Class 12 Accountancy - ISC
Issue of Shares
The chapter 'Issue of Shares' is a cornerstone of corporate accounting for Class 12 ISC students, focusing on how joint-stock companies raise capital by issuing equity and preference shares. You will learn the complete accounting treatment from the initial public offer (IPO) through application, allotment, and call stages. It also covers crucial scenarios like over-subscription, under-subscription, calls-in-arrears, calls-in-advance, issue of shares at par, premium, and for consideration other than cash. Furthermore, the chapter delves into the strict legal and accounting procedures required when shares are forfeited and subsequently reissued, making it a high-scoring, heavily weighted topic in your ISC board exams.
Start Learning FreeKey Concepts
Over-subscription
Occurs when applications are received for more shares than the company has offered to the public, requiring the company to allot shares on a pro-rata basis or refund excess money.
Calls-in-Arrears
The unpaid amount by shareholders when they fail to pay allotment or call money by the due date, debited to the 'Calls-in-Arrears Account'.
Forfeiture of Shares
The cancellation of shares due to non-payment of calls after due notice, where the amount already received is forfeited by the company.
Issue of Shares at Premium
When shares are issued at a price higher than their face value, with the extra amount credited to the Securities Premium Reserve Account.
Pro-Rata Allotment
A proportional distribution of shares to all applicants when there is over-subscription, where excess application money is adjusted towards allotment.
Important Formulas
Board Exam Info
In the ISC Class 12 Accounts exam, this chapter typically carries significant weight, frequently appearing as a compulsory 10-to-12-mark long-answer question. Common question types include comprehensive journal entry problems on pro-rata allotment, forfeiture, and reissue of shares, as well as balance sheet presentation.
Frequently Asked Questions
How do we adjust excess application money in pro-rata allotment?
Excess application money received from applicants is first adjusted against the amount due on allotment. If any surplus remains, it is either refunded or adjusted against future calls, as per the company's terms.
What is the maximum discount allowed when reissuing forfeited shares?
The maximum discount allowed on the reissue of forfeited shares cannot exceed the amount that was originally forfeited on those specific shares (i.e., the balance in the Forfeited Shares Account for those shares).
Where does Securities Premium Reserve appear in the Balance Sheet?
Securities Premium Reserve is shown under the head 'Equity and Liabilities', under the sub-head 'Reserves and Surplus'.
Learn Issue of Shares with Your AI Tutor
10 different ways to study this chapter. Free for 3 chapters per day.
Lecture
Key Points
Interactive
Quiz
Flashcards