Meaning and types of share capital and shares, issue of share capital, reduction of share capital i. The certificate of incorporation of a company is issued by registrar of. Alteration of share capital and internal reconstruction. Capital notes carry more risk than other types of secured corporate debt, because capital note. Equity share capital, with reference to any company limited by shares, means all share capital which is not preference share capital. Shortterm unsecured debt generally issued by a company to pay shortterm liabilities. As discussed above, under alteration of share capital, if a company diminishes its share capital by cancelling its unissued shares, the confirmation by the court is not necessary for such a step, though it is also a way in which share capital may be reduced. In this market, the capital funds comprising of both equity and debt are issued and traded. Some important terms used in accounting for share capital note 1. Having said that, during class 12, accountancy chapter 6accounting for share capital is an essential subject as well as a difficult one with many problems diagrams and many concepts.
This also includes private placement sources of debt and equity as well as organized markets like stock exchanges. Jun 27, 2017 ts grewal solutions for class 12 accountancy company account accounting for share capital volume ii question 1. Share may be defined as an interest in the company entitling the owner thereof to receive proportionate part of the profits, if any, and, at the same. An efficient capital market can provide a mechanism for raising capital and also by protecting investors in corporate securities4.
Here is a compilation of top four accounting problems on alteration of share capital and internal reconstruction with its relevant solutions. This can lead to questions when shares are issued for no consideration improper purpose sometimes. The company offered for public subscription all the shares. Jul 23, 2012 according to section 86 of the companiesact, 1956 was amended with effect from 122000 new issues of share capital to be only of twokinds. Company a joint stock company is an artificial person, created by law, having separate entity distinct from its members with a perpetual succession and a common seal. When you buy a capital note, youre loaning money to a company for a fixed period of time in return for regular interest payments on a fixed interest rate called a coupon rate. Capital market is a market for longterm debt and equity shares. Now customize the name of a clipboard to store your clips. In other words, the cost of capital is simply the rate of return the funds used should produce to justify their use within the firm in the light of the wealth maximisation objective. Ncert class 12 accountancy chapter 6accounting for share. As per section 43 a equity share capital may be divided on the basis of voting rights and differential rightsdvr as to dividend, voting rights or otherwise according to the rules. Share capital refers to the funds that a company raises in exchange for issuing an ownership interest in the company in the form of shares. These cbse revision notes are arranged subjectwise and topicwise. Share capital can be raised only by companies limited by shares and registered with share capital.
These shareholders are issued shares of the company. Ncert class 12 accountancy chapter 6accounting for share capital notes free pdf. A joint stock company should have capital in order to finance its activities. Share capital can be raised by a company either at the time of its formation for starting its operations or later on for further expansion. After reading this article you will to learn about. Funds raised by issuing shares in return for cash or. Accounting for share capital class 12 notes accountancy. If part of the forfeited shares are reissued, then profit shall.
Ordinary shares are also known as common stock and equity shares. No nominal value 1 shares in a company have no nominal. Basis of preparation and principal accounting policies basis of preparation the company ascential plc the company is a company incorporated in the united kingdom on 4 january 2016 and its registered office is the prow, 1 wilder walk, london w1b 5ap. The current rules relating to share capital require companies having a share capital to have a par value or a nominal value ascribed to their shares. The amount of share capital or equity financing a company has can. Shareholders equity represents the amount by which a company is financed through common and preferred shares. Shareholders equity, share capital, and retained earnings. Sep 29, 2019 ncert solutions for class 12 accountancy part ii chapter 1 accounting for share capital. A corporations share capital or capital stock in us english is the portion of a corporations. This chapter deals with the accounting for share capital of companies. Share capital audit role of auditor in verifying issue of. If there is any increase in the number of shares due to loans or conversion of debentures, the same has to be verified whether all the formalities were as per law.
Share capital consists of all funds raised by a company in exchange for shares of either common or preferred shares of stock. Pdf complete lecture notes for mba 643 stock market. Profit on forfeiture further discount on reissue of such forfeited share to capital reserve note. The cost of capital is the minimum rate of return required on the investment projects to keep the market value per share unchanged.
They are considered as good as currency notes due to their easy. Equity includes capital contributed by, and other amounts attributable to, the. Raising share capital rights attached to shares are contractual in nature s 140 this extends to the issue of shares. The share capital of a company limited byshares shall be of two kinds only, namely. Share capital is the backbone of the company without it the company cannot achieve its goals. Jun 03, 2019 accounting for share capital cbse notes for class 12 accountancy. Nature and types a company is an artificial person created by law, having separate entity with a perpetual succession and a common seal. A company usually raises its capital in the form of shares called share capital and debentures debt capital. Meaning of share capital a joint stock company should have capital in order to finance its activities.
The provisions of sections 100 to 105 have to be complied with if a company reduces its share capital. A share is a share in the share capital of acompany, and includes stock receipt where there is adistinction between stock and shares is expresed. Comments are turned off autoplay when autoplay is enabled, a suggested video will automatically play next. Ncert solutions for class 12 accountancy part ii chapter 1. Provided that where the equity shares of a company are listed on a recognized stock exchange, the issue of such shares shall be approved by the shareholders. The capital of a company is contributed by a large number of persons known as shareholders.
Part 4 share capital division 1 nature of shares 4. The characteristics of common stock are defined by the state within which a company incorporates. Accounting for share capital accountancy cbse class 12. The accounting of such transactions is special and involves the share capital account. The term capital gearing refers to the relationship between equity capital equity shares plus reserves and longterm debt.
Complete lecture notes for mba 643 stock market theory and practice. Cbse class 12 accountancy accounting for share capital. Share capital equity invested by shareholders and investors. It may be planned or historical, the latter describing a state of affairs where the capital structure has evolved over a period of time, but not necessarily in the most advantageous way.
Mar 11, 2019 cbse class 12 accounting for share capital class 12 notes accountancy in pdf are available for free download in mycbseguide mobile app. Guidance note increase or decrease of shares issue date. Comments are turned off autoplay when autoplay is enabled, a. Pdf complete lecture notes for mba 643 stock market theory. A capital note is a shortterm bond issued by a company to help pay company liabilities.
Pdf this paper examines the economic case for rules of company. Issue of ordinary shares is accounted for by allocating the proceeds between the following accounts. Notes to the company financial statements for the period ended 31 december 2016 1. Sections 174 and 175 contain provisions relating to the reconversion of stock into shares. Ordinary share capital ordinary share premium retained income. Share capital is the money a company raises by issuing shares of common or preferred stock. An auditor can verify the issued capital from balance sheet of the previous year. Share capital means the money paid into the company or legally promised as being available on call by members for shares in the company.
Ordinary share capital represents equity of a company and therefore its issuance is recorded as part of the equity reserves in the balance sheet. This document is highly rated by class 12 students and has been viewed 20094 times. The memorandum also states the number of shares to be issued. Lecture notes, lecture share capital lwb334 corporate. Accounting for share capital cbse notes for class 12. Capital market includes financial instruments with more.
Also known as share capital, net worth or stockholders equity. Test your understanding i state which of the following statements are true a a company is formed according to the provisions of indian companies act, 1932. Ts grewal solutions for class 12 accountancy company. Please note that the use of this module of training material is not subject to the.
Ncert solutions cbse sample papers accountancy class 12 accountancy. Share capital shareholders capital, equity capital, contributed capital, or paidin capital is the amount invested by a companys shareholders for use in the business. Minimum subscription section 39 it is the minimum amount stated in the prospectus that must be subscribed by the public before an allotment of any security is made. Nature and transferability of shares 1 a share or other interest of a member in a company is personal property. Sep 16, 2011 equivalently, it is share capital plus retained earnings minus treasury shares. Nov 27, 2019 share capital consists of all funds raised by a company in exchange for shares of either common or preferred shares of stock. The capital market has two interdependent and inseparable segments, the primary market and stock s econdary market. The above amounts will be shown in the notes to accounts of the balance sheet of sunrise company ltd. When a company is created, if its only asset is the cash invested by the shareholders, then the balance sheet is balanced through share capital. Download cbse revision notes for cbse class 12 accountancy accounting for share capital in pdf format. Cbse class 12 accounting for share capital class 12 notes accountancy in pdf are available for free download in mycbseguide mobile app.
Share capital class 12 notes edurev is made by best teachers of class 12. Clipping is a handy way to collect important slides you want to go back to later. The best app for cbse students now provides accounting for partnership firms fundamentals class 12 notes latest chapter wise notes for quick preparation of cbse board exams and schoolbased annual examinations. Accounting for share capit al share and share capital. Public applied for 4,50,000 shares and allotment was made to. If other calls are there, similar entries will be passed. The balance sheet notes to the financial statements trading business xplanation the balance sheet the balance sheet should include all assets, liabilities and equity information, thus. Reduction of share capital a company may reduce share capital by. The share capital note should provide a narrative explanation that the changes are a result of the abolition of nominal value of shares under the new co.