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Unit 12: Valuation of Shares
If the arrears of preference dividend are shown in the liability side of the balance sheet that Notes
is always subtracted from the net assets of the company and then value of each share is
calculated.
(iv) When preference shares have no priority for payment of capital and dividend: It means
preference shares and equity shares are of the same rank. If the paid up value of both type
of the shares is the same, total net assets will be divided by the total number of equity
and preferences shares to compute the value of each share. Here the value of equity and
preference share will be same. If the paid up value of equity and preferences shares is not
equal, first the total net assets of the company will be divided in the ratio of paid up capital
of equity shares and preference shares. To ascertain the value of each share, each portion of
the net assets will be divided by their respective number of shares.
(v) When preferences shares are participating: In this case, the entire net assets will be divided
into the equity shares and preference shares as per the rights given in the Articles of
Association of the company. Then, each portion of the net assets will be divided by its
respective number of shares in order to compute the value of share.
Format for Assets Valuation Method for Valuation of Shares
`
Asset at realisable value or market value
Fixed Assets:
Goodwill x x x x
Land & Buildings x x x x
Plant & machinery x x x x
Furniture x x x x
Investment:
Quoted and Unquoted
Current Assets:
Stock x x x x
Debtors x x x x
Bills Receivable x x x x
Cash in hand x x x x
Cash at bank x x x x
Gross Realisable Value of the Assets x x x x
Less: External Liabilities:
Creditors x x x x
Bill Payables x x x x
Amount Payable to Debenture-holders
(including outstanding interest) x x x x
Outstanding Liabilities for Expenses x x x x x x x x
Contd...
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