Class 12 Accountancy - TELANGANA
Accounting for Share Capital
Accounting for Share Capital is a crucial chapter in Class 12 Accountancy under the Telangana Board (TSBSE) syllabus. It introduces students to how joint-stock companies raise capital by issuing shares to the public. You will learn the entire accounting treatment from issuing prospectus, receiving applications, making allotments, and calling calls-on-shares, up to the critical processes of forfeiture and reissue of shares. This chapter carries significant weight in the TSBSE board examinations, frequently featuring 8-mark or 10-mark practical problems on journal entries and balance sheet presentation, making thorough practice essential for scoring high marks.
Start Learning FreeKey Concepts
Share Capital
The total capital of a company divided into small units of fixed denominations called shares, representing ownership in the company.
Over-subscription and Under-subscription
Over-subscription occurs when the public applies for more shares than offered, requiring pro-rata allotment or refunds. Under-subscription happens when applications are received for fewer shares than offered.
Calls-in-Arrears and Calls-in-Advance
Calls-in-arrears represent the amount demanded by the company on shares but not paid by shareholders. Calls-in-advance is money received from shareholders before it is officially called up.
Forfeiture of Shares
The cancellation of shares due to non-payment of allotment or call money by a shareholder, resulting in the forfeiture of previously paid amounts.
Reissue of Forfeited Shares
The process by which a company resells its previously forfeited shares to new or existing buyers at par, premium, or discount (up to the amount forfeited).
Important Formulas
Board Exam Info
In the Telangana (TSBSE) Class 12 Accountancy board exam, this chapter typically carries about 12 to 15 marks. Questions usually include one long-answer 8-mark or 10-mark practical problem involving journal entries for issue, forfeiture, and reissue of shares, along with 2-mark or short-answer questions defining terms like authorized capital, reserved capital, or over-subscription.
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 allowed to raise as stated in its Memorandum of Association. Issued capital is that part of authorized capital which is actually offered to the public for subscription.
How do we calculate the amount to be transferred to Capital Reserve on the reissue of forfeited shares?
Capital Reserve is calculated as the total forfeited amount on the shares that have been reissued, minus any discount allowed (or amount utilized) during their reissue.
Is the pro-rata table mandatory to solve over-subscription problems?
Yes, preparing a pro-rata analysis table helps calculate excess application money correctly and determines how much money is adjusted towards allotment and calls, preventing calculation errors in journal entries.
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