Company Accounts for CA Foundation
Company accounts: kinds of share capital, issue of shares at par and premium, calls in arrears and advance, forfeiture and reissue of shares, and debentures.
AccountingPaper 112 MCQs2 lessons2 flashcards3 memory tricks
Practise Company Accounts free
What you'll learn
- Share capital and issue of shares
Record the issue of shares payable in instalments. - Forfeiture and reissue
Record forfeiture and reissue of shares.
Concepts explained
Share capital and issue of shares
Share capital moves from authorised to paid-up; shares are issued at par or a premium (not a discount) and money is collected through application, allotment and calls.
What it means
- Authorised ≥ issued ≥ subscribed ≥ called-up ≥ paid-up.
- Equity shares: voting, residual profits; preference shares: fixed dividend and capital priority.
- Discount issue prohibited (s.53) except sweat equity.
- Minimum subscription not received → refund (s.39); debenture holders are creditors.
- 10,000 shares of ₹10 at ₹2 premium
Answer: Share capital ₹1,00,000; premium ₹20,000
- Only 80% applied for, below the minimum
Answer: Refund the money
Related terms
- Over-subscription: pro-rata allotment or rejection of excess
- Sweat equity: shares to employees or directors for know-how
Exam tip: Only face value goes to Share Capital; the premium goes elsewhere.
Securities premium and calls
Premium received on shares goes to the Securities Premium Account, usable only under Section 52. Unpaid calls are calls in arrears; early payments are calls in advance.
What it means
- Section 52 uses: bonus shares, preliminary or issue expenses, premium on redemption, buy-back.
- Not for dividends.
- Table F: interest up to 12% on calls in advance; up to 10% on calls in arrears.
- Calls in arrears are deducted from called-up capital; calls in advance are a liability.
- Company wants to issue bonus shares
Answer: Can use securities premium
- Pay dividend from premium
Answer: Not allowed
Related terms
- Capital reserve: capital profits like gain on reissue
- Bonus issue: free shares from reserves
Exam tip: Premium: capital purposes only.
Forfeiture and reissue of shares
Shares are forfeited for non-payment of calls; the amount paid goes to Share Forfeited Account. On reissue, any surplus is a capital profit transferred to Capital Reserve.
What it means
- Forfeiture: Share Capital Dr (called-up); To unpaid calls; To Share Forfeited (paid).
- Reissue at a discount: discount debited to Share Forfeited.
- Discount can't exceed the forfeited amount.
- Balance on reissued shares → Capital Reserve.
- 100 shares, ₹7 paid
Answer: ₹700
- Reissued at ₹8 (₹2 discount)
Answer: 700 − 200 = ₹500
Related terms
- Share Forfeited A/c: shown under share capital until reissue
- Pro-rata shares forfeited: only on shares actually forfeited
Exam tip: Forfeit what was called; credit forfeiture with what was paid.
Memory tricks
Authorised ≥ issued ≥ subscribed ≥ called-up ≥ paid-up.
Section 52: bonus shares, issue expenses, premium on redemption, buy-back.
Interest on calls in advance ≤ 12%; on calls in arrears ≤ 10%.
Try 3 CA Foundation-style questions
Q1. Under Section 53 of the Companies Act, 2013, a company issuing shares at a discount is
- prohibited, except for sweat equity shares
- always allowed
- allowed up to 10%
- allowed only for preference shares
Show answer
Answer: (1) prohibited, except for sweat equity shares
Section 53 prohibits issuing shares at a discount; an issue in breach is void. Sweat equity shares are an exception.
Q2. If a company fails to receive the minimum subscription within the specified period, it must
- refund the application money
- allot shares anyway
- forfeit the shares
- issue bonus shares
Show answer
Answer: (1) refund the application money
Section 39: if the minimum subscription isn't received within 30 days of the issue of the prospectus (or the period SEBI specifies), the application money must be returned.
Q3. 100 shares of ₹10 each are forfeited for non-payment of the final call of ₹3, after ₹7 per share had been paid. The amount credited to Share Forfeited Account is
- ₹1,000
- ₹300
- ₹700
- ₹1,300
Show answer
Answer: (3) ₹700
Amount received on the forfeited shares = 100 × ₹7 = ₹700.
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