Accounting for Share Capital, Kinds and Disclosure

In the world of business, share capital is an important concept. It represents the ownership people have in a company. This guide will help you understand shares, the different types of share capital for CS Exams , and the rules that govern them.

What Is Accounting for Share Capital?

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Understanding Shares and Share Capital

Kinds of Share Capital

Disclosure of Share Capital

Terms of Issuing Shares

• At Par: This means shares are sold at their original value.
• At Premium: Shares can be sold at a higher price than their original value.

• At Discount: Sometimes, shares are sold at a lower price than their original value.

Subscription, Calls-in-Advance, and Calls-in-Arrears

Other Important Aspects

• Issue of Shares for Consideration other than Cash: Sometimes shares are issued in exchange for things other than money.
• Forfeiture of Shares &  Re-issue of Forfeiture Shares  : If shareholders don't pay what they owe for shares, those shares can be taken back and sold again.
• Buy-back of Shares: Companies can buy back their own shares.
• Issue of bonus Shares [SECTION 63]: Sometimes companies give out bonus shares to their shareholders for free.
• Employee Stock Option Scheme: Employees might also get the chance to buy shares through special schemes.
• Issue of Right Shares: Companies can issue shares to specific people first, these are called rights shares.
• Redemption of Preference Shares: A company with shares can issue preference shares that can be redeemed within twenty years, as allowed by its articles. But it can't issue preference shares that are not redeemable.
• Capital Redemption Reserve Account: When using company profits to redeem preference shares, an equal amount is transferred to a reserve called Capital Redemption Reserve Account. The rules for reducing share capital apply to this reserve as if it were paid-up share capital.
• Underwriting of Shares: Shareholders can agree to sell their shares to someone else, who promises to buy them even if others don't want them.