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प्रश्न
Long Answer Question
What do you mean by the term ‘share’? Discuss the type of shares, which can be issued under the Companies Act, 2013 as amended to date.
उत्तर
The total capital of a company is divided into equal units of small denomination termed as shares. The ownership of these shares is easily transferable, from one person to other, subject to certain conditions. The person who is contributing in the capital in the form of shares is known as shareholder. The ownership of a shareholder is limited to the value of the shares held by him/her.
Types of Shares
As per the Section 44 of the Company Act of 2013, there are two types of shares- Preference Shares and Equity Shares (also known as Ordinary Shares)
i) Preference Shares: Section 43 of the Company Act,2013 defines Preference Shares to be featured by the following rights:
a. Preference Shares entitle its holder the right to receive dividend at a fixed rate or fixed amount.
b. Preference Shares entitle its holder the preferential right to receive repayment of capital invested by them before their equity counterparts at the time of winding up of the company.
ii) Equity Shares: Equity Shareholders have a voting right and control the affairs of a company.
As per Section 43 of Companies Act 2013; equity share is a share that is not a preference share. It does not possess any preferential right of payment of dividend or repayment of capital. The rate of dividend is not fixed on equity shares and varies from year to year, depending upon the amount of profit available for distribution after paying dividend to the preference shareholders.
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संबंधित प्रश्न
The type of shareholders who can participate in the management of the company.
What is meant by a 'Share' ? Give any two differences between 'Preference Shares' and 'Equity Shares'.
Jain Motors Ltd. converted its 200, 8% debentures of Rs 100 each issued at a discount of 6% into equity shares of Rs 10 each, issued at a premium of 25%. Discount on issue of 8% debentures has not yet been written off.
Showing your working notes clearly pass necessary Journal Entries on conversion of 8% debentures into equity shares.
Jain Ltd. purchased Building for Rs 10,00,000 from Gupta Ltd. 10% of the payable amount was paid by a cheque drawn in favour of Gupta Ltd. The balance was paid by issue of Equity Shares of Rs 10 each at a discount of 10%.
Pass necessary Journal Entries in the books of Jain Ltd.
A person who purchases shares of a company is known as _______ of the company.
State, with reason, whether the following statement is True or False.
Preference shareholders do not enjoy normal voting rights.
Define Equity Shares and explain its features.
Write notes on Features of equity shares.
State, with reasons, whether the following statement is True or False :
Right shares are issued to the general public.
Write a letter to the debenture holder informing him/her about the conversion of debentures into equity shares.
Select the proper option from the option given below and rewrite the sentences:
If a share of 100 is issued at 110. It is said to be issued at ___________.
Write a word or term or phrase which can substitute each of the following statements:
The use of borrowed capital for financing a business firm.
What is equity share? Explain the feature of equity shares.
Equity shares are paid dividend at ____________ rate.
Name the shareholders who are real masters of the company.
Fully convertible debentures are converted into __________ shares on maturity.
The Adersh Control Device Ltd was registered with the authorised capital of Rs 3,00,000 divided into 30,000 shares of Rs 10 each, which were offered to the public. Amount payable as Rs 3 per share on application, Rs 4 per share on allotment and Rs 3 per share on first and final call. These share were fully subscribed and all money was dully received. Prepare journal and Cash Book.
A limited company offered for subscription of 1,00,000 equity shares of Rs 10 each at a premium of Rs 2 per share. 2,00,000. 10% Preference shares of Rs 10 each at par. The amount on share was payable as under :
|
|
Equity Shares |
Preference Shares |
|
On Application |
Rs 3 per share |
Rs 3 per share |
|
On Allotment |
Rs 5 per share |
Rs 4 per share |
|
|
(including a premium) |
|
|
On First Call |
Rs 4 per share |
Rs 3 per share |
All the shares were fully subscribed, called-up and paid. Record these transactions in the journal and cash book of the company:
Discuss the process for the allotment of shares of a company in case of over subscription.
Sangam Ltd. invited applications for 10,000 Equity Shares of ₹ 100 each issued at par. The amount was payable on application. The issue was oversubscribed by 2,000 shares and allotment was made on pro rata basis. Pass necessary Journal entries.
Bharat Ltd made the first call of ₹ 2 per share on its 1,00,000 Equity Shares on 1st March , 2006. Ashok, a shareholder, holding 800 shares paid the second and final call amount along with the first call money. The second and final call amount was ₹ 3 per share. Pass necessary journal entries for recording the above using the Calls-in Advance Account.
2,000 Equity Shares of ₹ 10 each were issued to Limited from whom assets of ₹ 25,000 were acquired .
Pass Journal entry.
'Amrit Dhara Ltd.' issued 800 Equity Shares of ₹ 100 each at a premium of 25% as fully paid-up in consideration of the purchase of plant and machinery of ₹ 1,00,000.
Pass entries in company's Journal.
Jain Ltd purchased machinery costing ₹ 10,00,000 from Ayer Ltd. 50% of the payment was made by cheque and for the remaining 50% , the company issued Equity Shares of ₹ 100 each at a premium of 25% . Pass necessary Journal entries in the books of Jain Ltd . for the above transaction.
Ankit Ltd. issued 20,000 equity shares of 10 each at a premium of ₹ 2 per share, payable as:
| On Application | : | ₹ 3 |
| On Allotment | : | ₹ 5 (including premium) |
| On First Call | : | ₹ 2 |
| On Second and Final Call | : | ₹ 2 |
Vijay was allotted 500 shares. Pass the necessary Journal entries relating to the forfeiture of shares in following cases.
| Case I | Vijay did not pay allotment money and his shares were immediately forfeited. |
| Case II | Vijay did not pay allotment and first call, his shares were forfeited after first call. |
| Case III | Vijay failed to pay first call and his shares were forfeited immediately. |
| Case IV | Vijay failed to pay both the calls and his shares were forfeited. |
State, with reason, whether the following statement is True or False.
Preference shareholders have normal voting rights.
Explain any three disadvantages of issuing equity shares, from the Company's point of view.
What is meant by participating preference shares?
Write any four features of equity shares.
Which type of shares is not convertible?
Equity share holders are ______.
On the basis of information given by Aradhana Ltd., prepare a Cash Flow Statement for the year ending 31st March 2021:
| Aradhana Ltd. Balance Sheet as on 31st March, 2021 | |||
| Particulars | Note No. | 31st March, 2020 | 31st March, 2021 |
| I. Equity and Liabilities | |||
| 1. Shareholder’s Funds | |||
| (a) Share Capital | 5,00,000 | 7,30,000 | |
| (b) Reserves and Surplus | 1 | 3,50,000 | 3,70,000 |
| 2. Non-current Liabilities | |||
| Long-term Borrowings | 2 | 4,00,000 | 2,00,000 |
| 3. Current Liabilities | |||
| (a) Trade Payables | 3 | 3,60,000 | 4,60,000 |
| (b) Short Term provisions | 4 | 3,25,000 | 3,20,000 |
| Total | 19,35,000 | 20,80,000 | |
| II. Assets | |||
| 1. Non-current Assets | |||
| (a)Fixed Assets | 5 | ||
| (i) Tangible Assets | 6 | 4,50,000 | 5,00,000 |
| (ii) Intangible Assets | 3,10,000 | 3,02,000 | |
| (b)Long-term Loans and Advances | 4,00,000 | 4,30,000 | |
| 2. Current Assets | |||
| (a) Inventories | 2,70,000 | 2,90,000 | |
| (b) Trade Receivables | 2,40,000 | 2,60,000 | |
| (c) Cash and Cash Equivalents | 2,65,000 | 2,98,000 | |
| Total | 19,35,000 | 20,80,000 | |
Note to Accounts
| Particulars | 31st March 2020 | 31st March 2021 |
| 1. Reserves and Surplus Statement of Profit and loss | 3,50,000 | 3,70,000 |
| 2. Long-term Borrowings 10% Debentures | 4,00,000 | 2,00,000 |
| 3. Trade Payables | ||
| Creditors | 2,40,000 | 2,60,000 |
| Bills Payable | 1,20,000 | 2,00,000 |
| 3,60,000 | 4,60,000 | |
| 4. Short-Term Provisions Provision for Tax | 3,25,000 | 3,20,000 |
| 5. Tangible Fixed Assets | ||
| Machinery | 5,50,000 | 6,60,000 |
| Less: Provision for Depreciation | 1,00,000 | 1,60,000 |
| 4,50,000 | 5,00,000 | |
| 6. Intangible Fixed Assets Patents | 3,10,000 | 3,02,000 |
Additional Information:
- Debentures were redeemed on 1st April,2020.
- Tax paid during the year ₹2,80,000.
When Equity Shares dominate the capital structure, the capital is considered as high geared.
What are preference shares?
Ms. Rubina, a first-time investor, does not understand the difference between securities with voting rights and securities without voting rights.
Give any five differences between the two types of securities to help her understand the difference.
Anjum is a first-time investor wanting to invest 10 lakhs in long term capital appreciation. She is willing to take risks in return for high growth.
Which type of security should she invest in? Suggest any four features of this type of security.
