Page 104 - DCOM409_CONTEMPORARY_ACCOUNTING

Unit 8: Corporate Reporting

1. Share Capital: It means the share of the owner’s in the company. There are different types Notes
of capital.
(a) Authorized Share Capital: This is the amount of capital which the company is authorized
to raise from the public. Generally authorized capital is given in the memorandum
of association, popularly known as M/A at the time of incorporation of the company.
There are two types of share capital – (i) Equity share capital, and (ii) Preference
share capital. It is given by way of information in the balance sheet. It is not added
to the liabilities of the company, unless the entire share capital is issued, subscribed,
called up and received in full.
(b) Issued Share Capital: It is that part of issued share capital, which is offered for the
public to subscribe till the date of Balance Sheet. Various types of share capital along
with classes and face value etc. are given.
(c) Subscribed Capital:
(i) It is that part of issued share capital which is actually, subscribed by the public
along with share value called up.
(ii) Shares, which are issued other than cash for different consideration and issued,
as bonus shares must also be given.
(iii) Shares on which calls are in arrear must also be shown by way of deduction
from called up capital.
(iv) Shares which are forfeited on account of non-payment must be shown
separately.
(v) If forfeited shares are reissued in full or in part, in case of profit must be
transferred to capital reserve account only.

Example: The following are the key informations of Amazon Artifice Ltd.:
`
1. Authorised share capital:
Equity share capital (400000 equity shares of ` 10 each) 4000000
Preference share capital (10000 15% preference share capital @ ` 100 each) 1000000
2. Issued and Subscribed share capital: 3000000
Equity share capital (300000 equity shares of ` 10 each) 500000
Preference share capital (5000 15% preference share capital @ ` 100 each) 1700000
3. Paid up capital (equity 12 lakhs and preference 5 lakhs) 2600000
4. Called up capital on allotment (14 lakhs + 12 lakhs) 12000
5. Unpaid equity shareholders on allotment (3000 equity shares@ ` 4) 6000
6. Unpaid equity shareholders on calls (2000 equity shares@ ` 3)

The share capital will be collected as under
Equity shares Preference shares
(`) (`)
with application 3 100
On allotment 4 —
On calls 3 —
10 100

The public has subscribed, in full, to both equity and preference shares of the company. Shows
the treatment of capital in company’s balance sheet.

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