfeiture A/c
To calls in arrear A/c
Journal entry
Forfeiture of Shares
100 X 7
100 X 4
100 X 3
4 2 1 3
700
400
300
Prepared by Ms Mamta Narula88

89. Example-A3
X Ltd . Issued 50,000 Equity shares of Rupee 10 each
payable as follows:
 Application : Rupee 4
 Allotment : Rupee 2
 First Call : Rupee 1
 Second & final Call : Rupee 3
Public applied for the shares and paid the money due except
one shareholder holding 100 shares failed to pay allotment
and his shares were forfeited .
Cancelle
d after
allotment
Called
up
amount
6
Prepared by Ms Mamta Narula89

90. Share Capital A/c Dr
To Share Forfeiture A/c
To calls in arrear A/c
Journal entry
Forfeiture of Shares
100 X 6
100 X 4
100 X 2
4 2 1 3
600
400
200
Prepared by Ms Mamta Narula90

91. Forfeiture of Shares
Shares can be issued
At
PAR
AT
PREMIUM
Premium money received
Premium money NOT received
Prepared by Ms Mamta Narula91

92. Share Capital A/c Dr
To Share Forfeiture A/c
To calls in arrear A/c
Forfeiture of Shares
At
Premium
(Number of shares forfeited X Called up
amount )
(Number of shares forfeited X amount
already received )
(Number of shares forfeited X amount
NOT received )
Premium money received
IGNORE Premium received
Prepared by Ms Mamta Narula92

93. Example- B1
X Ltd . Issued 50,000 Equity shares of Rupee 10 each at a
premium of Rs 2 payable as follows:
 Application : Rupee 4
 Allotment : Rupee 2
 First Call : Rupee 1+2
 Second & final Call : Rupee 3
Public applied for the shares and paid the money due except
one shareholder holding 100 shares failed to pay second
and final call .His shares were forfeited .
Cancelle
d after
Second
and final
call
Called
up
amount
10
Prepared by Ms Mamta Narula93

94. Share Capital A/c Dr
To Share Forfeiture A/c
To calls in arrear A/c
Journal entry
Forfeiture of Shares
100 X 10
100 X 6
100 X 4
4 2 1+2 3
1000
700
300
If Premium
is received
Ignore
Premium
Prepared by Ms Mamta Narula94

95. Share Capital A/c Dr
Securities Premium reserve A/c Dr
To Share Forfeiture A/c
To calls in arrear A/c
Forfeiture of Shares
At
Premium
(Number of shares forfeited X Called up
amount )
(Number of shares forfeited X amount
already received )
(Number of shares forfeited X amount
NOT received including premium)
Premium money is NOT
received
(Number of shares forfeited X premium
money
not received)
Prepared by Ms Mamta Narula95

96. Example- B2
X Ltd . Issued 50,000 Equity shares of Rupee 10 each at a
premium of Rs 2 payable as follows:
 Application : Rupee 4
 Allotment : Rupee 2
 First Call : Rupee 1+2
 Second & final Call : Rupee 3
Public applied for the shares and paid the money due except
one shareholder holding 100 shares failed to pay first and
second & final call .His shares were forfeited .
Cancelle
d after
Second
and final
call
Called
up
amount
10
Prepared by Ms Mamta Narula96

97. Share Capital A/c Dr
Securities Premium Reserve A/c Dr.
To Share Forfeiture A/c
To calls in arrear A/c
Journal entry
Forfeiture of Shares
100 X 10
100 X 6
100 X 6
4 2 1+2 3
1000
600
600
Premium
is not
received
100 X 2 200
Prepared by Ms Mamta Narula97

98. Example-C1
X Ltd . Issued 50,000 Equity shares of Rupee 10 each at a
premium of Rs 2 payable as follows:
 Application : Rupee 4
 Allotment : Rupee 2 +1
 First Call : Rupee 1
 Second & final Call : Rupee 3
Public applied for the shares and paid the money due except
one shareholder holding 100 shares failed to allotment and
first call .His shares were forfeited .
Cancelle
d after
First call
Called
up
amount
7
Prepared by Ms Mamta Narula98

99. Share Capital A/c Dr
Securities Premium Reserve A/c Dr.
To Share Forfeiture A/c
To calls in arrear A/c
Journal entry
Forfeiture of Shares
100 X 7
100 X 4
100 X 4
4 2+1 1 3
700
400
400
Premium
is not
received
100 X 1 100
Prepared by Ms Mamta Narula99

100. Example-C2
X Ltd . Issued 50,000 Equity shares of Rupee 10 each at a
premium of Rs 1 payable as follows:
 Application : Rupee 4
 Allotment : Rupee 2 +1
 First Call : Rupee 1
 Second & final Call : Rupee 3
Public applied for the shares and paid the money due except
one shareholder holding 100 shares failed to allotment .His
shares were forfeited .
Cancelle
d after
Allotment
Called
up
amount
6
Prepared by Ms Mamta Narula100

101. Share Capital A/c Dr
Securities Premium Reserve A/c Dr.
To Share Forfeiture A/c
To calls in arrear A/c
Journal entry
Forfeiture of Shares
100 X 6
100 X 4
100 X 3
4 2+1 1 3
600
400
300
Premium
is not
received
100 X 1 100
Prepared by Ms Mamta Narula101

102. Reissue Of forfeited shares
 These forfeited share may later be reissued
 Forfeited shares may be reissued at a par, premium, discount
 Maximum Discount on Reissue
It may be noted that the amount of discount allowed cannot exceed the
amount that had been received on forfeited shares at the time of initial issue
4 2 1 3 Example
One shareholder holding 100 shares failed to pay first and Second & final call
.His shares are forfeited and later Reissued at Discount .What will be the
maximum discount ?
Solution : Maximum discount is Rs. 6 (i.e. the amount already received )
So Share can be reissued at Minimum Rs. 4 /share and not less than that .Prepared by Ms Mamta Narula 102

103. Reissue of Shares
Reissue of shares
At
PAR
At
PREMIUM
AT
DISCOUNT
Prepared by Ms Mamta Narula 103

104. Reissue of shares
At
PAR
At
PREMIUM
AT
DISCOUNT
Shared are reissued at Rs . 6 /share
fully paid up
Shared are reissued at Rs . 6 /share
Rs. 8 paid up
Shared are reissued at Rs . 8 /share
fully paid up
Shared are reissued at Rs . 4 /share
Rs. 6 paid upPrepared by Ms Mamta Narula 104

105. Reissue of shares
At
PAR
At
PREMIUM
AT
DISCOUNT
Shared are reissued at Rs . 8 /share
Rs. 6 paid up
Shared are reissued at Rs . 10 /share
Rs. 8 paid up
Shared are reissued at Rs . 12 /share
fully paid up
Shared are reissued at Rs . 11 /share
Rs. 10 paid upPrepared by Ms Mamta Narula 105

106. Reissue of shares
At
PAR
At
PREMIUM
AT
DISCOUNT
Shared are reissued at Rs . 8 /share
Rs. 8 paid up
Shared are reissued at Rs . 10 /share
Rs. 10 paid up
Shared are reissued at Rs . 6 /share
Rs. 6 paid up
Shared are reissued at Rs . 10 /share
Rs. Fully paid up
Prepared by Ms Mamta Narula 106

107. Reissue of shares
At
PAR
At
PREMIUM
AT
DISCOUNT
Shared are reissued at Rs . 6 /share
fully paid up
Bank A/c Dr
Share Forfeiture A/c Dr
To Share Capital A/c
100 X 6
100 X 4
100 X 10
600
400
1000
Prepared by Ms Mamta Narula 107

108. Reissue of shares
At
PAR
At
PREMIUM
AT
DISCOUNT
Shared are reissued at Rs . 12 /share
fully paid up
Bank A/c Dr
To Share Capital A/c
To Securities Premium Reserve A/c
100 X 12
100 X 2
100 X 10
1200
200
1000
Prepared by Ms Mamta Narula 108

109. Reissue of shares
At
PAR
At
PREMIUM
AT
DISCOUNT
Shared are reissued at Rs . 10 /share
fully paid up
Bank A/c Dr
To Share Capital A/c
100 X 10
100 X 10
1000
1000
Prepared by Ms Mamta Narula 109

110. Reissue of shares
At
PAR
At
PREMIUM
AT
DISCOUNT
Bank A/c Dr
To Share Capital A/c
Number of share reissued X Reissued amount
Number of share reissued X Paid up value
If Dr. side short
Share Forfeiture A/c
If Cr. side short
Securities Premium
Reserve A/c Prepared by Ms Mamta Narula 110

111. Bank A/c Dr
To Share Capital A/c
800 X 6
800 X 4
800 X 10
4800
3200
8000
800 shares were reissued as fully paid for Rs 6 per share. Journalise
Example-D1
Share Forfeiture A/c Dr
Prepared by Ms Mamta Narula 111

112. Bank A/c Dr
To Share Capital A/c
60 X 7
60 X 1
60 X 8
420
60
480
60 shares were reissued at Rs. 7 per share, as Rs. 8 paid up, Journalise
Example-D2
Share Forfeiture A/c Dr
Prepared by Ms Mamta Narula 112

113. To Share Capital A/c
50 X 12
50 X 2
50 X 10
600
100
500
50 shares were re-issued @ Rs. 12 per share, fully paid up. Journalise
Example-D3
To Securities premium
reserve A/c Dr
Bank A/c Dr
Prepared by Ms Mamta Narula 113

114. Combined question of
Forfeiture and Reissue
Prepared by Ms Mamta Narula 114

115. Shares can be issued
At
PAR
AT
PREMIUM
Premium money received
Premium money NOT received
Reissue of
shares
At
PAR
At
PREMIUM
AT
DISCOUNT
Forfeiture of Shares Reissue of Shares
Prepared by Ms Mamta Narula 115

116. Example-E
X Ltd . Issued 50,000 Equity shares of Rupee 10 each payable as follows:
 Application : Rupee 4
 Allotment : Rupee 2
 First Call : Rupee 1
 Second & final Call : Rupee 3
Public applied for the shares and paid the money due except one shareholder
holding 100 shares failed to first and second & final call .His shares were
forfeited .
These shares were later reissued at 6 per share fully paid .
Give journal entry for forfeiture and reissue
Prepared by Ms Mamta Narula 116

117. 4 2 1 3100
shares
Reissued at 6 per share fully paid
Share Capital A/c Dr
To Share Forfeiture A/c
To calls in arrear A/c
1000
600
400
Bank A/c Dr
To Share Capital A/c
Share Forfeiture A/c Dr
600
1000
400
Share Forfeiture A/c Dr
To Capital Reserve A/c
200
200
Prepared by Ms Mamta Narula 117

118. Example-F
X Ltd . Issued 50,000 Equity shares of Rupee 10 each payable as follows:
 Application : Rupee 2
 Allotment : Rupee 3
 First Call : Rupee 1
 Second & final Call : Rupee 4
Public applied for the shares and paid the money due except one shareholder
holding 100 shares failed to pay allotment and first call .His shares were
forfeited .
These shares were later reissued at 8 per share Rs.5 paid up.
Give journal entry for forfeiture and reissue
Prepared by Ms Mamta Narula 118

119. 2 3 1 4100
shares
Reissued at 8 per share Rs.6 paid up
Share Capital A/c Dr
To Share Forfeiture A/c
To calls in arrear A/c
600
200
400
Bank A/c Dr
To Share Capital A/c
To securities premium
Reserve A/c
800
600
200
Share Forfeiture A/c Dr
To Capital Reserve A/c
200
200
Prepared by Ms Mamta Narula 119

120. Example- G
X Ltd . Issued 50,000 Equity shares of Rupee 10 each at premium of Rupee
2 payable as follows:
 Application : Rupee 2
 Allotment : Rupee 3 +2
 First Call : Rupee 1
 Second & final Call : Rupee 4
Public applied for the shares and paid the money due except one shareholder
holding 100 shares failed to pay allotment and first call .His shares were
forfeited .
These shares were later reissued at 5 per share Rs.6 paid up.
Give journal entry for forfeiture and reissuePrepared by Ms Mamta Narula 120

121. 2 3+2 1 4100
shares
Reissued at 5 per share 6 paid up
Share Capital A/c Dr
Securities premium Reserve Dr.
To Share Forfeiture A/c
To calls in arrear A/c
600
200
600
Bank A/c Dr
To Share Capital A/c
Share Forfeiture A/c Dr
500
600
100
Share Forfeiture A/c Dr
To Capital Reserve A/c
100
100
200
Prepared by Ms Mamta Narula 121

122. If all Forfeited shares are
not reissued
Prepared by Ms Mamta Narula 122

123. Example-H
X Ltd . Issued 50,000 Equity shares of Rupee 10 each at premium of Rupee
2 payable as follows:
 Application : Rupee 2
 Allotment : Rupee 3+2
 First Call : Rupee 1
 Second & final Call : Rupee 4
Public applied for the shares and paid the money due except one shareholder
holding 100 shares failed to pay second and final call .His shares were
forfeited .
50 of these shares were later reissued at 7 per share Rs.fully paid up.
Give journal entry for forfeiture and reissuePrepared by Ms Mamta Narula 123

124. 2 3+2 1 4100
shares
50 shares Reissued
at 7 per share fully paid up
Share Capital A/c Dr
To Share Forfeiture A/c
To calls in arrear A/c
1000
600
400
Bank A/c Dr
To Share Capital A/c
Share Forfeiture A/c Dr
350
500
150
Share Forfeiture A/c Dr
To Capital Reserve A/c
150
150
100 shares
50 shares
Working note:
For 100 shares forfeiture A/c = 600
For I share forfeiture A/c = 600/100= 6
For 50 shares ,forfeiture A/c = 6 X 50= 300
Less 150
= 150
Prepared by Ms Mamta Narula 124

125. Prepared by Ms Mamta Narula 125