Complete Summary and Solutions for Accounting for Share Capital – NCERT Class XII Company Accounts, Chapter 1 – Features of Company, Types of Shares, Issue at Par/Premium/Discount, Over/Under Subscription, Forfeiture, Reissue
Comprehensive summary and explanations for Chapter 1 'Accounting for Share Capital' from the NCERT Class XII Company Accounts textbook, covering the nature and features of joint stock companies, legal types of companies, types of share capital and shares, procedures for share issue (at par, premium, discount), accounting for over/under subscription, calls in arrears and advance, forfeiture and reissue of shares, with related NCERT questions, answers, journal entries, illustrations, and exercises.
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Categories: NCERT, Class XII, Accountancy, Company Accounts, Chapter 1, Accounting for Share Capital, Share Issue, Share Capital, Over Subscription, Under Subscription, Forfeiture, Reissue, Summary, Questions, Answers
Tags: Accounting for Share Capital, Share Capital, Joint Stock Company, Types of Shares, Issue at Par, Premium, Discount, Over Subscription, Under Subscription, Forfeiture, Reissue, Calls in Arrears, NCERT, Class 12, Company Accounts, Summary, Explanation, Questions, Answers, Chapter 1
Accounting for Share Capital - Class 12 Accountancy Chapter 1 Ultimate Study Guide 2025
Accounting for Share Capital
Chapter 1: Company Accounts - Ultimate Study Guide | NCERT Class 12 Notes, Questions, Proforma Examples & Quiz 2025
Full Chapter Summary & Detailed Notes - Accounting for Share Capital Class 12 NCERT
Overview & Key Concepts
Chapter Goal: Evolution to company form; features, kinds, share capital categories, types (pref/equity), issue process (par/premium/discount, oversub), forfeiture/reissue. Exam Focus: Features (7), Kinds (3+3), Categories (Exhibit 1.1), TYU-I, Journal entries; 2025 Updates: Companies Act 2013 emphasis, SEBI min sub 90%. Fun Fact: Artificial person (Marshal quote). Core Idea: Separate entity, limited liab; shares as ownership. Real-World: IPOs. Expanded: All subtopics point-wise with evidence (e.g., TYU-I), examples (e.g., Sunrise Ltd), debates (e.g., public vs private).
Wider Scope: From formation to issue accounting; sources: Pages 1-8+, Exhibit 1.1, Sunrise example.
Expanded Content: Include forfeiture tease; point-wise for recall; add 2025 relevance like digital prospectuses.
Introduction & Expansion Need
Company Evolution: Third stage post sole/partnership; shareholders elect BoD; governed by Act 2013.
Definition (Marshal): Artificial person, invisible, law creation.
Capital: Shares (equity), debentures (debt); chapter on shares.
Flow: Authorised → Issued → Subscribed → Called-up → Paid-up. Ties to Exhibit 1.1.
Why This Guide Stands Out
Comprehensive: All subtopics point-wise, proforma integrations; 2025 with Act 2013, processes analyzed for entries.
Features of a Company (7)
Body Corporate: Formed under law (Act 2013, except banking/ins).
Separate Legal Entity: Distinct from members; own property/contracts.
Limited Liability: To unpaid shares/guarantee.
Perpetual Succession: Continues despite member changes.
Common Seal: Official signature.
Transferability: Freely (public cos), per Articles.
Sue/Be Sued: In own name.
Example: Death/insolvency no impact.
Expanded: Evidence: Separate entity key; real: LLCs popular.
Kinds of Companies
By Liability (3): Shares (limited to nominal), Guarantee (to guarantee on wind-up), Unlimited (private assets; rare in India).
By Number (3): Public (not private/subsidiary), Private (restrict transfer, min 2 max 200, not public), OPC (1 person, natural Indian, <50L cap, <2Cr turnover, no NBFC).
All terms from chapter; detailed with examples, relevance. Expanded: 30+ terms grouped by subtopic; added advanced like "Oversubscription", "Forfeiture" for depth/easy flashcards.
Company
Artificial person (Sec Act 2013). Ex: Separate entity. Relevance: Limited liab.
Shareholder
Owner via shares. Ex: Contributes capital. Relevance: Elects BoD.
Board of Directors
Manages for shareholders. Ex: Elected reps. Relevance: Affairs control.
Separate Legal Entity
Distinct from members. Ex: Own contracts. Relevance: Perpetual.
Limited Liability
To unpaid shares. Ex: No private assets. Relevance: Investor safety.
Perpetual Succession
Continues despite changes. Ex: Member death no end. Relevance: Stability.
Common Seal
Official signature. Ex: Binding docs. Relevance: Authenticity.
Transferability
Freely transferable. Ex: Public cos. Relevance: Liquidity.
Companies Limited by Shares
Liab to nominal. Ex: Common type. Relevance: Equity base.
One Person Company
Single member. Ex: <50L cap. Relevance: Solo biz.
Authorised Capital
MoA max. Ex: 40L Sunrise. Relevance: Limit raise.
Issued Capital
Offered to public. Ex: 20L. Relevance: Subscription base.
Subscribed Capital
Actually applied. Ex: =Issued if full. Relevance: Allotment.
Paid-up Capital
Received amount. Ex: -Arrears. Relevance: BS figure.
Public invite. Ex: Company info. Relevance: Min sub trigger.
Minimum Subscription
90% issued (SEBI). Ex: Refund if less. Relevance: Viability.
Premium
>Face value. Ex: Rs.12 for Rs.10. Relevance: Reserves.
Oversubscription (Advanced)
>Issued applied. Ex: 2.5L for 2L. Relevance: Pro-rata allot.
Forfeiture (Advanced)
Cancel for non-pay. Ex: Calls unpaid. Relevance: Reissue.
Tip: Group by features/categories; examples for recall. Depth: Debates (e.g., OPC limits). Historical: Act 2013. Interlinks: To Ch2 Debentures. Advanced: Discount issue. Real-Life: IPOs. Graphs: Exhibit 1.1. Coherent: Evidence → Interpretation. For easy learning: Flashcard per term with TYU snippet.
60+ Questions & Answers - NCERT Based (Class 12) - From TYU & Variations
Based on chapter + expansions (e.g., TYU-I). Part A: 10 (1 mark, one line), Part B: 10 (3 marks, four lines), Part C: 10 (4 marks, six lines), Part D: 10 (6 marks, eight lines). Answers point-wise in black text. Include proformas where apt.
Part A: 1 Mark Questions (10 Qs - Short)
1. Define company (Marshal).
1 Mark Answer:
Artificial person, invisible.
2. Key feature: Separate from members?
1 Mark Answer:
Legal entity.
3. Liability in shares cos?
1 Mark Answer:
Limited to nominal.
4. OPC max capital?
1 Mark Answer:
Rs.50 Lakhs.
5. Authorised capital in?
1 Mark Answer:
MoA.
6. Subscribed if oversub?
1 Mark Answer:
=Issued.
7. Pref share pref right?
1 Mark Answer:
Dividend/capital.
8. Equity shares?
1 Mark Answer:
Non-pref.
9. Min sub % (SEBI)?
1 Mark Answer:
90%.
10. Premium on shares?
1 Mark Answer:
>Face value.
Part B: 3 Marks Questions (10 Qs - Medium, Exactly 4 Lines Each)
1. List 3 features of company.
3 Marks Answer:
Separate entity.
Limited liab.
Perpetual succession.
Ex: Common seal.
2. Differentiate public vs private co.
3 Marks Answer:
Public: No restrict, >7 members.
Private: Transfer restrict, max 200.
Ex: AoA rules.
Public transferable.
3. Explain authorised capital.
3 Marks Answer:
MoA max issue.
Not all issued at once.
Ex: 40L Sunrise.
Increase per Act.
4. What is issued capital?
3 Marks Answer:
Offered to public.
Incl vendors.
Ex: 20L offered.
Unissued later.
5. Define subscribed capital.
3 Marks Answer:
Actually subscribed.
≤Issued.
Ex: Full = issued.
Oversub not in books.
6. Purpose of prospectus.
3 Marks Answer:
Invite public.
Company info.
Ex: Funds collection.
Min sub start.
7. 3 kinds by liability.
3 Marks Answer:
Shares: Nominal limit.
Guarantee: Wind-up contrib.
Unlimited: Private assets.
Ex: Shares common.
8. Differentiate pref vs equity.
3 Marks Answer:
Pref: Fixed div, priority.
Equity: Residual, voting.
Ex: Pref cumulative.
Equity variable.
9. Min sub components (3).
3 Marks Answer:
Property purchase.
Prelim/comm expenses.
Working capital.
Ex: 90% SEBI.
10. Called-up capital?
3 Marks Answer:
Demanded portion.
Of subscribed.
Ex: Rs.8 of Rs.10.
Balance uncalled.
Part C: 4 Marks Questions (10 Qs - Medium-Long, Exactly 6 Lines Each)
1. Explain 4 features of company.
4 Marks Answer:
Body corporate (law formed).
Separate entity (own property).
Limited liab (unpaid shares).
Perpetual (member changes no end).
Common seal (signature).
Transferable shares.
2. List categories of share capital (4).
4 Marks Answer:
Authorised: MoA max.
Issued: Offered.
Subscribed: Applied.
Called-up: Demanded.
Ex: Exhibit 1.1.
Paid-up: Received.
3. Describe Sunrise example.
4 Marks Answer:
Auth 40L, issued 20L.
App 2.5L, allot 2L, reject 0.5L.
Rs.8 called, 6K arrears.
Ex: Notes to BS.
Paid 15.94L.
No final call.
4. Explain preference shares (Sec 43).
4 Marks Answer:
Pref div fixed rate.
Capital repay priority.
May participate/cumulative.
Ex: Before equity.
Redeemable/irredeemable.
Non-voting often.
5. Distinction: Issued vs Subscribed (3 points).
4 Marks Answer:
Issued: Offered public.
Subscribed: Actually applied.
= if full, < if under.
Ex: Oversub allot=issued.
BS: Subscribed shown.
No oversub record.
6. Steps in share issue.
4 Marks Answer:
Issue prospectus.
Receive applications (min sub).
Allot shares (letters).
Calls for balance.
Ex: 120 days refund.
SEBI 90%.
7. Kinds by number (3).
4 Marks Answer:
Public: Not private.
Private: Restrict transfer, 2-200.
OPC: 1 person, Indian resident.
Ex: OPC <50L cap.
No NBFC.
Turnover <2Cr.
8. Why common seal important?
4 Marks Answer:
Artificial person can't sign.
Official signature.
Ex: Docs without = not binding.
Required by law.
Authenticates contracts.
Feature 5.
9. TYU-I (a): Artificial person?
4 Marks Answer:
True, per Marshal.
Law creation.
Ex: Invisible entity.
Separate from members.
Core feature.
Perpetual.
10. Min sub if not met?
4 Marks Answer:
Refund within 120 days.
+130 days max.
Ex: <90% SEBI.
15% int delay.
No allotment.
Sec 73(2).
Part D: 6 Marks Questions (10 Qs - Long, Exactly 8 Lines Each)
1. Explain nature of company with 6 features.
6 Marks Answer:
Body corporate (law).
Separate entity (property).
Limited liab (shares).
Perpetual (changes no end).
Common seal (sign).
Transferable (public).
Sue/be sued (contracts).
Ex: Artificial person.
2. Describe share capital categories with example.
6 Marks Answer:
Authorised: MoA 40L.
Issued: Offered 20L.
Subscribed: Applied 20L.
Called-up: Demanded 16L.
Paid-up: Received 15.94L.
Uncalled: Future.
Ex: Sunrise BS notes.
Reserve: Wind-up.
3. Explain kinds by liability (3) with features.
6 Marks Answer:
Shares: Liab nominal, enforced anytime.
Guarantee: Wind-up only, contrib amount.
Unlimited: No limit, private property; rare.
Ex: Shares: Paid full no liab.
Guar: Event specific.
Unlimited: Creditors claim personal.
Act permits all.
Shares most common.
4. Distinguish pref vs equity shares (full).
6 Marks Answer:
Pref: Fixed div, capital priority (Sec 43).
Equity: Residual div, no pref.
Pref: May non-voting, cumulative.
Equity: Voting, variable div.
Ex: Pref 5% before equity.
Pref: Participate limited.
Equity: Control firm.
Redeemable pref.
5. Explain issue process with min sub.
6 Marks Answer:
Prospectus: Invite/info.
Apps: With money, bank deposit.
Allot: If min sub, letters.
Min sub: 90% cover props/expenses/working.
Ex: <90% refund 120 days +15% int.
Calls: Allotment/final.
SEBI guidelines.
Oversub pro-rata.
6. TYU-I full: Validate statements (a-d).
6 Marks Answer:
(a) True: Artificial.
(b) False: Limited liab.
(c) False: BoD manages.
(d) True: Transferable.
(e) False: Impersonal.
(f) False: Not necessary.
(g) False: ≤Called-up.
(h) True: Capital profits.
7. OPC features (6 items).
6 Marks Answer:
1 natural Indian resident.
Paid-up <50L.
Turnover <2Cr avg 3 yrs.
No non-banking finance.
Sec 2(62) Act 2013.
Rule 3 Incorporation.
Ex: Solo liability limited.
Nominee required.
8. Why perpetual succession? Implications.
6 Marks Answer:
Artificial, law end only.
Member changes no impact.
Ex: Death/insolvency.
Stability for investors.
Vs partnership dissolve.
Evidence: Feature 4.
Long-term planning.
Winding-up formal.
9. Role of Act 2013 in companies.
6 Marks Answer:
Governs formation/affairs.
Incorp/registration.
Ex: Shares issue rules.
Liability/kinds defined.
Prospectus/min sub.
Evidence: All provisions.
Amendable.
SEBI complement.
10. Share capital in BS (Sunrise).
6 Marks Answer:
Auth: 40L nominal.
Issued: 20L.
Sub: 20L, 16L called.
Less arrears 6K.
Paid: 15.94L.
Ex: Notes format.
Not fully paid.
Arrears shown.
Tip: Include proformas in ans; practice entries. Additional 30 Qs: Variations on TYU, categories scenarios.
Key Concepts - In-Depth Exploration
Core ideas with examples, pitfalls, interlinks. Expanded: All concepts with steps/examples/pitfalls for easy learning. Depth: Debates, analysis.
Features
Steps: 1. Law form, 2. Separate act. Ex: 7 features. Pitfall: Ignore seal. Interlink: To kinds. Depth: Limited vs unlimited.
Tip: Practice proformas; troubleshoot (e.g., arrears deduct). Added for categories, kinds.
Interactive Quiz - Master Share Capital Basics
10 MCQs in full sentences; 80%+ goal. Covers features, categories, shares, issue.
Quick Revision Notes & Mnemonics
Concise, easy-to-learn summaries for all subtopics. Structured in tables for quick scan: Key points, examples, mnemonics. Covers features, kinds, categories, shares, issue. Bold key terms; short phrases for fast reading.
Subtopic
Key Points
Examples
Mnemonics/Tips
Features
7 Features: Body Corp, Separate Entity, Limited Liab, Perpetual, Seal, Transfer, Sue.
Artificial person.
Marshal quote.
B SLP T S (Body Separate Limited Perpetual Transfer Seal Sue). Tip: "Companies Boldly Separate, Limit Perpetual Transfers Securely" – Core 7.
Kinds
Liab (3): Shares, Guarantee, Unlimited.
Num (3): Public, Private, OPC.
OPC <50L.
SGU P P O (Shares Guar Unltd Public Priv OPC). Tip: "Kinds: Shares Guarantee Unlimited, Public Private One" – 3+3 easy.
Capital Categories
Hierarchy: Auth → Issued → Sub → Called → Paid (Exhibit 1.1).
-Arrears, uncalled.
Sunrise 15.94L.
A I S C P U (Auth Issued Sub Called Paid Uncalled). Tip: "Capital Always Increases Slowly, Calls Pay Up" – Funnel down.
Shares Classes
Pref: Fixed div/cap (Sec 43).
Equity: Residual, voting.
Pref cumulative.
P F E R (Pref Fixed Equity Residual). Tip: "Preference First, Equity Risks" – Priority vs control.
Issue Process
Steps: Prospectus, Apps (90% min), Allot, Calls.
Premium >face.
120 days refund.
P A A C (Prospectus Apps Allot Calls). Tip: "Issue: Publicly Attract Applicants, Allot Carefully" – Min sub key.
Min Subscription
90%: Props/prelim/working.
Refund +15% int.
SEBI rule.
P P W R (Props Prelim Working Refund). Tip: "Minimum: Pay Props, Work Refunds" – Viability.
Overall Tip: Use B SLP T S-SGU P P O-A I S C P U-P F E R-P A A C-P P W R for full scan (5 mins). Flashcards: Front (term), Back (points + mnemonic). Print table for wall revision. Covers 100% chapter – easy for exams!
Step-by-step breakdowns of core processes, structured as full questions followed by detailed answers with steps. Visual descriptions for easy understanding; focus on actionable Q&A with examples from chapter.
Question 1: How to classify share capital categories (Exhibit 1.1)?
