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EQUITY SHARE Payment of equity dividend is made after the payment of preference
dividend.
Repayment of capital
EQUITY SHARE Repayment of Equity share capital is made after the
repayment of preference share capital.
PRFERENCE SHARE Repayment of preference share capital is made before the
repayment of equity share capital.
Arrears of dividend
EQUITY SHARE In case of an equity share, arrears of dividend cannot
accumulate in any case.
PRFERENCE SHARE In case of a preference share, arrears of dividend may
accumulate.
Convertibility
EQUITY SHARE It cannot be convertible.
PREFERENCE SHARE It may be convertible.
Voting Rights
EQUITY SHARE Equity shareholders generally enjoy voting rights.
PREFERENCE SHARE Preference shareholders
(1)UNDER SUBSCRIPTION:
Share are said to be UnderSubscribed when the
number of share applied for is less than the number
of shares offered.
(2) OVER SUBSCRIPTION:
DEBENTURE
1.Capital VS Loan
Kind of Debentures
ISSUE OF DEBENTURES
Issue of debentures for consideration other then cash When the company
purchases some assets and instead of making the payment to
the supplier in the form of cash issues its fully paid
debentures such issue of debentures is called as the issue of
debentures for consideration other than
(b) On issue of Debentures
(i) At Par
(ii) At a Premium
(iii) At a discount
REDEMPTION OF DEBENTURES
On applications, Rs.3 on allotment Rs. 4 on first call Rs. 2 and final call the
balance.
Applications were received for 1,20,000 shares. Allotments were made on
the following basis:
All the shares on which calls were not paid were forfeited by the Board
of Directors.
2,000 forfeited shares were reissued as fully paid on receipt of Rs. 8 per
share.
Show the Journal Entries in the books of ACE Private Limited.
Solution :
Solution :
Journal Entries
Date Particulars Debit Credit
L.F.
I Bank A/c 1,40,000
To Share Application A/c 1,40,000
(Being share application money
received on 70,000 shares @ Rs. 2 per
share)
II Share Application A/c 1,40,000
To Share Capital A/c 80,000
To Share Allotment A/c 20,000
To Bank A/c 40,000
(Being share application money
transferred to Share Capital account,
Share Allotment account and balance
refunded)
III Share Allotment A/c 2,00,000
To Share Capital A/c 1,20,000
To Securities Premium A/c 80,000
(Being share allotment money due on
40,000 share@ Rs. 5 per shares,
including premium of Rs. 2 per share)
IV Bank A/c 1,73,250
Calls in Arrears A/c 6,750,
To Share Allotment A/c 1,80,000
(Being the amount received on share
allotment)
V Share First Call A/c 80,000
To Share Capital A/c 80,000
(Being share first call money due on
40,000 shares @ Rs. 2 per share)
VI Bank A/c 73,000
Calls in Arrears A/c 7,000
To Share First Call A/c 80,000
(Being share first call money due on
36,500 shares @ Rs. 2 per share)
VII Share Second and Final Call A/c 1,20,000
To Share Capital A/c 1,20,000
(Being share second and final call
money due on 40,000 shares @ Rs. 3
per share)
VIII Bank A/c 1,09,500
Call in Arrears A/c 10,500
To Share Second and Final Call A/c 1,20,000
(Being amount received on 36,500
shares @ Rs. 3 per share)
IX Share Capital A/c 35,000
Securities Premium A/c 3,000
To Calls in Arrears A/c 24,250
To Share Forfeited A/c 13,750
(Being 3,500 shares forfeited for non-
payment of call in arrears)
X Bank A/c 24,000
Share Forfeited A/c 6,000
To Share Capital A/c 30,000
Working Notes :
Solution : -
Journal
Date Particulars L.F. Debit Rs. Credit Rs.
Bank A/c 10,00,000
To Share Application A/c 10,00,000
(Being the application money
received)
Share application A/c 10,00,000
To Share Capital A/c 10,00,000
(Being the application money
adjusted)
Share allotment A/c 10,00,000
Discount on issue of shares A/c 5,00,000
To Share Capital A/c 15,00,000
(being allotment money due)
Bank A/c 10,00,000
To Share allotment A/c 10,00,000
(Being the allotment money
received)
Share Ist call A/c 12,50,000
To Share Capital A/c 12,50,000
(Being the first call money due)
Bank A/c 12,50,000
To Share Ist call A/c 12,50,000
(Being the first call received)
Share IInd & F8anl call A/c 12,50,000
To Share Capital A/c 12,50,000
(being the second & final call
money received)
Bank A/c 12,47,500
To Share IInd & Final Call A/c 12,47,500
(Being the second & final call
received on 49,900 shares)
Share Capital A/c 10,000
To Forfeited Shares A/c 6,500
To Share IInd & Final Call A/c 2,500
To Discount on Issue of Shares 1,000
A/c
(Being 100 shares forfeited as
per boards resolution dated ..)
Bank A/c 2,800
Discount on Issue shares A/c 400
Forfeited Shares A/c 800
To Share Capital A/c 4,000
(Being 40 forfeited shares
reissued as per boards
resolution dated))
Forfeited Shares A/c 1,800
To Capital Reserve A/c 1,800
(Being the transfer of profit on
reissue)
Working Notes : -
Amount forfeited on 100 shares = Rs.6,500
Journal
Date Particulars L.F Debit Credit
1. Profit and Loss 40,000
Appropriation A/C 40,000
To Debentures A/C
(Premium payable on
redemption of debentures)
2. Debentures A/C 8,00,000
Premium on Redemption of
Debenture A/C 40,000
To Debenture 8,40,000
holders A/C
(Amount paid to Debenture
holders)
3. Debenture holders A/C 8,40,000
To Bank A/C 8,40,000
( Amount paid to
Debenture holders)
4. Profit & Loss Appropriation 8,00,000
A/C 8,00,000
To General Reserve
A/C
(Amount equal to face
value of debentures
redeemed, transferred to
General Reserve)
Solution:
Naveen Ltd Journal
Date Particulars L.F. Debit Credit
(i) (On Redemption) 20,000
12% Debentures A/c 2,000
To Discount on issue of Debentures A/c 18,000
To Debenture-holders A/c
(Being the amount due to debenture-holders on
conversion of 200, 12% debentures)
Debenture-holders A/c 18,000
To 10% Preference Share Capital A/c 14,400
To Securities Premium A/c 3,600
(Being issue of 144, 12% preference shares of
Rs. 100 each at Rs. 125 on conversion of 12%
on conversion of 12% debentures)
(ii) 12% Debentures A/c 5,000
To debentures-holders A/c 5,000
(Being the amount due to debenture-holders on
conversion of Rs. 500 each )
12% Debenture-holders A/c 5,000
Discount on 8issue of Debentures A/c 1,200
To 15% Debenture A/c (500 x 12) 6,000
To Bank Account 200
(Being the issue of 12; 15% debentures of Rs.
500 each at 20% discount on conversion of 12%
debentures)
(iii) Bank A/c 90,000
Loss on issue of Debentures A/c 15,000
To 12% Debentures A/c 1,00,000
To Premium on redemption of Debentures 5,000
A/
(Being issue of 1,000, 12% debentures of Rs.
100 each at a discount of 10% and redeemable
at premium of 5%)
Solution:
Journal
Dat Particulars L.F. Debit Credit
e Rs. Rs.
On Issue
Bank A/c 45,000
Discount on Issue of Debentures 5,000
A/c 50,000
To 15% Debentures A/c
(Issue of 500 15% Debentures of
Rs.100 each at a discount of 10%)
On conversion/redemption
15% Debentures A/c 50,000
To Equity Share Capital A/c 45,000
To Discount on Issue of 5,000
Debentures A/c
(Conversion of 500 debentures of
Rs.100 each issued at 10%
discount into equity shares of
Rs.10 each)
Solution:
Journal
Date Particulars L. Debit Credit
F
16% Debentures A/c 4,80,00
Premium on Redemption of Debentures 0
A/c 5,28,00
To Debenture holders A/c 48,000 0
(Amount due to debenture holders on
conversion of debentures)
Debentures holders A/c 5,28,00
Discount on issue of Debentures A/c 0
To Equity Share Capital A/c 5,50,00
(Issue of 55,000 equity shares of Rs . 22,000 0
10each at 4% discount on conversion
of debentures)