Class 12 Accountancy - MP
Accounting for Share Capital
The chapter 'Accounting for Share Capital' in Class 12 Accountancy is a core component of corporate accounting, crucial for MPBSE board exams. It introduces students to how a joint stock company raises capital by issuing shares to the public. You will learn the systematic accounting treatment for the issue and forfeiture of shares, over-subscription and under-subscription, and pro-rata allotment. Mastery of journal entries for share application, allotment, and calls is essential, as practical long-answer questions from this chapter consistently carry heavy weightage in the final board examinations.
Start Learning FreeKey Concepts
Share Capital
The total capital of a company divided into small denomination units called shares, representing ownership in the company.
Pro-Rata Allotment
Proportional allotment of shares to applicants when an issue is over-subscribed, adjusting excess application money towards allotment and calls.
Forfeiture of Shares
Cancellation of shares due to non-payment of calls made by the company, resulting in the forfeiture of the amount already paid by the shareholder.
Resale of Forfeited Shares
Re-issuing the shares that were previously forfeited by the company, either at par, premium, or discount (up to the amount forfeited).
Capital Reserve
The profit earned on the re-issue of forfeited shares, which is transferred to the Capital Reserve account as it is a capital profit.
Important Formulas
Board Exam Info
In the Madhya Pradesh (MPBSE) Class 12 Accountancy board exam, this chapter typically carries around 10 to 15 marks. Common question types include objective questions, short-answer theoretical notes on types of shares, and a compulsory long-answer practical numerical problem involving journal entries for issue, forfeiture, and re-issue of shares.
Frequently Asked Questions
What is the difference between Authorized Capital and Issued Capital?
Authorized Capital is the maximum amount of capital a company is legally permitted to raise, whereas Issued Capital is that part of authorized capital which is actually offered to the public for subscription.
How is Call-in-Arrears treated in journal entries?
Calls-in-Arrears represents the amount not paid by shareholders when a call is made. It is debited to the 'Calls-in-Arrears Account' or can be shown by not opening the arrears account and directly reducing the called-up amount.
Can forfeited shares be re-issued at a discount?
Yes, forfeited shares can be re-issued at a discount, but the discount given on re-issue cannot exceed the amount that was already forfeited on those specific shares.
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