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Accounting for Companies-I

Notes Allotment is the acceptance of offer made by the applicant to purchase the shares. If there is
oversubscription, the board of directors is free to allot the shares. Directors may allot the full
number of shares applied for, or none at all, or a number less than applied for. A letter of regret
along with refund of application money is dispatched to those applicants whose applications are
rejected. Letters of Allotment are dispatched to other applicants whose applications are accepted
and in this letter they are requested to remit any money due on allotment. Some applicants may
be accepted partially or on a pro-rata basis. The surplus application money on such an application
can be retained for allotment money; the balance of surplus application money will be refunded
unless the applicant has agreed to get it treated as calls in advance. Such retention of over
subscription is normally permitted up to 15% of the amount sanctioned. If the company wants
such retention of application money, it should so state in the original application to the CCI and
obtain the approval. It should inform the CCI and the Stock Exchange immediately after the
issue about the outcome of the issue and the retention of oversubscription upto the permitted
amount. In any case, the directors of a company cannot allot more than the number of shares
offered to the public in the prospectus even if it has received applications for a large number.

Calls on Shares

5% of the face value of share is paid on application, some money is paid on allotment and the
balance of the face value of share is paid on calls. This balance may be called in one call or in
different calls. Call notices are sent to the shareholders who will make the payment. Generally,
calls are due by the board of directors on particular dates fixed by its Articles. If the Articles are
silent in this respect, provisions laid down in Table A shall apply. These are:
(i) a period of one month must elapse before another call is made
(ii) the amount of each call should not exceed 25% of the face value of the share, and
(iii) a notice of 14 days is given to the shareholders to pay the amount; a call must be made on
a uniform basis on all shares within the same class.

Books of Account of a Public Company

As per Section 209 of the Companies Act 1956 a company is required to maintain such books as
will give a true and fair picture in respect of :

(a) all sums of money received and extended by the company and the matters in respect of
which receipts and expenditure take place.
(b) all sales and purchases of goods of company.

(c) all assets and liabilities of the company.
(d) and such particulars regarding utilisation of materials or labour or other items of cost as
may be prescribed by the Central Government, in case the company belongs to a class of
companies engaged in manufacturing, processing and mining.
Sub-section (3) makes it clear that these accounts should be maintained to show the true and fair
picture of the state of affairs of the company. These books must be prepared on accrual basis and
according to the double entry system of accounting. These must be preserved for a minimum
period of eight years. Books of account should be kept at the registered office of the company
and these should be open for the inspection of directors, the registrar and the officers authorized
by the Central Government during business hours. If the directors decide to place these books of
accounts of the company at a place other than registered office (but in India) the company shall
within seven days of this decision, file with the registrar a notice in writing, giving the full
address of that other place.

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