Class 12 Accountancy - CBSE
Accounting for Share Capital
Accounting for Share Capital is a high-weightage chapter in Class 12 CBSE Accountancy that introduces students to how joint-stock companies raise capital by issuing shares. It covers the complete accounting lifecycle of shares, from initial public offering (IPO) and allotment to calls, including situations of over-subscription, under-subscription, and calls-in-arrears. A major focus is placed on the forfeiture and reissue of shares when shareholders fail to pay call money. Mastering this chapter is essential for scoring well in board exams, as it forms the foundation for company accounts and regularly features 6-mark or 8-mark comprehensive problems.
Start Learning FreeKey Concepts
Authorized Capital
The maximum amount of capital that a company is authorized to raise by issuing shares, as stated in its Memorandum of Association.
Over-subscription
A situation where the public applies for more shares than the company has actually offered to issue, requiring adjustments like pro-rata allotment or refunds.
Calls-in-Arrears
The amount demanded by the company on shares but not paid by the shareholders when due, which is debited to the Calls-in-Arrears account.
Forfeiture of Shares
The cancellation of shares due to non-payment of allotment or call money, where the amount already received by the company is forfeited.
Reissue of Forfeited Shares
The process of selling shares that were previously forfeited to new or existing buyers, usually at a discount limited to the forfeited amount.
Important Formulas
Board Exam Info
In the CBSE Class 12 Accountancy board exam, this chapter typically carries 12 to 15 marks. Common question types include 1-mark MCQs, 3-mark short problems on forfeiture and reissue, and a mandatory 6-mark or 8-mark long answer question combining pro-rata allotment, calls-in-arrears, forfeiture, and reissue.
Frequently Asked Questions
Over-subscription is the event where applications received exceed the shares offered, while pro-rata allotment is the method used by the company to distribute shares proportionately among applicants in such a scenario.
Can forfeited shares be reissued at a discount?
Yes, forfeited shares can be reissued at a discount, but the maximum discount cannot exceed the amount that was originally forfeited on those specific shares.
How is the balance of the Forfeited Shares account treated after all forfeited shares are reissued?
The remaining balance in the Forfeited Shares account is transferred to the Capital Reserve account, as it represents a capital profit for the company.
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