Page 18 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Date Particulars Date Particulars
To Equity Share
Application account 18,00,000 By Balance c/d 1,10,000
To Preference Share Unit 1: Share Capital – Issue of Shares
Application Account 15,00,000
To Equity Share
Allotment Account 18,00,000
To Preference Share Notes
Allotment Account 15,00,000
To Equity Share
First Call Account 12,00,000
To Preferences Share
First Call Account 10,00,000
nd
To Equity Share 2
and Final Call Account 12,00,000
nd
To Pref. Share 2
and Final Call Account 10,00,000
1,10,00,000 1,10,00,000

Self Assessment

Fill in the blanks:
4. A Public Company Limited by shares must have at least .......................... members.
5. A Private Company should have at least .......................... members.
6. Shareholders are the ......................... of the company.

1.3.1 Issue of Shares at Premium (Under Section 78)

When a share is issued at a price higher than the face value, par value or nominal value then it
is said that it has been issued at premium. For instance, if a share of 100 is issued by a company
for 110, 10 are the premium on share. Premium on issue of shares is the capital profit for the
company and the amount so earned has to be credited to a separate account known as share
premium account.

!
Caution No restriction is imposed on the issue of shares at premium and the power to issue
shares at premium need not be taken in the Articles of Association. But there are some
restrictions on the use of the amount of share premium.
Under Section 78 of the Companies Act 1956, the amount of share premium may be used wholly
or partly in the following ways:
(a) It may be utilized in paying up unissued shares of a company, to be issued to members of
the company as fully paid bonus shares, or
(b) It may be utilized in writing off the preliminary expenses of the company, or

(c) It may be utilized in writing off the expenses of, or the commission paid or discount
allowed on any of shares or debentures of the company, or

(d) It may be utilized in providing for the premium payable on redemption of any redeemable
preference shares or debentures.

Premium on shares maybe collected by a company in a lump sum or in instalments. According
to the terms of issue the amount of share premium may be included in either application money
or allotment money or one of call money. Usually, the amount of share premium is to be paid
along with application or allotment money. If nothing is mentioned in the problem, it should be
assumed that the entire amount of the share premium is to be paid along with allotment money.

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