Companies raise long-term funds by issuing shares. Corporate accounting focuses on the legal and accounting treatment of share capital transactions such as:
In exams, marks are often awarded for:
You should be able to:
A share represents a unit of ownership and a right to:
Share capital is the total amount raised by issuing shares.
This classification is very common in theory questions.
Equity shareholders are real owners. Key points:
Preference shareholders get preference:
Common preference types (basic list): cumulative, non-cumulative, redeemable, participating, convertible (varies by syllabus; write any 2–3).
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Companies raise long-term funds by issuing shares. Corporate accounting focuses on the legal and accounting treatment of share capital transactions such as:
In exams, marks are often awarded for:
You should be able to:
A share represents a unit of ownership and a right to:
Share capital is the total amount raised by issuing shares.
This classification is very common in theory questions.
Equity shareholders are real owners. Key points:
Preference shareholders get preference:
Common preference types (basic list): cumulative, non-cumulative, redeemable, participating, convertible (varies by syllabus; write any 2–3).
Let face value be ₹10 per share:
Premium is credited to Securities Premium account and used for specific purposes (write “as per Companies Act provisions”).
Assume shares are issued for cash with calls:
Bank A/c Dr
To Share Application A/c
Share Application A/c Dr
To Share Capital A/c
Share Allotment A/c Dr
To Share Capital A/c
(and To Securities Premium A/c if premium is due on allotment)
Bank A/c Dr
To Share Allotment A/c
Note: Exact entry depends on when premium is collected (application/allotment/call).
Oversubscription occurs when applications received exceed shares offered.
Common treatments (write any 3):
If excess application money exists, it can be:
Pro-rata means allot shares in proportion to applications.
Company offered 10,000 shares. Applications received for 12,000 shares. Allotment is on pro-rata basis.
Pro-rata ratio = Shares offered / Shares applied
= 10,000 / 12,000 = 5 / 6
So, for every 6 shares applied, 5 shares are allotted.
If application money is ₹2 per share and applicant applied for 600 shares:
This “excess adjustment” step is the key in problems.
For pro-rata problems, keep a clean working:
Mini working table:
From this topic
Any three types of share capital:
(You may also write called-up and paid-up with meanings.)
Equity vs preference shares:
Thus, preference shareholders get priority, equity shareholders are real owners.
Bank A/c Dr
To Share Application A/c
(Being application money received.)
Share Application A/c Dr
To Share Capital A/c
(Being application money transferred to share capital for shares allotted.)
These entries record collection and capitalisation of application money for allotted shares.