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Share Capital

“A share is a share in the share capital of the company”. In other words, total capital of the company is divided into a number of small indivisible units of a fixed amount and each such unit is called share. The amount invested by the shareholders towards the face value of shares is collectively known as share capital.

 

Share capital of a Company is classified into the following categories:


Let us understand the above concepts with the help of an example:

 

Example: A Ltd issued 100 shares of ₹ 10 each to be subscribed by the public. Out of which 90 shares are subscribed. Company has called ₹ 6 on share so far including 2 on application and 4 on allotment. One shareholder holding 5 shares failed to pay the allotment money.

 

 

Answer:

 

Issued capital: It includes shares offered to the public for subscription, in the above example, company has issued 100 shares to public.

 

Hence issued capital = 100 x 10 = 1000.

 

 

Subscribed Capital: It is that part of issued capital which has been subscribed by the public.

 

 

Hence, subscribed capital = 90 x 10 = 900.

 

 

Called up capital: It refers to that part of subscribed capital on which calls are made by the company.

 

Called up capital: 90 x 6 = 540.

 

Paid up capital: It includes that part of called up capital which is paid by the subscribers. In other words

 

Paid up capital = Called up capital – Calls in arrears.

 

Hence, Paid up capital = 540 – (5x4) = 520.

 

Example: Balance Sheet abstract of A Ltd. As on 31-03-2014
 



It may be observed from the above abstract of the Balance Sheet that authorised and issued share capital are disclosed in the Balance Sheet but they are not considered for the total.

 

It is only the paid-up capital which is considered while totalling the liability side of the Balance Sheet.

Illustration 1

 

Identify the various categories of share capital in each of the following cases:

  1. A Ltd. was formed with a capital of ₹ 1,00,000 divided into shares of ₹ 10 each. A Ltd offered the entire shares and called up fully on application. The subscribers paid ₹ 1,00,000
  2. B Ltd was formed with a capital of ₹ 1,00,000 divided into shares of ₹ 10 each. It offered 90% shares and called up fully on application. The subscribers paid ₹ 90,000.
  3. C Ltd. was formed with a capital of ₹ 1,00,000 divided into share of ₹ 10 each. It offered 90% shares and called up fully on application. The subscribers paid ₹ 85000
  4. D Ltd. was formed with a capital of ₹ 100000 divided into shares of ₹ 10 each. It offered 90% shares and called up 60% on application. The subscribers paid ₹ 54000
  5. E Ltd. was formed with a capital of ₹ 100000 divided into shares of ₹ 10 each. It offered 90% shares called up 40% on application and 20% on allotment. The subscribers paid ₹ 34000 on application and ₹ 16900 on allotment

Solution:

 

Note: Share capital is credited only with face value of shares. Any sum received over and above the face value shall be credited to separate account called securities premium account.

 

Issued capital cannot exceed the authorised capital.





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