Class 12 Accounting-II Notes | SHARE AND SHARE CAPITAL OF A COMPANY | Principles of Accounting-II XII

Class 12 Accounting-II Notes,SHARE AND SHARE CAPITAL OF A COMPANY,Principles of Accounting-II XII

SHARE AND SHARE CAPITAL OF A COMPANY

8) Difference between Equity shares and Preference shares

Below are the two differences between equity shares and preferences shares: 

1. Voting Right: Equity shareholders enjoys voting right, but preference shareholders lacks voting right.
2. Refund of capital: Equity share capital is refunded only after of preference share capital in case of liquidation. Preference shareholders have prior right to refund the capital over equity shareholders.
3. Conversion: Preference shares can be converted into equity shares whereas equity shares are non-convertible.

9)   Define Share capital, issued capital and subscribed capital.

• Share Capital: The share capital of a company is usually divided into certain numbers of unit of a fixed amount. These units are called shares. A share refers to a fractional part of the capital. So, the individual unit of capital owned by a shareholder is called a share.
• Issued capital: It is that part of authorized capital which offered to the public for subscription. The company issues only those numbers of shares, which are sufficient to meet the present financial requirement of the company.
• Subscribed capital: It is the share capital actually subscribed by public. It can never exceed the issued capital. The issued share capital, which has not been subscribed by the public, is called under subscription of capital.

10) Authorized Capital

It is a maximum amount of capital that a company can raise as mentioned in the MOA. It is also known as registered or nominal capital. A company can increase its authorized capital by fulfilling necessary legal provisions.

11) Define Preference shares.

Preference share are risk free and return on investment at certain fixed rate is fixed. Preference share are the shares issued by the company which have the right to received specified rate before paid on equity shares. The dividend is pre-determined in case of preference shares.

12) Calls is Arrear and Calls in Advance

• Calls in arrears are unpaid amount by shareholders as per call notice of the company till the last date of payment. The company can charge interest in case of Calls in Arrear.
• Calls in advance are prepaid amount by shareholders before making call. The company has to pay interest to shareholders as per the provision made in AOA (Article of Association).

13) Re-issue of forfeited share

When a share is forfeited, it is a property of the company. The directors are authorized to re-issue such shares at par, premium or discount. The re-issue amount is debited to bank account and credited to share capital account. The re-issued share at discount should not exceed the forfeited amount.

14) What do you mean by 'Pro-rata allotment'?

When shares issued is oversubscribed, applicants may be allotted shares in fixed proportion. This is called pro-rata allotment. The proportion depends upon the shares offered and share applied. For example, if company allots 5,000 shares to the applicant of 8,000 shares. It is pro- rata allotment in the proportion of 5:8.