Types of shares ppt

company accounts issue of shares and debentures pdf and company accounts issue of shares notes
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Published Date:25-07-2017
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Fundamentals of Accounting – CPT Chapter 9 – Unit 2 Issue, Forfeiture and Re-issue of Shares Prof Rahul J. Malkan E-mail : rahulmalkanlive.com Forfeiture and Reissue of Share Accounting for Issue Introduction Capital • Funds provided by the owner(s) into a business is known as capital. Proprietor Partnership Company • Sole - • Partners • Shareholders Proprietor Share capital • Total capital of the company is divided into a number of small indivisible units of a fixed amount and each such unit is called a share. Share Share capital Share capital • The fixed Value of share, printed on the share certificate, is called nominal / par / face value of share. When the When the When the share is share is share is issued at issued at issued at Face Value. value above value below For eg. Share face value. the face For eg. Share value. For eg. of ₹ 10 is of ₹ 10 issued Share of ₹ 10 issued at ₹ 10 at ₹ 12 issued at ₹ 8 Issued At Par Issued At Premium Issued at Discount Share Capital Authorised Capital Issued Capital Unissued Capital Subscribed Unsubscribed Capital Capital Called up Uncalled Reserve Capital Capital Capital Paid up Unpaid (Calls in Capital Arrears) Share Capital Authorised • Maximum capital that the company can collect during its life time. It is referred as ‘Registered Capital’ or ‘Nominal Capital’ Share Capital Issued Share • The portion of Authorised Capital Issued by the company capital Subscribed • The part of the issued share capital that is subscribed by the public Share Capital Called up • The portion of Subscribed Share Capital which is called up. Share Capital Paid up • The portion of Called up capital paid up by shareholders is known as paid up capital. share capital Illustration • A company had a registered capital of ₹ 1,00,000 divided into 10,000 equity shares of ₹ 10 each. It decided to issue 6,000 shares for subscription and received applications for 7,000 shares. It allotted 6,000 shares and rejected remaining applications. Upto 31-12-2011, it has demanded or called ₹ 9 per share. All share holders have duly paid the amount called, except one shareholder, holding 500 shares who has paid only ₹ 7 per share. Illustration 1 – page 9.14 Solution ₹ 1,00,000 Authorised (10,000 x 10) Capital ₹ 60,000 ₹ 40,000 Issued Capital Unissued Capital (6,000 x 10) (4,000 x 10) ₹ 60,000 Subscribed Nil Unsubscribed (6,000 x 10) Capital Capital ₹ 54,000 ₹ 6,000 Called up Uncalled (6,000 x 9) (6,000 x 1) Capital Capital ₹ 1,000 ₹ 53,000 Paid up Unpaid (Calls in (500 x 2) (54,000 – 1,000) Capital Arrears) Types of Shares : The different kinds of shares which can be raised by Companies are :  EQUITY SHARES  PREFERENCE SHARES Preference Shares : Preference shares are those shares which carry with them preferential rights for their holders, i.e, 1. Preferential right as to fixed rate of dividend & 2. Repayment of capital at the time of winding up of the Company. Characteristics :  Fixed rate of dividend.  Priority as to payment of dividend.  Preference as to repayment of capital during liquidation of the Company.  Generally preference shareholders do not have voting rights.  According to The Companies (Amendment) Act, 1988, the reference shares are redeemable & the maximum period for which they can be issued is 10 years. Kinds of Preference Shares :  On the basis of cumulation of dividend :  Cumulative Preference Shares: They are those shares on which the dividend at a fixed rate goes on cumulating till it is all paid.  Non Cumulative Preference Shares: These are those shares on which the dividend does not cumulate.  On the basis of participation :  Participating Preference shares: This type of shares are allowed to participate in surplus profits during the lifetime of the company & surplus assets during winding up.  Non Participating Shares: These shares are not entitled to participate in surplus profit. Dividend at fixed rate is given. Kinds of Preference Shares :  On the basis of conversion :  Convertible preference shares: The owners of these shares have the option to convert their preference shares into equity shares as per the terms of issue.  Non-convertible preference shares: The owners of these shares do not have any right of converting their shares into equity shares.  On the basis of redemption:  Redeemable preference shares: These are to be purchased back by the company after a certain period as per the terms of issue.  Irredeemable preference shares: These are not to be purchased back by the company during its lifetime. Kinds of Preference Shares : Status of Preference Shares, if Articles of Association are silent : • Preference shares will be presumed to be:  Cumulative  Non-Participating  Redeemable and  Non-Convertible. Equity Shares : The equity shares or ordinary shares are those shares on which the dividend is paid after the dividend on fixed rate has been paid on preference shares. Characteristics:  No fixed rate of dividend.  Dividend is paid after dividend at a fixed rate is paid on preference shares.  At the time of liquidation, capital on equity is paid after preference shares have been paid back in full.  Non redeemable.  Equity shareholders have voting rights & thus, control the working of the Company.  Equity shareholders are the virtual owners of the Company. Issue of shares : For Cash For Consideration Other Than Cash Issue of shares for cash : Prospectus Application Allotment Calls Issue of shares for cash : Prospectus Prospectus is an legal document, which contains information company and securities, it is to issue. It is an invitation to the public to subscribe to the shares of the Company. Issue of shares for cash : Application 1. Share application is an offer made by public to subscribe the shares of the company. 2. Application should be accompanied with application money as demanded by the company. 3. Minimum application money should be 5% of the nominal value of the shares as per companies act. 4. As per SEBI, minimum application money should be 25% of the issue price.

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