1. Accounting For Share
capital
Types of share capital with Practical Problem
BY: MS. DIVYA RASTOGI
ASSISTANT PROFESSOR
GL BAJAJA INSTITUTE OF MANAGEMENT, GREATER NOIDA U.P

2. Topics To be Cover:
Share – Meaning
Share Capital Of Company
Types of Share Capital
Practical Problem

3. Share Capital Of a Company:
 Share: The capital of the Company is divided into a number of equal
parts. Each part is called Share.
 A Company may divide its capital into shares of Rs1, Rs2, Rs5, Rs10 Rs50
Rs100 or any suitable amount.
 Example: Total Capital required by company- Rs5,00,000 divided into
50,000 parts of Rs.10 each. Each part of Rs10 will be called share.
 Means Company has 50,000 shares of Rs10 each.
 A Company, being an artificial person, cannot generate its own capital
which has necessarily to be collected from several persons. These
persons are known as Shareholders and the amount contributed by
them is called Share Capital.
 The persons who contribute money through shares are called Shareholders.

4. Classes of Shares:

 As per Section 86 of The Companies Act, a Company can issue two types of
shares:
 Preferences Shares and
 Equity Shares (also called Ordinary Shares)
Preference
Shares
Equity
Shares

5. Preference Shares:
 According to Section 85 of The Companies Act, a Preference Share is
one, which carries the following two rights:
 They have the right to receive dividend at a fixed rate before any
dividend is paid on the equity shares.
 On the winding up of the company, they have the right to return of
capital before the capital is returned to equity shareholder.

6. Equity Shares:
 According to section 85 of The Companies Act, an equity share is a
share which is not a preference share. In other words, shares which do
not enjoy any preferential right in the payment of dividend or
repayment of capital, are termed as equity/ordinary shares.
 They do not have any fixed rate of dividend. It varies from year to
year depending upon the profitability position of the company. It may
not get any dividend if there is no profit or insufficient profit in any
year.
 At the time of winding up of company, capital of equity shareholder is
returned only if capital of preference shareholder is returned in full.
 Equity shareholder enjoy the voting right in general meeting of the
shareholder and they control the affairs of the company.
MOSTLY INVESTORS (80%) INVEST THEIR SURPLUS FUND IN EQUITY SHARES.

7. Categories Of Share Capital
Authorized Share Capital
Issued Capital Unissued Capital
Subscribed Capital Unsubscribed Capital
Called up Capital Uncalled up Capital
Unreserved Capital Reserved Capital
Paid up Capital Calls in arrears

8. Categories of Share Capital
1. Authorized Capital/Nominal/Registered capital: Authorized capital is the amount
of share capital which a company is authorized to issue by its Memorandum of
Association. The Company cannot raise more than the amount of capital as
specified in the Memorandum of Association.
 Depending upon its requirement, it may issue share capital but in any case, it
should not be more than the amount of authorized capital.
 Example: Authorized Capital- 5 crore
2. Issued Capital: It is that part of the authorized capital which is actually issued to
the public for subscription.
The authorized capital which is not offered for public subscription is known as
“Unissued Capital”. Unissued capital may be offered for public subscription at a
later date. Example- Issued Capital- 3 crore, Unissued Capital- 2 crore

9. 3. Subscribed Capital: It is that part of the issued capital which has
been actually subscribed by the public, i.e. applied for and allotted by
the company.
 The balance of issued share capital not subscribed for by the public
is called Unsubscribed Share Capital. The Subscribed share capital
of the company cannot exceeds its issued share capital.
 Example- Subscribed capital- 2 crore, Unsubscribed capital- 1 crore
4. Called up Capital: The portion of the subscribed share capital which
the shareholders are called upon to pay is termed as Called Up Capital
of the company. Company usually does not require to pay shareholder
in one lot, the full value of share.
 Shareholder is generally required to pay it in instalment. The
balance of subscribed capital which has not been called up
represents Uncalled Share Capital. The company may collect this
amount any time when it needs further funds.

10.  Example- If Company has subscribed share capital (Rs 10,00,000) of Rs
1,00,000 equity share of Rs 10 each, Rs 8 called up, then the called up share
capital will be Rs 8,00,000. (1,00,000*8)
 Uncalled Up Share Capital – Rs 2,00,000 (Rs 2*1,00,000)
5. Paid Up Capital: It is that portion of called up capital which has been
actually paid by the shareholders is called as paid up share capital and the
amount still due from the shareholder are called as Call In Arrear.
Example- If some member fail to pay Rs 10,000 out of called up share capital of
Rs 8,00,000.
Paid Capital shall be- Rs 7,90,000
Calls In Arrear- Rs 10,000
6. Reserve capital: As per section 99 of Company Act, A Company may resolve
by special resolution that a portion of uncalled share capital shall not be called
up, except in the event of winding up of the company. Such Uncalled amount is
called “Reserve Capital” of the company. It is available only for the creditors
on winding up of the company.

11. Let us take the following example and show how the share capital will be shown in the
balance sheet.
Sunrise Company ltd. New Delhi, has registered its capital as Rs 40,00,000 divided into
4,00,000 shares of Rs. 10 each. The company offered to the public for subscription of
2,00,000 shares of Rs. 10 each, as Rs 2 on application, Rs 3 on allotment, Rs 3 on first call
and the balance on final call. The company received applications for 2,50,000 shares. The
company finalized the allotment on 2,00,000 shares and rejected applications for 50,000
shares. The company did not make the final call. The company received all the amount
except on 2,000 shares where call money has not been received. The above amounts will be
shown in the Notes to Accounts of the balance sheet of Sunrise Company Ltd. As follows:
Notes to Accounts
Share Capital (Rs.)
Authorized or Registered or Nominal Capital:
4,00,000 Shares of Rs. 10 each 40,00,000
Issued Capital
2,00,000 shares of Rs. 10 each 20,00,000
Subscribed Capital
Subscribed but not fully paid up
2,00,000 Shares of Rs. 10 each. Rs. 8 called up 16,00,000
Less: Calls in Arrears (6,000) 15,94,000