Accounting Of Shares Flashcards
Pvt. Company
- Minimum number of members
- Maximum number of members
- Minimum capital
- Minimum number of directors
- 2
- 200 (2013)
50 (1956) - 2 lakh
- 2
Public Company
- Minimum number of members
- Maximum number of members
- Minimum capital
- Minimum number of directors
- 7
- To the extent of number of shares
- 5 lakh
- 3
Permission from central government to issue share capital is required if nominal capital exceeds?
1 crore
Deemed to be public company?
> =100 crore
Turnover of 5 crore or more for three consecutive financial years
- Minimum subscription in case of public company?
- Minimum application money in case of public limited company?
- Minimum application money to be paid by an applicant along with the application money shall not be less than _ of the issue price?
- 90%
- 5% of nominal face value
- 25% (as per SEBI)
- Maximum rate of discount on the nominal value of share?
- Maximum limit of premium on shares?
- Maximum amount of discount on reissue of forfeited shares?
- 10%
- No limit
- Amount received on forfeited shares
- Penalty for delay in refunding application money?
- Time period to allot the shares?
- Time period to refund application money?
- 12%(SEBI) / 15%(companies)
- 60 days
- Within 15 days of completion of 60 days
(*130 days of the date of issue of prospectus.
*should get min subscription within 120 days from issue of prospectus.
*if delay beyond 8 days from closure of subscription list :15%)
- Lock in period in case of private placement of shares?
- Issue of shares are discount sanction from company law board must be obtained and shares must be issued within how many days?
- 3 years
2. Within 2 months of obtaining sanction from company law board
- The meeting of the board of director should be at least?
- What is the notice period to be given to directors to attend the meeting?
- How many meetings should at least a director attend in an year?
- Every quarter
- 7 days at registered address
- 4
- If a shareholder does not pay call money on time a lotus of how many days should be given to the shareholder to pay the amount?
- Time period between two calls?
- Amount on first call should not be more than what percent of phase value?
- 14 days
- Not less than 1 month
- 25%
- A company formed according to the provisions of Indian companies act?
1956, 2013
Liability of members in a company?
Limited to the extent of the nominal value of shares held by them.
If a member has paid the full amount of the shares there is no liability on his part what so ever maybe the debt of the company.
- Interest on calls in arrear?
2. Interest on calls in advance?
- 5%
10% (Table F) - 6%
12% (Table F)
- A company can issue share on discount after?
After 1 year of company starting
- Usage of securities premium reserve?
- issue of fully paid bonus share capital
- meeting the preliminary expenses incurred/ loss or discount on issue of debentures
- commission or Discount concerned with previous securities
- premium on the redemption of redeemable debentures or preference share capital of the company
- buy-back of securities
- Which section of Companies Act is related with application of security premium?
- Security premium once received cannot be cancelled?
- The amount of premium should be received with which installment?
- Who determines the premium on issue of shares?
- Is premium credited when shares are not allotted?
- Premium is capital profit or receit?
1. Section 78(2) ; 1956 Section 52(2) ; 2013 Section 52(1) ; 2013; define premium 2. True 3. Can be received with any installment 4. Issuer company (decided by board of directors as per guidelines issued by SEBI) 5. No 6. Capital receipt
- Which Reserves can be utilised to make partly paid shares into fully paid up?
- Use of capital redemption reserve?
- Capital Reserve from sale of fixed assets in cash.
2. Used to pay up new shares to be allotted to members as fully paid bonus shares
- Company formed by special act of Legislature or parliament?
- Liability of member Limited up to the amount he guaranteed to contribute in the event of winding up?
- Incorporated under special charter by the king?
- Restricts the right to transfer of shares? / prohibits invitation or deposit from person other than members are directors?
- More than 50% of paid up capital held by central or state government?
- Incorporated outside India but established business in India?
- Special rights under Companies Act 3 section (iii) ?
- Share the listed on a recognise stock exchange for public trading?
- Statutory
- Guarantee company
- Chartered company
- Private company
- Government company (section 617)
- Foreign company (as per section 591)
- Private company
- Listed company
Arrange in proper sequence as types of share capital:
Paid up capital, issued capital, subscribed capital, called up capital
Issued capital
subscribed capital
called up capital
paid up capital
- Surrender of shares
2. Cancellation of shares
- Shares return by shareholder voluntarily/partly paid shares returned by shareholders to the company.
- Company cancels share or terminate membership of shareholder by taking away the shares ( forfeiture of shares)
What does a company issue instead of issuing prospectus in the case of private placement of shares?
Prepare the statement in place of prospectus
Which account is debited for shares issue to promoters for their service?
Goodwill account or incorporation cost account
The director of a company must be a
Shareholder of the company
If a shareholder does not pay his dues on allotment for the mount due there will be which balance in the account
Debit balance in the Shere allotment account
When is the need of valuation of shares?
Time of merger
For converting one class of shares to another
- As per SEBI guidelines a new company without any track record can issue share at a premium?
- A new company set up by existing companies with five year track record can you show share at premium provided?
- False
- participation of existing companies not less than 50% (in ownership)
* prospectus contains justification for issue price
* issue price is made applicable to all new investors uniformly
- participation of existing companies not less than 50% (in ownership)
- Balance of share forfeiture shown in balance sheet under the head?
- Balance of share forfeiture after reissue is shown under the head?
- Amount of calls in advance is shown on which side?
- Amount of money not received out of called a capital is subtracted from?
- Capital included in the total of balance sheet of a company is called?
- Amount of calls in arrear is shown as?
- If company has passed resolution for reserve capital how is it shown in Bs?
- Calls is advance?
- Share capital acc
- Reserve and surplus
- Equity and liabilities
- Share capital
- Subscribe capital ( show that last under the heading share capital)
- Deduction from subscribed capital
- Subscribed but not fully paid up
- Other current liabilities
- Is Capital Reserve available for distribution?
- What is transferred to Capital Reserve?
- Capital Reserve is created from which kind of profit?
- No
- Profit on forfeiture of shares, premium on issue of shares, profit from sale of fixed assets, profit on redemption of debentures.
- Capital profit
- Forfeiture of shares result in reduction of?
- Share forfeiture account is which kind of account?
- Is forfeited share a part of subscribed capital?
- Subscribe capital
- Nominal acc
- No
In what way is share issued to relatively small selected group of persons
Private placement of shares
Give an example of a free reserve?
Capital Reserve collected in cash
- Cumulative and non cumulative preference shares
- Participating and non participating preference shares
- Non convertible and convertible preference shares
- Redeemable preference shares and irredeemable preference share (doesn’t exist now)?
- Default status of a preference share?
- Preference shares get preferential write in respect of?
- Which type of shares company cannot tissue as per the Act 2013?
- Dividend payment / arrear
- Priority dividend at specified rate + surplus profit
- Convertible into equity shares
- At expiry/winding up
- Cumulative, non participating and non convertible
- Right of dividend and repayment of capital on winding up
- Irredeemable preference shares
- Equity shares cannot be issued for the purpose of?
- Which kind of equity shares the company cannot issue?
- Equity shares are convertible?
- Maximum risk?
- Maximum reward?
- Authorised share same for equity and preference?
- Distribution of dividend
- Redeemable equity share
- No
- Losing all value of shares
- Payment of higher dividend/ appreciation in market
- No different
Person who starts a company are called
Promoters
Which of the way is not used by company to issue the shares
Without Stock Exchange
- Shares reserved for purchase and issue to employees at price lower than market price (fair value)
- Is it an obligation for the employees
- Conditions for issue
- ESOP ( employee stock option plan)
- No
- class of shares already issues
- special resolution
- SEBI regulation
- not less than a year since company comment business
- Process of Incorporation
2. Commencement of business certificate in how many days
- *Promotion by promoters
- Incorporation or registration with registrar
- Certificate of Incorporation
- Capital subscription and commencement
- 180 days
Characteristics?
- Management and ownership is separate
- Common seal mayor may not exist
- Audit is mandatory
Sweat equity shares Vs ESOP
- sweat equity : issued to the employees or directors as consideration for providing intellectual property rights or know-how or any value additions to the company
- ESOP : granted in the form of an option for the employees to purchase the shares at fair value
- Issue of share at a discount; section?
- Discount of issue of shares shows debit balance. Shown on assets side under the head?
- Issue of share at discount must be authorised by a resolution passed by the company in general meeting and duly sanctioned by?
- Conditions for issue?
- Section 53/79
- Miscellaneous expenditure
The account represents a fictitious asset and should be gradually written off by transfer to Profit and Loss Account although there is no legal compulsion. - Central government
- *one year elapsed since commencement.
*belong to already issued class of shares.
*issue within 2 months after date of sanction by court.
*resolution specifies max rate of discount.
Miscellaneous expenditure
incidental expenses which cannot be classified as manufacturing, selling, and administrative expenses. These expenses are not revenue in nature and hence shown in the asset side of the Balance Sheet and should be written off over a period of time.
Share capital suspense account?
temprorary a/c created, to transfer any receipts on shares issue or re-issue (in case of forefeiture) is case of a pending decision regarding that receipt.
Application money is received but balance sheet is prepared before allotment
the process by which an underwriter attempts to determine the price at which an initial public offering (IPO) will be offered./
For marketing a public offer of equity shares
Book building process
T/F
- Shareholder is agent?
- Same person is agent and creditor of company
- False
2. True
Right share Vs Bonus share
Right shares: issued on discounted price to the existing shareholders and they have option to agree or deny the offer.
Bonus shares : issued free of cost to the shareholders in a certain ratio, other than a dividend.
- Fully paid bonus shares
- Partly paid shares
- Partly paid up bonus shares
- shares that are distributed at no extra cost in the proportion of the investors holding in the company
- A partly paid share is a share in a company that is only partially paid compared to the full issue price. It means that the investor can buy partly paid shares without paying the total issue price.
However, the remaining amount for partly paid shares can be paid in instalments when the company makes calls. - when the bonus is applied in the partly-paid shares and converted into fully paid shares without calling out the uncalled amount through profit capitalization, it is called partly-paid up bonus shares
Reserves:
- Fully paid bonus
- Partly paid up bonus
- free reserves, securities premium account or capital redemption reserve account, dividend equalisation reserve.
- Except capital redemption reserve and securities premium
*The bonus shares shall not be issued in lieu of dividend.
*no issue shall me made within 12 months of any public or right issue.
*must be implemented within 6 months from approval.
*cannot be issued out of revaluation profit. (2013)
Can be out of revaluation (1956)
*not made unless partly paid are made fully paid up.
- Capital reserves
- Revenue reserves
- Free reserves
- Specific reserves
- from a profit of a capital nature such as profit on re-issue of forfeited shares or profit in case of an acquisition and mergers
- revenue profits such as general reserve, dividend equalisation reserve, depreciation reserve,
- no specific purpose for these reserves. Free reserves can be used by the company to declare dividends, to issue bonus shares, to write off accumulated losses and to write off share issue expenses.
- created for specific purposes.
case with dividend equalisation reserve which can be used only to maintain consistency of dividend.
- Buy back shares?
2. Sources for buy back shares?
- share repurchase, is when a company buys its own outstanding shares to reduce the number of shares available on the open market.
- Free reserves
Securities premium account
Proceeds of an earlier issue of shares or other specified securities
Debt/cash/cash flow from operations
*not allowed out of the proceeds of any earlier issue of the same kinds of shares
- Does EPS decrease and dilution occurs due to rights share? How?
- Why issue rights share?
- As a shareholder what can u do with rights issue?
- Purchase period?
- When is right share not offered to existing shareholders?
- Yes. Dilution occurs because arights offering spreads a company’s net profit over a larger number of shares. Thus, the company’s earnings per share, or EPS, decreases as the allocated earnings result in share dilution.
- *Pay debt when can not borrow money. (Financial trouble)
* Raise capital. - *subscribe in full
* ignore
* sell to someone else - 16 to 30 days (prorata allocation of additional shares at specific price)
- decided so in general meeting by special resolution.
* decided by ordinary resolution and approved by central government.
- decided so in general meeting by special resolution.
- OPC cannot carry?
- Paid up capital?
- Avg annual turnover of 3 years?
- Non banking financial investment activities.
- Not more than 50 lakhs
- Does not exceed 2 crores.
Statistical book of a company?
Who maintains it?
Record Books like an Inventory. Statutory Books are those which are necessary to observe legal formalities of a company including Registers.
- It is the duty of the Company Secretary to prepare and maintain the Statutory Books
Articles of association
specifies the rules®ulations for a company’s operations and defines the company’s purpose.
- transfer of shares(regulates)
- decide dividend to be distributed
- participating preference shares
- permits calls in advance
- interest on calls in advance
- charge interest on calls in arrear
- guidelines for calls during installments
- allows for forfeiture
Memorandum of Association
root document of the company, which contains all the basic details about the company’s incorporation.
- permits business to be carried out (objects clause)
- authorised capital (capital clause)
- limits liability in company limited by shares and by guarantee
- subscribed by shareholders
Prospectus
- terms&conditions
- purpose
- red herring / shelf / circular or document
Preliminary expenses written off
- securities premium reserve
* statement of p&l
Fixed assets as per AS 10
Property plant and equipment
Reissue is issue or sale of shares?
Selling of shares
Special resolution for esop specifies?
ESOP issued to?
- Number of shares
- Current market price/ consideration
- Class or classes of directors are employees to whom sweat equity are to be issued
*officers of company *employees *whole time directors
- Conditions for equity and preference shares?
- Penalty on delay in refunding application money?
- But back of shares?
- Section 43 (companies 2013)
- Section 73 (2)
- Section 68 (2013)
