NCERT MOST IMPORTANT QUESTIONS CLASS – 12 | ACCOUNTANCY PART 1 IMPORTANT QUESTIONS | CHAPTER – 1 | ACCOUNTING FOR A SHARE CAPITAL | EDUGROWN |

In This Post we are  providing Chapter- 1 ACCOUNTING FOR A SHARE CAPITAL NCERT MOST IMPORTANT QUESTIONS for Class 12 ACCOUNTANCY which will be beneficial for students. These solutions are updated according to 2021-22 syllabus. These MCQS  can be really helpful in the preparation of Board exams and will provide you with a brief knowledge of the chapter

NCERT MOST IMPORTANT QUESTIONS ON ACCOUNTING FOR A SHARE CAPITAL

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Illustration 1: S T L Global Ltd. was formed with a nominal Share Capital of Rs. 40,00,000 divided into 4,00,000 shares of Rs. 10 each. The Company offers 1,30,000 shares to the public payable Rs. 3 per share on Application, Rs. 3 per share on Allotment and the balance on First and Final Call. Applications were received for 1,20,000 shares. All money payable on allotment was duly received, except on 200 shares held by Y. First and Final Call was not made by the Company.
How would you show the relevant items in the Balance Sheet of STL Global Ltd.?
Solution 1:
Balance Sheet (Extract) of S T L Global Ltd. (Relevant Part only)
As at ________________

Particular	Notes. no	(Rs.)
Equity and Liabilities
Shareholder’s Funds:
(a) Share Capital	(1)	7,14,000
Assets
Current Assets:
Cash and Cash Equivalents (Cash at Bank)		7,14,000
Particular	Details	(Rs.)
(1) Share Capital
Authorised Capital :
4,00,000 Shares of Rs. 10 each		40,00,000
Issued Capital :
1,30,000 shares of Rs 10 each		13,00,000
Subscribed but not fully paid capital:
1,20,000 shares of Rs. 10 each Rs. 6 per share called – up	7,20,000
Less : calls in Arrears (200 shares x Rs. 3)	6,000
		7,14,000

Illustration 2: On 1st April, 2012, Janta Ltd. was formed with an authorized capital of 50,00,000 divided into 1,00,000 equity shares of 50 each. The company issued prospectus inviting application for 90,000 Shares. The issue price was payable as under:
On Applicant : Rs. 15
On Allotment : Rs. 20
On call : Balance amount
The issue was fully subscribed and the company allotted shares to all he applicants. The company did not make the call during the year.
Show the following :

1. Share capital in the Balance Sheet of the company as per revised schedule – VI, Part-I of the companies Act, 1956.
2. Also prepare Notes to Account’s for the same.

Solution :
Balance Sheet of Janta Ltd.
As at……………………. (As per schedule iii)

Particulars	Note. no	Amount Current Years	Amount Previous Years
Equity & liabilities  1. Shareholder’s funds (a) Share Capital	1.	31,50,000

Notes to Accounts

Particulars	(Rs.)
1. Share Capital
Authorised Capital
1,00,000 equity shares of Rs. 50 Each	50,00,000
Issued Capita;
90,000 equity shares of Rs. 50 Each	45,00,000
Subscribed capital
Subscribed but not fully paid
90,000 shares of Rs. 50 each Rs. 35 called up Rs.	31,50,000

Issue of Shares  Shares can be issued in two ways 1. for cash 2. for consideration other than cash Terms of Issue of Shares Shares can be issued in two ways. 1. Issue of shares at Par 2. Issue of shares at Premium

Issue of shares against Lump sum payment : When whole amount due on shares is payable in one instalment. The journal entries will be as follow:
Illustration 3 : Vaibhav Ltd. issued 1,00,000 shares of Rs. 10 each at per. The whole amount was payable with application. Pass the necessary journal entries in the books of company.
Solution:
Journal

Date	Particulars	L.F	Debit(Rs.)	Credit(Rs.)
	Bank A/c		10,00,000
	To Share Application and allotment A/c			10,00,000
	(Being the application money received on 1,00,000 shares at Rs. 10 per share)
	Share Application and allotment A/c Dr.		10,00,000
	To Share Capital A/c			10,00,000
	(Being the share allotted and transfer of application money an 1,00,000 shares to share capital account)

Illustration 4 : X Ltd. invited application for 10,000 shares of the value of Rs. 10 each. The amount is payable as Rs. 2 on application and Rs. 5 on allotment and balance on First and Final Call. The whole of the above issue was applied and cash duly received. Give Journal entries for the above transaction.

Date	Particulars	L.F	Debit(Rs.)	Credit(Rs.)
	Bank A/c     Dr.		20,000
	To share application A/c			20,000
	(Being the application money received on 10,000 shares at Rs. Per share)
	Share Application A/cv    Dr.		20,000
	To Share Capital A/c			20,000
	(Being the transfer of application money on 10,000 shares to share capital account).
	Share Allotment A/c      Dr.		50,000
	To Share Capital A/c			50,000
	(Being the amount due on 10,000 shares at Rs. 5 per Share)
	Bank A/c      Dr.		50,000
	To Share Allotment A/c			50,000
	(Being the receipt of Rs. 5 on 10,000 Shares)
	Shares first & final Call A/c     Dr.		30,000
	To Share Capital A/c			30,000
	(Being the amount due on 10,000 Shares at Rs. 3 per share)
	Bank A/c               Dr.		30,000
	To Share first & final all A/c			30,000
	(Being the receipt of Rs. 3 on 10,000 shares)

Illustration 5 : V Ltd. Issued 20,000 Equity shares of Rs. 10 each at a premium of Rs. 3 payable as follows:
On Application Rs. 4
On Allotment Rs. 5 (including Securities Premium Reserve)
On First Cell Rs. 2
On Final Call Rs. 2
All shares were duly subscribed and all money duly received. Pass necessary Journal Entries.
Solution :
In the Book of X Ltd.

Date	Particulars	L.F	Debit(Rs.)	Credit(Rs.)
	Bank A/c     Dr.		80,000
	To Equity Share Application A/c			80,000
	(Being the application money received on 20,000 Equity Shares at Rs. 4 per Equity Share)
	Equity Share Application Account    Dr.		80,000
	To Equity Share Capital Account			80,000
	(Being the transfer of application money on 20,000 Equity Shares of Equity Shares Capital Account)
	Equity Share Allotment Account    Dr.		1,00,000
	To Equity Share Capital Account			40,000
	To Securities Premium Reserve A/c			60,000
	(Being the amount due on 10,000 Equity Shares at Rs. 5 including Premium Rs. 3 Shares)
	Bank A/c		1,00,000
	To Equity Share allotment A/c			1,00,000
	(Being the receipt of Rs. 5 on 10,000 Equity Shares)
	Equity Share First Call A/c      Dr.		40,000
	To Equity Share Capital Account			40,000
	(Being the amount due on 20,000 Equity Shares at Rs. 2 Equity Shares)
	Bank A/c    Dr.		40,000
	To Equity Shares First Call A/c			40,000
	(Being the receipt of Rs. 2 on 20,000 Equity Shares)
	Equity Share Final Call A/c     Dr.		40,000
	To Equity Share Final Call A/c			40,000
	(being the receipt of Rs. 2 on 20,000 Equity Shares)
	Bank A/c    Dr.		40,000
	To Equity Shares First Call A/c			40,000
	(being the receipt of Rs. 2 on 20,000 Equity Shares)

Issue of shares at discount [Section 53] : A company cannot issue shares at discount other than sweat equity shares.
Shares Issue for Consideration Other than Cash
When a company purchases any fixed asset or business and makes the payment to the vendor in form of issue of shares in place of cash it is called the issue of shares for consideration other than cash.
Share can be issued at par, at premium.
Journal entries for issue of shares to vendors/consideration other than cash

Date	Particulars	L.F	Debit (Rs.)	Credit(Rs.)
	On Purchases of asset:		Amount of purchase price
	Sundry Asset Account       Dr.
	To vendor
	On Purchases of business:
	When purchases consideration is more then net asset
	Sundry Asset Account      Dr.			Agreed
	Goodwill Account (B/F)			Value
	To Sundry Liabilities		Consideration	Agreed  Value
	To Vendor		-Net assets	Purchase Consideration
	When purchase consideration is less than net asset
	Sundry Assets Account		Agreed Value	Agreed
	To Sundry Liabilities			Value
	To Vendor			Purchases
	To capital Reserve A/c (B/F)			Condsideration
				Difference
	On Issue of Shares (a) at Par
	Vendor       Dr.
	To share Capital
	(b) On Issue of Share At Premium
	Vendor      Dr.
	To Share Capital A/c
	To Securities Premium Reserve A/c

Note: When name of vendor is given then we write the name of vendor
Illustration 6 : Atlas Co. Ltd. Purchased a machine from HMT Co. for Rs 64,000. It was decided to pay Rs. 10,000 in cash and balance will be paid by issue of shares of Rs. 10 each,
Pass journal entries shares

1. Issued at par
2. Issued at premium of 20%

Solution :
Journal

Date	Particulars		Debit (Rs.)	Credit (Rs.)
	Machinery Account        Dr.		64,000
	To HMT Ltd.			54,000
	To Bank Account			10,000
	(being the machine purchased and Rs. 10,000 paid cash and balance to be paid by issue of shares)
	(a) When Shares are issued at par
	HMT Ltd. (Vendor)		54,000
	To Share Capital			54,000
	(Being 5,400 shares of Rs, 10 each at pa at HMT Ltd.)
	(b) when Shares are issued at premium
	HMT Ltd. (vendor)      Dr.		54,000
	To Share Capital Account			45,000
	To Share Premium Account			9,000
	(being 4 ,500 shares of issued to vendor at a premium of Rs. 2 per share 54,000/10+2 = 4500

Illustration 7 : A company issued 15,000 fully paid up equity shares of Rs. 100 each for the purchases of the following assets and liabilities from Gupta Bros.
Plant – Rs. 3,50,000; Stock Rs. 4,50,00;
Land and Building Rs. 6,00,000; Sundry Creditors Rs. 1,00,000
Pass necessary Journal entries.
Solution:
Journal

Date	Particulars	L.F	Debit (Rs.)	Credit(Rs.)
	Plant A/c    Dr.		3,50,000
	Land and Building A/c      Dr.		6,00,000
	Stock Account       Dr.		4,50,000
	Good will Account (b/f)     Dr.		2,00,000
	To Sundry Creditors A/c			1,00,000
	To Gupta Bros.			15,00,000
	(Being the purchase of Business)
	Gupta Bros.       Dr.		15,00,000
	To Equity Shares Capital Account			15,00,000
	(Being issue of 15,000 shares of Rs. 100 each as payment of business price)

Note : Calculation : Goodwill = Purchases consideration + Liabilities – assets = Rs. 15,00,000 + Rs. 1,00,000 = Rs, 14,00,000 Rs. 2,00,000.
Illustration 8 : A company purchased a running business from Mahesh for a sum of Rs.
1,50,000 payable as Rs. 1,20,000 in fully paid equity shares of Rs. 10 each and balance in cash. The assets and liabilities consisted of the following Plant and Machinery Rs. 40,000; Stock Rs. 50,000; Building Rs. 40,000; Cash Rs, 20,000 Sundry debtors Rs, 30,000; Sundry creditors Rs. 20,000
Pass necessary Journal entries.
Solution
Journal

Date	Particulars	L.F	Debit (Rs.)	Credit(Rs.)
	Plant and Machinery A/c     Dr.		40,000
	Building A/c      Dr.		40,000
	Sundry Debtors    Dr.		30,000
	Stock Account     Dr.		50,000
	Cash A/c		20,000
	To sundry Creditors A/c			20,000
	To Mahesh			1,50,000
	To Capital Reserve A/c			10,000
	(Being the purchase of Business)
	Mahesh		1,50,000
	To Equity Shares Capital A/c			1,20,000
	To Bank A/c			30,000
	(Being the payment made to Mahesh in form of Shares)

Note : Calculation; Net assets – liabilities = Rs. 1,800,000- Rs. 20,000 Rs. 1,60,000 Capital reserve = Net Asset – Purchase consideration = Rs. 1,60,000 – Rs. 1,50,000 = Rs. 10,000
Illustration 9 : Pass necessary journal entries for the following transactions in the Books of Rajan Ltd.

1. Rajan Ltd. purchased machinery of Rs. 7,20,000 from Kundan Ltd. The payment was made to Kundan Ltd. by issue of equity shares of Rs. 100 each at 20% Premium.
2. Rajan Ltd. purchased a running business from Vikas Ltd. for a sum of Rs. 2,50,000 payable as Rs. 2,20,000 in fully paid equity shares of Rs.10 each and balance by a bank draft. The assets and liabilities consisted of the following:
   Plant & Machinery Rs, 90,000; Buildings Rs, 90,000;
   Sundry Debtors Rs. 30,000; Stock Rs. 50,000; Cash Rs. 20,000;
   Sundry Creditors Rs. 20,000

Solution
Rajan Ltd.
Journal

Date	Particulars	L.F	Debit(Rs.)	Credit(Rs.)
(a)	Machinery A/c    Dr.		7,20,000
	To Kundan Ltd.			7,20,000
	(Machinery purchased from Kundan)
	Kundan Ltd.      Dr.		7,20,000
	To Equity Share Capital A/c			6,00,000
	To Securities premium A/c			1,20,000
	(6,000 Equity Shares of Rs. 100 each issued as purchase consideration)
(b)	Plant & Machinery A/c     Dr.		90,000
	Building A/c     Dr.		90,000
	Sundry Debtors A/c    Dr.		30,000
	Stock A/c      Dr.		50,000
	Cash A/c    Dr.		20,000
	To Sundry Creditors A/c			20,000
	To Vikas Ltd.			2,50,000
	To Capital Reserve A/c			10,000
	(Business Purchased)
	Vikas Ltd.   Dr.		2,50,000
	To Equity Share Capital A/c			2,20,000
	To bank A/c			30,000
	(Shares issued and draft given

Illustration 10 : Ram holding 10 shares of Rs. 10 each of which Rs. 2 on application Rs. 3 on allotment but could not pay Rs. 3 on first call. His shares were forfeited by the Directors. The Final call is not made as yet. Give Journal entries in the book of company.
Solution:
Journal

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
	Share Capital A/c (10×8)      Dr.		80
	To share First Call/calls in arrear A/c			30
	To Forfeited Shares A/c			50
	(Being 10 Shares forfeited for nonpayment of first call money)

Forfeiture of Shares Issued at Premium :

1. when the premium has been received;
2. When the premium has not been received.

Case 1: When the premium has been received : In such cases premium received will not be forfeited and will not record anywhere in the forfeiture journal entry.
Journal

Date	Particulars	L.F	Debit (Rs.)	Credit (Rs.)
	Shares Capital A/c       Dr.		Amount Called
	To various Calls/calls in arrear A/c		(Excluding Premium)	Unpaid Amt.
	To Forfeited Shares A/c			Amt. received (Excluding Premium)