Chapter 1 Company
A joint stock company, popularly known as a
company, is a voluntary association of persons formed the purpose of some
business for profit with common capital divided into transferrable shares of a
fixed face value.
According
to Company Act 2063, “Company refers to any company formed and registered under
this act.”
From the above definition, it is clear that
a company is a voluntary association of many persons created by law for the
purpose of carrying on some business with distinctive name and a common seal
having capital divided into shares, which are transferrable.
Company
is an association of many persons united for a common objective with perpectual
succession and a separate common seal.
·
Company collects its capital by issuing shares and
debentures.
·
It is a separate legal or artificial person.
1.
Separate legal or artificial person:
2.
Common seal:
3.
Perpectual life:
4.
Collection of capital through shares and debentures:
5.
Limited liability:
6.
Separate ownership and management
A. On
the basis of formation:
I.
Chartered company:
The companies which are incorporated under special charter
or proclamation issued by king or queen, is known as chartered company.
II.
Statutory company:
The companies which are formed or incorporated by a special
act of parliament, is known as statutory company.
III.
Registered company:
The companies which are formed by registration under the
company act of the state, is known as registered company.
These companies also can be further divided into private and
public company:
B. On
the basis of liability:
I.
Companies having limited liability:
II.
Companies having unlimited liability:
C.
On the basis of ownership:
D. On
the basis of domicile:
E.
On the basis of controll:
1.
Huge capital:
2.
Limited liability:
3.
Permanent existence:
4.
Transferability of shares:
5.
Democratic management:
Chapter 2 Accounting
for shares
Methods of raising
Capital in company:
1.
Through shares:
·
Equity shares
·
Preference shares
·
Right shares
2.
Through Debentures:
·
Redeemable debentures
·
Irredeemable debentures
·
Convertible debentures
·
Non-convertible debentures
Methods of making
journal entries of shares:
1)
Application step:
·
Received entry
·
Transfer entry
2)
Other step:
·
Due entry
·
Received entry
3)
Only in due entry:
Discount on issue…..Dr
Premium on issue….. Cr
4)
Only in received entry:
Calls in arrear ……Dr
Calls in arrear recovered ……Cr
Calls in advance …….Cr
Calls in advance expired …..Dr
|
Date
|
Particular
|
L/f
|
Dr
Amount
|
Cr
Amount
|
|
1.
|
Entry of Application:
i.
Bank a/c …Dr
To Share application a/c
(Being share application money received for …. Shares)
|
|
xxx
|
Xxx
|
|
|
ii.
Share Application a/c …Dr
To
share Capital a/c
To
share Allotment a/c
To
Bank a/c
(Being share application money transferred to share capital, share
allotment & excess money were refunded)
|
|
xxx
|
xxx
xxx
xxx
|
|
2.
|
Entry of Share Allotment:
iii.
Share Allotment a/c … Dr
Discount on issue of shares
a/c…Dr(If issue at discount)
To share Capital a/c
To
share premium a/c (if issue at premium)
(Being share allotment money due)
|
|
xxx
|
Xxx
|
|
|
iv.
Bank a/c …Dr
Calls in
arrear a/c ….Dr
To share allotment a/c
To Calls in advance a/c
(Being share allotment money received with premium & advance of …
shares except ….. shares.)
|
|
xxx
xxx
|
xxx
xxx
xxx
|
|
3.
|
Entry of Share First Call:
v.
Share first call a/c …Dr
To share
capital a/c
(Being share first call money due)
|
|
xxx
|
Xxx
|
|
|
vi.
Bank a/c …Dr
Calls in
arrear a/c …Dr
Calls in
advance a/c ….Dr
To share first call a/c
To calls in advance a/c
(Being share first call money received with advance of … shares and
except …. Shares.)
|
|
xxx
xxx
|
xxx
xxx
|
|
4.
|
Entry of Share Final Call:
vii.
Share final call a/c …Dr
To share capital a/c
(Being share final call money due)
|
|
xxx
|
Xxx
|
|
|
viii.
Bank a/c ….Dr
Calls in arrear a/c ….Dr
Calls in advance a/c ….Dr
To share final call a/c
(Being share final call money received except …. shares)
|
|
xxx
xxx
|
Xxx
|
The term ‘forfeit’ actually means taking away of property on
breach of a condition.
|
Date
|
Particular
|
L/F
|
Dr Amount
|
Cr Amount
|
|
|
Share Capital A/c……Dr
Share premium A/c….Dr
To share allotment
a/c
To share first call A/c
To share final call A/c
To discount on issue A/c
To forfeited shares A/c
(Being shares forfeited due to non-payment of allotment and call
money)
|
|
XXX
XXX
|
XXX
XXX
XXX
XXX
XXX
|
Alternatively, calls in arrear A/c can be credited for all
amounts
|
Date
|
Particular
|
L/F
|
Dr Amount
|
Cr Amount
|
|
|
Share capital A/c….Dr
Share premium A/c….Dr
To calls in arrear A/c
To discount on issue A/c
To forfeited shares A/c
(Being shares forfeited due to non-payment of allotment and call
money)
|
|
XXX
XXX
|
XXX
XXX
XXX
|
NOTE: SHARE PREMIUM IS INCLUDED IF AND ONLY IT IS NOT
RECEIVED. IF THE PREMIUM ON SUCH SHARES HAS ALREADY BEEN RECEIVED BY THE
COMPANY, IT CANNOT BE CANCELLED BECAUSE PREMIUM ONCE RECEIVED IN ITSELF A KIND
OF CAPITAL GAIN AND NEED NOT TO CONVERT INTO CAPITAL RESERVE.
Reissue of forfeited shares:
Journal entries in the book of company
|
Date
|
Particular
|
L/F
|
Dr Amount
|
Cr Amount
|
|
1.
2.
|
a) Re-issued
at Par:
Bank A/c….Dr
To share capital A/c
(Being forfeited shares re-issued at par)
Forfeited share A/c…Dr
To capital reserve A/c
(Being share forfeited money transferred to capital reserve)
|
|
|
|
|
|
b) Re-issued
at Premium:
Bank A/c….Dr
To share capital A/c
To share premium A/c
(Being forfeited shares re-issued at premium)
Forfeited share A/c…Dr
To capital reserve A/c
(Being share forfeited money transferred to capital reserve)
|
|
|
|
|
|
c) Re-issued
at discount:
Bank A/c….Dr
Discount on issue of share
A/c…..Dr
To share premium A/c
(Being forfeited shares re-issued at discount)
Forfeited share A/c…Dr
To capital reserve A/c
(Being share forfeited money transferred to capital reserve)
|
|
|
|
Gain on forfeiture= Cr. share forfeiture amount *NORS-Dr.
Share forfeiture amount
NOFS
Chapter 3 Accounting for
debentures
Issue entry
Discount … Dr
Premium ….. Cr
Redemption entry
Discount (Not considered)
Premium (Two times)
·
Loss on issue…..Dr
·
Redemption on premium…..Cr
At the time of redemption:
Issue entry:
Ignore both discount and premium
Redemption entry:
Consider both discount and premium
NOFS=Amount payable/ (par rate +premium rate+ discount rate)
Issue and redemption condition:
A. Issue
of debenture at par and:
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Bank a/c ….Dr
To debenture a/c
(Being issued debenture at par)
|
xxx
|
xxx
|
a) Redeemable
at par:
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Debenture a/c …..Dr
To debenture holder’s a/c
(Being amount due to debenture holders)
|
XXX
|
XXX
|
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Debenture holder’s a/c …..Dr
To bank a/c
(Being amount paid to debenture holders)
|
XXX
|
XXX
|
b) Redeemable
at discount:
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Debenture a/c …..Dr
To debenture holder’s a/c
To discount on redemption
of debentures a/c
(Being amount due to debenture holders)
|
XXX
|
XXX
|
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Debenture holder’s a/c …..Dr
To bank a/c
(Being amount paid to debenture holders)
|
XXX
|
XXX
|
c) Redeemable
at premium:
|
Date
|
Particular (issue
case)
|
Debit amount
|
Credit amount
|
|
|
Bank a/c …..Dr
Loss on issue a/c….Dr
To debenture a/c
To premium on redemption a/c
(Being issued
debenture at par and redeemable at premium)
|
XXX
XXX
|
XXX
XXX
|
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Debenture a/c …..Dr
premium on redemption a/c….Dr
To debenture holder’s a/c
(Being amount due to debenture holders)
|
XXX
|
XXX
|
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Debenture holder’s a/c …..Dr
To bank a/c
(Being amount paid to debenture holders)
|
XXX
|
XXX
|
B. Issue
of debenture at discount and,
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Bank a/c…..Dr
Discount on issue a/c….Dr
To debenture a/c
(Being issued debenture at discount and redeemable at par)
|
XXX
XXX
|
XXX
|
a) Redeemable
at par:
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Debenture a/c …..Dr
To debenture holder’s a/c
(Being amount due to debenture holders)
|
XXX
|
XXX
|
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Debenture holder’s a/c …..Dr
To bank a/c
(Being amount paid to debenture holders)
|
XXX
|
XXX
|
b) Redeemable
at discount:
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Debenture a/c …..Dr
To debenture holder’s a/c
To discount on redemption
of debentures a/c
(Being issued debenture at discount and redeemable at discount)
|
XXX
|
XXX
|
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Debenture holder’s a/c …..Dr
To bank a/c
(Being amount paid to debenture holders)
|
XXX
|
XXX
|
c) Redeemable
at premium:
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Bank a/c….Dr
Discount on issue a/c….Dr
Loss on issue a/c….Dr
To debenture a/c
To premium on redemption
a/c
(Being issued debenture at discount and redeemable at premium)
|
XXX
XXX
XXX
|
XXX
XXX
|
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Debenture a/c …..Dr
premium on redemption a/c….Dr
To debenture holder’s a/c
(Being amount due to debenture holders)
|
XXX
|
XXX
|
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Debenture holder’s a/c …..Dr
To bank a/c
(Being amount paid to debenture holders)
|
XXX
|
XXX
|
C.
Issue of debenture at premium and,
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Bank a/c …..Dr
To debenture a/c
To debenture premium a/c
(Being issued debenture at premium)
|
XXX
|
XXX
XXX
|
a) Redeemable
at par:
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Debenture a/c …..Dr
To debenture holder’s a/c
(Being amount due to debenture holders)
|
XXX
|
XXX
|
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Debenture holder’s a/c …..Dr
To bank a/c
(Being amount paid to debenture holders)
|
XXX
|
XXX
|
b) Redeemable
at discount:
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Debenture a/c …..Dr
To debenture holder’s a/c
To discount on redemption
of debentures a/c
(Being amount due to debenture holders)
|
XXX
|
XXX
|
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Debenture holder’s a/c …..Dr
To bank a/c
(Being amount paid to debenture holders)
|
XXX
|
XXX
|
c) Redeemable
at premium:
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Bank a/c….Dr
Loss on issue a/c….Dr
To debenture a/c
To premium on redemption
a/c
To premium on redemption
of debenture a/c
(Being issued debenture at premium and redeemable at premium)
|
XXX
XXX
XXX
|
XXX
XXX
|
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Debenture a/c …..Dr
Premium on redemption of debentures a/c..Dr
To debenture holder’s a/c
(Being amount due to debenture
holders)
|
XXX
|
XXX
|
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Debenture holder’s a/c …..Dr
To bank a/c
(Being amount paid to debenture holders)
|
XXX
|
XXX
|
Issue of debentures as a collateral security:
|
Date
|
Particular
|
Debit amount
|
Credit amount
|
|
|
Bank a/c …..Dr
To loan from ….a/c
(Being cash received from loan)
|
|
|
|
|
Debenture suspense a/c…..Dr
To debenture a/c
(Being issued debenture as a collateral security for a loan)
|
XXX
XXX
|
XXX
XXX
XXX
|
