WHAT IS H5N1 ISSUE OF SHARE FOR CASH?
WHAT IS H5N1 ISSUE OF SHARE FOR CASH?Issue of percentage at premium & Issue of shares at discount
Introduction
Generally, articulation stock companies create large scale of business; therefore, these companies postulate a huge amount of capital. Such requirement is fulfilled past times issuing percentage in addition to debentures to the public. After receiving the certification of incorporation, a articulation stock fellowship tin offering t o Earth for sshares nether unlike methods.
Methods of lawsuit of shares
Generally, a fellowship issued equity shares to the public. When the upper-case alphabetic lineament raised through ordinary shares is non sufficient, the fellowship tin every bit good lawsuit preference shares. These shares tin live on lawsuit either collecting the total per value of shares at the fourth dimension of lawsuit or collecting the per value inward unlike calls such every bit application, allotment, offset telephone telephone etc.
Generally, articulation stock companies create large scale of business; therefore, these companies postulate a huge amount of capital. Such requirement is fulfilled past times issuing percentage in addition to debentures to the public. After receiving the certification of incorporation, a articulation stock fellowship tin offering t o Earth for sshares nether unlike methods.
Methods of lawsuit of shares
Generally, a fellowship issued equity shares to the public. When the upper-case alphabetic lineament raised through ordinary shares is non sufficient, the fellowship tin every bit good lawsuit preference shares. These shares tin live on lawsuit either collecting the total per value of shares at the fourth dimension of lawsuit or collecting the per value inward unlike calls such every bit application, allotment, offset telephone telephone etc.
Shares re issued for cash. However, a fellowship an lawsuit shares for other than cash for the purpose of purchasing assets, purchasing business, motivating promotes in addition to paying underwriting commission.
Issue of equity percentage on lump total basis
When the shareholders are called to pay the total amount of shares t the fourth dimension of application, it is called the lawsuit of equity shares on lump total basis. Share may live on lawsuit at the pr or to a higher house the par value or below the par value.
Issue of shares at par
The value stated on a shares certificate is called par value or expression upward value. Each fellowship tin dry reason its ain par value similar Rs. 10, Rs 100 etc. when total per value of a percentage is collected at the fourth dimension of application; it is called lawsuit of shares on lump total basis. For example, if a percentage of Rs. 10 is issued at Rs. 10 in addition to the whole amount is collected with application, it is called lawsuit of percentage at par on lump total basis. The next entries are made itches situation;
Issue of percentage at premium
When a percentage is issued at a cost which is to a greater extent than than the par value, it is called lawsuit of percentage at premium. For example, if a percentage of Rs.10 is issued t Rs. 12, so it is called lawsuit of percentage at premium. Here Rs. 2 is the premium amount per share. The next entries are made is this situation.
Issue of shares at discount
When shares are issued at an amount which which is less than per value, it is said to live on lawsuit of shares at discount, if a percentage of Rs. 10 is issued at Rs. 9, it is said to get got been issued at a discount of Rs. 1. In the illustration of issued of shares at discount inward lump sum, the whole amount of a percentage afterwards discount i.e., Rs.9 is collected at the fourth dimension of application. In this situation, the next entries are made:
Issued of equity shares on installments
H5N1 articulation stock fellowship to a greater extent than ofttimes than non collects required upper-case alphabetic lineament for its trace of piece of occupation organisation from Earth past times issuing shares to them for cash. The amount of percentage upper-case alphabetic lineament tin live on collected either gradually inward tardily installments or inward lump sum.
The of import steps or the procedures of lawsuit of shares cash are:
1. Issue applications. In guild to heighten the upper-case alphabetic lineament past times issuing shares from the public, offset of all, world fellowship lawsuit invitation inward leading newspapers usually national dailies inside ninety days from the engagement of its registration. This invitation is made through a prospectus.
H5N1 prospect describes the profitability in addition to fiscal soundness of the fellowship to attract Earth for investment. It contains all the necessary data regarding the company, its management, in addition to the projection for which the coin is proposed to live on raised past times the lawsuit of shares.
2. Receiving applications. After reading the prospectus, all those persons who intend to buy shares, get got to create total upward the application from along with the coin mentioned inward the prospectus such is called 'application money', which is fixed past times the board of directors. It cannot live on less than 5% of the nominal value of the shares in addition to has to live on deposited inward a shareholder bank.
3. Allotment of shares. After the in conclusion for the receipt of application is over, the fellowship distributes shares alongside the application. Such distribution of shares is called 'allotment of alphabetic lineament of allocation informs the applications, to which shares are allotted, are issued 'letters of allotment'. The alphabetic lineament of allocation informs the application the number of issued of share
4. Full subscription. When applications are received for the shares offered past times the fellowship the lawsuit is called fully subscribed. In this situation, usually all the applicants are allotted shares inward full.
5. Under subscription. When the lawsuit is non fully subscription, it is called nether subscription. In this case, usually shares are allotted to all the application inward full. It is to live on noted that allocation tin live on made solely when the minimum subscription amount has been received.
6. Over subscription. When the fellowship receives application for to a greater extent than number of shares than issued past times the company, he lawsuit is said to live on oversubscribed. However, the fellowship cannot allot shares to a greater extent than than those offered for subscription. In this case, in that place are 3 possible ways of allotment.
• The applications for excess shares re rejected in addition to total allocation is made upward to the number of shares offered.
• all the applicants are allotted shares but on pro-rate basis.
• Some applications are accepted inward full, about are rejected in addition to about are allotted on proportionately basis.
7. Making calls. After allotting the shares in addition to receiving allocation money, the fellowship may need the ease amount of the percentage inward i or to a greater extent than installments. The installment are with the provision of the articles of association, telephone telephone letters are sent to the shareholders specifying the amount of the call, scream of banking concern the in conclusion engagement of payment of telephone telephone money.
Entries for lawsuit of shares bin installments
When the total values of shares are collected past times a fellowship is unlike installment every bit application, allocation in addition to calls, it is known every bit the issued no shares inward installments. The shares tin live on issued inward installments at per or premium or discount.
Issue of shares at par
Issue of shares at par agency t he lawsuit of shares at a cost to the expression upward value of the shares. It expression upward value of a percentage is collected inward ii or to a greater extent than installment, so it is called lawsuit of percentage at per inward installment. For example, if a percentage of Rs. 10 in addition to the amount is collected inward unlike installment, it is called issued of percentage at par inward installments. The unlike entries to live on passed for unlike installments are mentioned below:
1. On receipt of application money. In the illustration of lawsuit of shares inward installment, a fellowship receives application coin every bit offset installment along with application forms for shares. When a fellowship received application money, it passes receipt in addition to transfer entries every bit shown below:
2. On allocation of shares. After receiving application money, the companies allot shares to the application in addition to transfer their application coin to shares upper-case alphabetic lineament account. After allotting shares to the applicants, a fellowship sends 'letters of allotment' informing the number of shares allotted to the amount payable past times them every bit allocation coin i.e. the instant installment. After this, fellowship receives the instant installment i.e. allocation money.
3. On due in addition to receipt of calls money: the ease amount of a share, which is demander afterwards receiving in addition to allocation money, is called alls money. H5N1 fellowship may need such calls coin inward i or to a greater extent than installments. the installment are named every bit offset call, 'second call' in addition to so on in addition to in conclusion telephone telephone is called 'final call', i due in addition to on receipts of each telephone telephone money, ii mag entries are made. One entry is made for due of calls coin in addition to no her entry is made for receipt of such due telephone telephone money.
Issue of percentage at premium
When shares are lawsuit at a cost to a greater extent than than its expression upward value or nominal value, it is known s lawsuit of percentage t premium. If a percentage of Rs. 10 is issued at Rs 12, it is said to get got been issued at a premium of Rs. 2.
In the illustration of lawsuit of percentage inward installment, the amount of premium may live on collected either along with application or allocation or telephone telephone money. However, the premium is usually collected with allotment. Therefore, inward the absence of whatever information, the amount of premium is assumed to live on collected with allocation money.
1. Premium along with application money: the next ii entries are made, when amount of premium is received along with application money.
2. Premium along with allocation money. When amount of premium is collected along with allotments money, the next entries are made.
3. Premium along with calls money: when amount of premium is collected along with calls coin i.e. offset or instant or in conclusion telephone telephone money, i time to a greater extent than the next entries are made.
Treatment of lawsuit of shares inward cash mass in addition to balance sheet
H5N1 cash mass is used for recording cash receipts in addition to payment. hence, the amount received on trace of piece of occupation organisation human relationship of unlike percentage installments are debited in addition to cash payment for refund for excess application coin are credited. Finally, it is balanced to know the cash balance.
H5N1 ease sail is a contention of assets in addition to liabilities. In assets side, the cash ease in addition to discount on lawsuit of percentage are records. Similarly, the liability side includes the paid-up capital, percentage premium in addition to calls inward advance.
Issue of shares of discount
It is already been said that discount on lawsuit of shares is a upper-case alphabetic lineament loss in addition to should live on shown on assets side of the ease sail nether the heading 'miscellaneous expenditure'. In the illustration of lawsuit of shares inward installment, the amount of discount may live on collected either along with application or allocation or all money. However, the discount is usually collected with allotment. Therefore, inward the absence of whatever information, the amount of discount is assumed to live on collected with allocation money.
1. Discount with application money: the next ii entries are made, when amount of discount Is received along with application money:
2. Discount with allocation money: when amount of discount is collected along with allocation money, the next entries are made;
3. Discount with calls money: when amount of discount is collected along with calls coin i.e. offset or instant or in conclusion telephone telephone money, i time to a greater extent than the next entries are made;
Calls inward advance
Calls inward advance hateful uncalled installments received past times a fellowship inward advance from its shareholders. It is the amount of hereafter installments paid inward advance past times the shareholders. In other words, the amount received past times earlier calls are made is called calls is advance.
According to department 38 of Nepal fellowship act, 2063, a fellowship if permitted past times its articles of association may have uncalled amount of installment from shareholders on shares held past times them.
The coin received on calls inward advance is non a role of percentage capital; therefore, a separate trace of piece of occupation organisation human relationship is opened in addition to credited to that account, called 'calls inward advance a/c'. When calls croak due, it is adjusted accordingly; advance mightiness live on received nether unlike installments. The entries are every bit follows.
1. Advance received with allocation money. If the calls inward advance are received with allotment, the next ii entries are passed.
2. Advance received earlier in conclusion call: if the calls inward advance are received earlier in conclusion call, the next ii entries are passed.
Adjustment of calls inward advance
When the detail telephone telephone is made, related amount of calls in advance is deducted toward the payment of calls, inward this situation, calls inward advance trace of piece of occupation organisation human relationship is debited every bit shown below.
Calls inward arrears
Sometimes a shareholder falls to pay the amount due on allocation or calls either intentionally or unintentionally. Such unpaid amount is known every bit calls inward arrear or unpaid calls. In other words, whatever installment coin (either allocation or calls coin or both) due but non paid past times a shareholder inside a specified fourth dimension is called calls inward arrears. For example, a fellowship lawsuit 10, 0000 shares of Rs. 10 each in addition to payment is to live on made inward 3 installments every bit Rs. 2 on application, Rs. 3 on allocation in addition to ease Rs. v on offset call. If Mr. a belongings 200 shares fails to pay offset in addition to in conclusion telephone telephone coin inside a particular time, so such unpaid amount of offset in addition to in conclusion telephone telephone coin Rs. 1,000 is treated every bit calls inward arrears.
Accounting treatment of calls inward arrears
There are ii choice for the accounting handling of calls inward arrears;
Method I: without opening separate trace of piece of occupation organisation human relationship for calls inward arrears
Under this method, a telephone telephone inward arrears trace of piece of occupation organisation human relationship is non opened separately for the amount of calls inward arrears. When an installment becomes due, that installment trace of piece of occupation organisation human relationship is debited in addition to percentage upper-case alphabetic lineament trace of piece of occupation organisation human relationship is credited similarly, about other entry is made on receipt of actual amount of such installment live on debiting banking concern trace of piece of occupation organisation human relationship in addition to credit ding concerned installment account.
In this situation, the debit ease of such installment (i.e. allocation in addition to / or calls) trace of piece of occupation organisation human relationship represents the calls inward arrears, which is shown on the liabilities side of the ease sail past times deducting it from the called upward capital. For example, a fellowship called upward in conclusion telephone telephone coin @ Rs. 3 per percentage on 10, 000 shares in addition to received that called in conclusion telephone telephone coin solely on 9,000 shares. In this situation, the next entries are made for calls inward arrears without opening a separate trace of piece of occupation organisation human relationship for it.
Method II: opening separate trace of piece of occupation organisation human relationship for calls inward arrear
Under this method, a separate trace of piece of occupation organisation human relationship is opened for calls inward arrears. When the amount of whatever installment (i.e. allocation or call) coin is non received, it is debited to calls inward arrears trace of piece of occupation organisation human relationship in addition to created to concerned telephone telephone account. In this situation, calls inward arrear trace of piece of occupation organisation human relationship shows a debit ease equal to the total unpaid allocation or telephone telephone money, which is shown i time to a greater extent than every bit a deduction from called-up shares upper-case alphabetic lineament inward the ease sheet.
Minimum subscription of shares
The situation, when a fellowship may have application for at to the lowest degree 50% of its issued capital, is called minimum subscription of shares. In unproblematic word, minimum subscription refers to the amount which must live on raised past times the fellowship to reckon necessary conditions. The minimum fulfilled, the fellowship cannot brand the allocation of the shares. In the thought of directors, minimum subscription must live on sufficient for the next purposes:
i. For purposing necessary assets for the company.
ii. For paying the preliminary expenses.
iii. For paying loan if arranges for the to a higher house ii purpose.
iv. For working capital.
v. For whatever other purpose for the company.
Under subscription of shares
When the number of shares applied past times Earth is less than the number of percentage issued past times the fellowship for subscription, it is called nether subscription of shares. In unproblematic word, when a fellowship received application for less number of shares than the issued number of shares, it is a province of affairs of nether subscription of shares. For example, a fellowship offers 10, 0000 shares to Earth for subscription. But world subscription solely for 9000 shares in addition to it is called nether subscription of shares.
Generally, inward the illustration of nether subscription of shares the accounting entries are made on the reason of number of application received past times the fellowship but non the reason of minimum of shares issued.
Over subscription of shares
When a fellowship received to a greater extent than application for shares than its issued number of shares, such suction is called 'over subscription of shares'. In other words, when Earth apply for to a greater extent than shares inward a fellowship than those offered to them, it is called over subscription of shares. For example, a fellowship issues 5,000 shares of rs 10 each to Earth for subscription. But if it received application for 7,000 shares, so it is called the suit ion of over subscription of shares.
In the illustration of over subscription, a fellowship cannot allot shares to a greater extent than than that issued for subscription; it agency a fellowship cannot allot its shares to all application inward full. In the to a higher house example, fellowship cannot lawsuit to a greater extent than than 5,000 shares. Under such condition, the next 3 alternatives are founds to bargain with the suit ion:
Rejection of excess application
Under this alternative, fellowship allots shares upward to the issued of shares of shares in addition to rejects the excess applications. The application coin of the allotted application is transferred to percentage upper-case alphabetic lineament trace of piece of occupation organisation human relationship in addition to the rejected excess application coin Is refunded inward total with alphabetic lineament of regret's he next accounting entries are made inward this suit ion:
Pro-rate allotment
In the illustration of over subscription of shares, when a fellowship allots shares proportionally to all application, it is called pro-rate allocation of shares. For example, a fellowship lawsuit 50, 0000 shares to the public, for which it receives 1, 00,000 applications. If 50, 0000 shares are allotted to all the application, it is called pro-rota allocation of shares. The next mag entries are made for pro-rate allotment;
1. When excess application coin is adjusted on allocation in addition to subsequent calls.
Generally, the excess application coin is adjusted on allocation in addition to subsequent calls in addition to next entries are passed:
2. When excess application coin is adjusted on allocation on allocation in addition to ease refunded.
Semitic he excess application money, which is to a greater extent than than the coin due on allotment, is non adjusted on subsequent calls. In absence of whatever data regarding the usage of such money, the amount which is over the allocation coin is returned. In this situation, the next entries are passed:
Mixed allotment
When a combination of the to a higher house ii alternatives is adopted inward the illustration of over subscription it is called mixed allotment. Under this method, a fellowship tin allot total shares to some, a prorate allocation to other in addition to no allotment. To the rest. In this situation, application coin is returned to the unsuccessful applications, but excess application coin on pro-rate allocation is retained for utilizing the amount d usage on allocation in addition to subsequent calls.
Generally, the next contention is prepared to adjust excess application coin toward allocation in addition to subsequent calls every bit good every bit refund the rejected application coin every bit shown I the next table:
Interest on calls inward advance
The fellowship has to pay involvement on the amount of calls inward advance from the engagement of its receipt to the engagement of adjustment, if it is specified inward the articles of association. In this situation, the next entries are made.
Interest on calls inward arrear
The articles of association of a fellowship usually empower the directors to accuse involvement at a particular charge per unit of measurement on calls inward arrears from the engagement of actual payment in addition to to convey the amount of calls inward arrears. Generally, the next entries entries are made inward the illustration of involvement on calls inward arrears:
Issue of preference share
H5N1 articulation stock fellowship tin lawsuit preference shares similar ordinary shares. In other words, preferences shares tin live on issued either on lump total reason or on installment basis.
Review of theoretical concept
1. What create yous hateful past times lawsuit of shares at par, premium in addition to discount?
Issue of shares at par: if a percentage is issued at its expression upward value, it is called lawsuit at par. For example, a percentage of Rs. 10 is issued for Rs. 10.
Issue of percentage at premium: if a percentage is issued at a cost to a greater extent than that its expression upward value, it is called lawsuit at premium for example, a percentage of Rs. 10 is issued for Rs. 12.
Issued of shares at discount: if a percentage is issued at a cost less than its expression upward value, it is called lawsuit at discount. For example, a percentage of Rs. 10 is issued for Rs. 9.
2. Briefly explicate virtually calls inward arrear in addition to calls inward advance with example?
If a shareholder fails to pay whatever due amount, it is called calls inward arrears. For example, a shareholder belongings 100 shares fails o pay the allocation at Rs. v per percentage Rs. 500 becomes calls inward arrear for the company. It is deducted from called upward upper-case alphabetic lineament so every bit to detect the paid upward capital. H5N1 telephone telephone inward advance is the amount received past times a fellowship earlier the calls are made. inward other words, it is the amount of hereafter installment paid past times the shareholders inward advance. For example, a shareholder belongings 100 shares pays the telephone telephone coin at per shares on allocation Rs. 200 becomes calls inward advance. It is shown inward liability side of ease sheets.
3. Write virtually minimum in addition to nether subscription?
The situation, when a fellowship may have application for at to the lowest degree 50% of its capital, is called minimum subscription of shares. In unproblematic word, minimum subscription refers to the amount which must live on raised past times the fellowship to reckon necessary conditions. The status of nether subscription. If the minimum subscription is nt fulfilled, the fellowship cannot of the shares.
When the number of percentage applied past times Earth is less than the number of shares issued past times the fellowship for subscription, it is called nether subscription of shares, inward unproblematic word, when a fellowship received applications for less number of shares than the issued number of shares; it is a province of affairs of nether subscription of shares.
4. What create yous hateful past times over subscription of shares? Mention the unlike alternatives to bargain with this.When the number of application received exceeds the number of shares issued, it is called over subscription of shares. In this situation, a fellowship cannot allot the shares to all the application every bit demanded past times them. There are 3 choice to bargain with this:
a. Rejection of excess applications.
b. Pro-rate allotment
c. Mixed allotments
5. What create yous hateful past times 'pro-rata allotment'?
When the shares ae allocation I proportionate reason inward illustration of over subscription, it is called pro-rate allocation of shares. Under this, each charge per unit of measurement application gets shares inward proportionate to the number of shares applied past times them. For example, if fellowship allots 50, 000 shares to the application of 70, 000 shares. It is pro-rate allocation inward the proportion of 5:7.
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