This chapter explores the accounting principles related to share capital in companies, including share issuance, types of shares, and the treatment of unpaid calls.
Accounting for Share Capital – Formula & Equation Sheet
Essential formulas and equations from Accountancy Part - II, tailored for Class 12 in Accountancy.
This one-pager compiles key formulas and equations from the Accounting for Share Capital chapter of Accountancy Part - II. Ideal for exam prep, quick reference, and solving time-bound numerical problems accurately.
Key concepts & formulas
Essential formulas, key terms, and important concepts for quick reference and revision.
Formulas
Authorised Capital = Nominal Capital
Represents the maximum amount of share capital a company is authorized to issue as specified in the Memorandum of Association.
Issued Capital = Subscribed Capital + Unissued Capital
Issued capital refers to the part of the authorized capital that is actually issued to shareholders.
Subscribed Capital = Issued Capital - Unsubscribed Capital
Subscribed capital is the portion of issued capital that has been subscribed or agreed by shareholders.
Paid-up Capital = Called-up Capital - Calls in Arrears
Paid-up capital is the actual amount received from shareholders against the shares that have been called for payment.
Calls in Arrears = Amount Due - Amount Paid
Calls in arrears indicate the amount that has not been paid by shareholders against the calls made by the company.
Share Forfeiture = Share Capital Account - Allotment (or Calls)
Forfeiture involves canceling a shareholder's shares due to non-payment of calls. The amount forfeited is reversed in the Share Capital Account.
Securities Premium = Total Premium on Shares Issued
Securities premium is the amount received over and above the nominal value of shares. It is credited to the Securities Premium Account.
Calls in Advance = Total Amount Received Prior to Calls Being Made
Calls in advance represent payments received from shareholders ahead of their actual due dates.
Final Call = Face Value - Previous Calls
The final call on shares reflects the last amount that must be paid by shareholders to make their shares fully paid.
Reserve Capital = Uncalled Capital in Liquidation
Reserve capital consists of the portion of uncalled capital that is reserved to be called only upon the company’s winding up.
Equations
Total Capital = Issued Shares × Face Value + Premium
Calculates total capital raised through shares, considering both the face value and any premium.
Total Amount Received = Application + Allotment + Calls
This equation sums up the total amounts received from shareholders through various stages of payment.
Forfeiture of Shares = Previous Amounts Received - Final Call
Determines the total amount forfeited based on amounts previously received against the total call amount due.
Reissue Price = Amount Received on Reissue - Original Forfeited Amount
Used to determine profit or loss on reissuing forfeited shares, reflecting the difference between the reissue price and the original amounts.
Funds from Forfeited Shares = Calls in Arrears - Calls Made
Calculates the net funds available from shares that have been forfeited after removing amounts that were not received.
Interest on Calls in Arrears = Outstanding Amount × Interest Rate × Time
Used to calculate the interest payable on calls that remain unpaid for a specific duration.
Profit on Forfeited Shares = Total Amount Received on Reissue - Amount Forfeited
Calculates the profit that can be transferred to capital reserve based on gains from reissuing forfeited shares.
Total Amount Returned = Rejected Applications × Application Money
Useful for calculating the total amounts to be refunded to applicants for shares that were not allotted.
Net Cash Flow from Shares = Total Cash Inflows - Total Cash Outflows
This evaluates the overall cash flow impact resulting from share issuance activities, including inflows and returns of applications.
Balance in Share Forfeiture Account = Total Forfeited - Total Reissued
Maintains a record of the remaining balance from shares forfeited until they are fully reissued.
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