Issue of Shares

  • Company is an association of people who contribute money to a common stock and use it for a common purpose.
  • On the basis of liability company can be limited by shares, guarantee or unlimited company.
  • Company limited by Shares can be private, public and One Person Company.
  • The total capital of the company is divided into units of small denominations. Each such unit is called a ‘share’.
  • Equity share does not enjoy any preferential right in payment of dividend or repayment of capital whereas preference share has right to receive dividend and right to receive repayment of capital on winding up of the company before the capital of equity shareholders is returned.
  • There are eight types of preference shares. Share Capital is the capital raised by a company by the issue of shares.
  • The capital of the company can be classified as authorised, issued, subscribed, subscribed and fully paid up and subscribed but not fully paid up.
  • When the shares are issued at the price equal to face value, it is known as issue of shares at par.
  • When the shares are issued at price more than face value, it is known as issue of shares at premium.
  • Premium so received is credited to Securities Premium Reserve account that is shown under head Reserves and Surplus.
  • The uses of this premium are restricted by section 52(2) of the Companies Act, 2013.
  • A company can issue shares to its promoters or to vendors for purchase of assets. This is known as issue of shares for consideration other than cash.
  • There can be under subscription or oversubscription.
  • Calls in arrears is the failure of shareholders to pay amount due on calls on which, according to Companies Act, 2013 interest will be charged at a rate not exceeding 10% p.a.
  • When amount is paid by the shareholder in excess of the amount due, it is case of Calls in advance on which, according to Companies Act, 2013 interest will be charged at a rate not exceeding 12% p.a.

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  • Q1

    Calls in advance means

    Marks:1
    Answer:

    amount paid by shareholders not yet called.

    Explanation:

    Call in advance means call paid by shareholder in advance, but yet not called by the company.

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  • Q2

    Entire subscrption money should be called by company from shareholders within

    Marks:1
    Answer:

    1 year.

    Explanation:

    According to SEBI Guidelines, A company should structure the calls in such a manner that the whole money is called within 12 months from the date of allotment.

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  • Q3

    The securities premium account can be utilised by the company for

    Marks:1
    Answer:

    writing off the capital expenses.

    Explanation:

    Securities premium account can be utilised for writing off the expenses/ discount on issue of debentures.

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  • Q4

    The difference between par value and an issue price above par is called

    Marks:1
    Answer:

    securities premium.

    Explanation:

    If, par value is lower then the issue price shares, then it is said to be issued at a premium.

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  • Q5

    Expenses for the promotion of company are debited to

    Marks:1
    Answer:

    "Incorporation Expenses Account".

    Explanation:

    Expenses for the promotion activities of the company which are not transferred elsewhere may be transferred to incorporation cost or incorporation expenses account.

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