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Dr. R.A.N.M ARTS AND SCIENCE COLLEGE�Affiliated to Bharathiar University , �Accredited with “ B+” NAAC

Mrs. A. Raameswari M.Com., � Assistant Professor,� Department of Commerce (CA)

Course Name : Corporate Accounting I

�Welcome You All

�

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Shares -- Meaning

A Share in a company is one of the units of fixed amount into which the total share capital of a company is divided.

Shares - Definition

“Share means a share in the capital of a company and includes stock except where a distinction between stock and shares expressed or implied”.

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Types of Shares

There are two types of shares namely preference shares and equity shares.

1. Preference Shares:

2. Equity Shares:

Preference Shares:

The Preference Shares are those which enjoy preferential rights over other classes of shares for the payment of dividend during the life-time of the company and repayment of capital over the other classes of shares at the time of winding up.

Equity Shares:

Equity Shares are those which do not enjoy the preferential right in payment of dividend and repayment of capital. The holders of these shares are paid dividend only after payment to the preferential shareholders is made. The rate of dividend is not fixed on equity shares and it varies from time to time.

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Procedure for Issue

From the accounting point of view, the following should be noted Every prospectus must mention the number of shares issued. Prospectus must mention the minimum subscription. The minimum amount of share capital is determined to cover. The purchase price of any property purchased or to be purchased;

ISSUE OF SHARES

Preliminary expenses;

Money borrowed for the foregoing matters and working Each application for shares must be accompanied by the prescribed application money. All application money must be kept intact in a schedule bank. If allotment takes place, a letter of allotment is sent to the allottees. If no allotment of shares is made, a letter of regret together with application money is sent to the applicants. The allotted has to pay the allotment money on allotment.

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A. Applications:

B. Allotment:

C. Under subscription:

D. Over subscription:

E. Calls:

F. Calls in Arrears:

G. Calls in Advance:

PROCEDURE FOR ISSUE OF SHARES FOR CASH

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Applications:

The company issues a prospectus which contains the details of the amount to subscribe for its shares. The company may demand the full value of shares on application itself or it may demand only a part of it. The application money should not be less than 5% of the issue price.

Allotment:

Allotment of shares means acceptance of the offer of the applicant for the purchase of shares. Applicants to whom the shares are to be allotted will be issued „Letter of Allotment‟ and if no allotment of shares is to be made, a letter of regret with application money is sent to the applicants.

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Under subscription:

If a company is not received applications for all the shares offered by it to the public is called under subscription.

Over subscription:

If a company receive applications for a larger number of shares than offered by it to the public it is called over subscription. The company may treat the excess applications received in one or more of the following ways: Certain applications may straightway be rejected.

Partial allotment may be made (or) Pro-rata allotment may be made. Pro-rata allotment is one in means the shares are allotted on the basis of the proportion of the number of shares applied.

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Calls:

Out of face value of the shares, at least 5% is payable with application, a part will be paid on allotment and rest of the money will be paid as and when calls are made.

Calls in Arrears:

If any amount, called in respect of a share either as allotment or call money, which is not paid is called calls in arrears.

Calls in Advance:

The money received by the company in excess of what has been called up is known as calls in advance.