Company

Accounts
Classes of shares

 Total capital Of the company is divided into units of

small denomination. Each unit into which capital of
the company is divided is called a share
According to companies act, a company can issue
two classes of shares:

 Preference shares:-
According to section 43 of companies act 2013 preference share is that part of the share
capital of the company which enjoys preferencial Rights as to
(a) Payment of dividend at a fixed rate and
(b) Return of capital on the winding up of the company.
Equity shares:-
. An equity share is a share which is not a preference share. Equity shareholders do not
have any right to get fixed rate of dividend. Rate of dividend may vary from year to year. Equity
shareholder will get dividend and repayment of capital after meeting the claim of preference
shareholders.
 Issue of shares: journal Entries

1. For receiving application money.

Bank account. Dr.
To share application account
(With the money, received on application)
2. For transferring the application money
Tooo share capital share application account. Dr.
To share capital account
(With the application money on shares allotted)
3. For the amount due towards allotment.
Share allotment a/c Dr.
To share capital account
. (With the amount due on shares allotted)
4. On receipt of allotment money.
Bank account. Dr.
To share allotment account.
(With amount received on allotment)
5. For the amount due towards first call
Share first call account. Dr.
. To share Capital account.
(with the amount due on first call)
6. On receipt of first call money
. Bank account. Dr.
. To share first call account.
. (With the amount received on first call)
Issues of shares at Discount

When shares are issued at a price lower than the face value,
they are said to be at a discount. According to section 53 of
the companies act 2013, a company cannot issue shares at a
discount accept in case of issue of sweat equity shares.
 Issues of shares for consideration other than
cash
a) To vendor for the purchase of accets.
i) sundry assets account. Dr.
(Individually)
To vendors’ account
. (With the purchase price agreed upon)
ii) vendors’ access. Dr.
To share capital account
To share premium account
b) To promoters for the services rendered by them.
Goodwill account Dr.
To share capital account
. (with the Nominal value of the alloted)
Debentures

 Companies raise substantial amount of Long terms Fund through the issue of
debentures. The amount to be raised by the way of loan from the public is divided
into small units called “debentures”. Debenture may be defined as written
instrument acknowledging a debt Issued under the seal of company containing
provisions regarding the payment of interest repayment of principal some, charge
on the assets of the company etc.
Underwriting of shares and debenture

 Underwriting is an agreement between a company and a

underwriter whereby the latter agrees to take up the shares or
debentures which are not subscribed by the public. The company
has to pay commission to underwriters for the surveys rendered by
them called underwriting commission.
Partial underwriting:
Incase of partial underwriting only a part of the whole issue is underwritten by one or
more underwriters and for the balance the company is treated as underwriter.
Firm underwriting:
An underwriter thorough such an agreement with the company gets priority over the
public in relation to the allotment, incase of over-subscription.
Bonus shares

In order to avoid the outflow of cash from the business and at the same time to satisfy the
share holders, the company may resort to issuing bonus shares to the existing shareholders. This
maybe done by making partly paid shares as fully paid up shares or by issuing fully paid shares to
the existing shareholders without getting cash from them.
Shares issued free of cost to the existing shareholders by the way of capitalisation of
profits and reserves are called “bonus shares”. The issue Of bonus shares implies the payment of
dividend in the form of shares instead of cash. These new shares Are alloted to the members in
proportion to their existing shareholdings.
Reserves that can be used for issue of bonus
shares

1. Balance in profit and account carried forward.

2. General reserves.
3. Dividend equalization reserve.
4. Capital reserve arising from profit on sale of fixed assets received in cash.
5. Balance in debenture resumption reserve after redemption of debenture.
6. Capital redemption reserve account created at the time of redemption of redeemable
preference shares out of profits.
7. Securities premium collected in cash only.
The End