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CLASS 12 ( COMMERCE )

BUSINESS STUDIES-1

CHAPTER 9-FINANCIAL MANAGEMENT

WORKSHEET 1

Q1. Fill in the blanks

(a) _______ is needed to run, to modernise and expand the business.

(b) Availability of adequate finance is crucial for the _____ and _________ of a business.

(c) ________ is concerned with the optimal procurement and usage of finance.

(d) The primary aim of functional management is to maximise _________.

(e) A long term investment decision is called ____.

(f) The _____, _____ and _______ are all affected by capital budgeting decision.

(g) Short term investment decision is also called _______.

(h) The risk of default on payment is called _______ risk.

(i) Tax deductibility makes ______ a cheaper source.

(j) The fund raising cost is called ________.

(k) A business having high fixed operating cost must _______ debt.

(l) The dividend in growth companies is usually ________.

(m) The objective of financial planning is to ensure that enough ________ are available at the

________ time and ______ are not raised.

(n) Short term financial plans are called ________.

(o) Financial planning helps avoid__________.

(p) Debt is cheaper but _________.

(q) When Return on investment is greater than rate of interest _______ is favourable.

(r) Two examples of current assets are _________ and _________.

Q2. Very short answers

(1) Which concept of financial management ensures that funds are not unnecessarily raised?

(2) Which financial decisions deals with how firms finance be used?

(3) Which financial decision deals with quantum of finance to be raised?

(4) Which financial decision affects the earning capacity due to huge amount of funds involved?

(5) Which concept indicates the proportion of debt in the overall capital?

(6) A company wants to expand to 3 more states. Identify the type of decision involved in financial

management

. (7)Why is capital budgeting decision important for any business?

(8) Which decision deals with the appropriation of profit?

(9) Which component of capital structure determines the overall financial risk?

(10) What is the term used to denote gap between placement of order and actual receipt of material

into finished goods?

Q3. Correct the given statement

(i) Financial Planning is concerned with optimal procurement and usage of finance.

(ii) Capital budgeting decision is a short term investment decision.

(iii) (iii) Cost of raising is higher in debt than in equity.

(iv) (iv) When return on investment is less than rate of interest debt is favourable?

(v) (v) If stock market is bearish, equity is favourable. (vi) Labour intensive organisation

requires more fixed capital.

(vi) (vii) More the competition, less is the requirement of working capital.

(vii) (viii) A good cash flow position gives rise to less distribution of dividend.

BUSINESS STUDIES-2

CHAPTER 9 FINANCIAL MANAGEMENT

WORKSHEET 2

Q1. Define financial management and explain the objective of financial management.

Q2. Define financial planning and explain its objective.

Q3. Explain importance of financial planning.

Q4. Explain factors affecting capital budgeting decisions.

Q5. Define fixed capital and explain factors affecting the requirement of fixed capital.

Q6. Explain why fixed capital decision is important for a firm.

Q7. Explain factors which help in determining the working requirements of a company.

Q8. Define dividend decision and explain factors affecting dividend decisions

Q11. Explain give factors affecting capital structure.

Q12. Radhika and Vani who young fashion designers are left their job with a famous fashion

designer chain to set-up a company ‘Fashionable Pvt. Ltd.’ they decided to run a boutique during the

day and coaching classes for entrance examination of National Institute of Fashion Designing in the

evening. For the coaching centre they hired the first floor of a nearby building. Their major expenses

was money spent on photocopying of notes for their. They thought of buying a photocopier knowing

fully that their scale of operations was not sufficient to make full use of the photocopier. In the

basement of the building of ‘Fashionate Pvt. Ltd.’ Praveen and Ramesh were carrying on a printing

and stationery business in the name of ‘Neo Prints Pvt. Ltd.’ Radhika approached Praveen with the

proposal to buy a photocopier jointly which could be used by both of them without making separate

investment, Praveen agreed to his. Identify the factor affecting fixed capital requirements of

‘Fashionate Pvt. Ltd.’

Q13. ‘A business that doesn’t grow dies’. Says Mr Shah,Marble the owner of Shah Marble Ltd. with

glorious 36 months of its grand success having a capital base of Rs.80 crores. Within a short span of

time, the company could generate cash flow which not only covered fixed cash payment obligations

but also create sufficient buffer. The company is on the growth path and a new breed of consumers

is eager to buy the Italian marble sold by Shah Marble Ltd. To meet the increasing demand, Mr Shah

decided to expand his business by acquiring a mine. This required an investment of Rs.120 crores. To

seek advice in this matter, he called his financial advisor Mr Seth who advised him about the

judicious mix of equity (40%) and Debt (60%). Mr Seth also suggested him to take loan from a

financial institution as the cost of raising funds from financial institutions is low. Though this will

increase the financial risk but will also raise the return to equity shareholders. He also apprised him

that issue of debt will not dilute the control of equity shareholders. At the same time, the interest on

loan is a tax deductible expense for computation of tax liability. After the deliberations with Mr Seth,

Mr Shah decided to raise funds from a financial institution. (i) Identify and explain the concept of

Financial Management as advised by Mr Seth in the above situation. (ii) State the four factors

affecting the concept as identified in part (a) above which have been discussed between Mr Shah

and Mr Seth.

Q14. ‘Abhishek Ltd.’ is manufacturing cotton clothes. It has been consistently earning good profits

for many years. This year too, it has been able to generate enough profits. There is availability of

enough cash in the company and good prospects for growth in future. It is a well managed

organisation and believes is quality, equal employment opportunities and good remuneration

practices. It has many shareholders who prefer to receive a regular income from their investments.

It has taken a loan of Rs.50 lakhs from ICICI Bank and is bound by certain restrictions on the payment

of dividend according to the terms of loan agreement. The above discussion about the company

leads to various factors which decide how much of the profits should be retained and how much has

to be distributed by the company. Quoting the lines from the above discussion identify and explain

any four such factors.

ECONOMICS:

SANT NIRANKARI PUBLIC SCHOOL CHAPTER 1. – INTRODUCTION OF MACROECONOMICS

WORKSHEET 1 Q.1. Define Macroeconomics. Q.2. Study of problem of unemployment in India is considered a microeconomic study (true/false). Q.3. Economics agents includes : (a) producers (b) consumers (c) govt. (d) all of the above Q.4. Give two examples of macroeconomics studies.

CHAPTER 2. MONEY WORKSHEET 2

Q.1. When the govt. prints & circulates more currency in the economic system, it may : (a) bring down the general price level (b) push up the general price level (c) increase the supply of goods in the economy (d) none of the above. Q.2. Demand deposits created by commercial bank are called ………………….. (a) Bank money (b) money (c) time deposits (d) high powered money Q.3. Demand deposits include …………………………… (a) saving account and fixed deposits (b) saving account & current account deposits (c) current account and fixed deposits (d) all of the above Q.4. ………………….. are called legal tender : (a) demand deposits (b) time deposits (c) currency and notes (d) inter-bank deposits Q.5. Currency issued by the central bank is called : (a) fiat money (b) high-powered money (c) legal tenders (d) all of the above Q.6. Define high powered money. Q.7. Cash reserves of the commercial bank with RBI are not part of Money Supply (true/false). Q.8. What are time/term deposits? Q.9. Explain the term ‘Liquidity’. Q.10. ...…… is the only institution which can issue currency notes. However, coins are issued by ………… .

ENGLISH

CLASS 12- ENGLISH(CORE) ASSIGNMENTS (2020-21)

Assignment no – 1 ( First Week)

Poem -1 My Mother at Sixty-six

1. What is the kind of pain and ache that the poet feels? 2. Why are the young trees described as ‘sprinting’? 3. Why has the poet brought in the image of the merry

children ‘spilling out of their homes’? 4. Why has the mother been compared to the ‘late winter’s

moon’? 5. What do the parting words of the poet and her smile signify

?

Chapter – 1 The Last Lesson (Flamingo)

1. What was Franz expected to be prepared with for school that day ?

2. What did Franz notice that was unusual about the school that day?

3. What had been put up on the bulletin board? 4. What changes did the order from Berlin cause in school that

day? 5. How did Franz’s feelings about M.Hamel and school change?

CLASS 12- ENGLISH(CORE) ASSIGNMENTS (2020-21)

Assignment no – 2 ( Second Week)

Poem 2- An Elementary Classroom in a Slum

1. What do you think is the colour of ‘sour cream’? Why do you think the poet has used this expression to describe the classroom walls?

2. What has possibly weighed-down the tall girl’s head? 3. What is the stunted boy reciting? 4. Who is sitting at the back of the dim class ? 5. Who is the unlucky heir’and What has he inherited ? 6. The poet says’and yet for these children, these windows, not

this map ,theirworld.Which world do these children belong to ? Which world is inaccessible to them ?

7. What does the poet Stephen Spender wish for the children of slum?

Chapter – 1 The Third level (Vistas)

1. Do you think that the third level was a medium of escape for Charley? Why?

2. What do you infer from Sam’s letter to Charley ? 3. What happened when Charley went to the Grand Central

Station with the old style currency bills? 4. Describe briefly the scene at the third level of Grand Central as

seen (or seemed to be seen) by Charley. 5. What do you know a first-day cover?

ENTREPRENEURSHIP:

UNIT 6: RESOURCE MOBILIZATION

TRUE OR FALSE

State whether the following statements are True or False.

1. Equity Share capital is a permanent source of finance for a company.

2. There is a charge over assets on the issue of Equity Shares.

3. Retained Profit is the best source of Equity Financing for a new company.

4. Equity shareholders do not get the right to participate in the management of the

Company.

5. When a company is winding up, the capital investment of a preference shareholder is

returned after returning the capital invested by the Equity shareholder.

6. Venture Capitalists are investors who invest in new companies having high potential.

7. Small businesses resort to venture capitalists when they cannot persuade banks to lend

money to them.

8. Entrepreneurs have to only pay back the amount of funds borrowed under debt financing.

9. The maximum time period for which an entrepreneur can raise public deposit is 36

months.

10. A bank charges interest for discounting a trading bill.

11. Trade credit can be give for the purchase of supplies for a period of 200 days.

12. An industrial unit investing 6 crores in plant and machinery is known as a Small Scale

Industry.

13. Commerce deals with the production of goods.

14. A bank provides overdraft facilities on a saving bank account.

15. An Export oriented unit sells 50 percent of its output to a parent unit.

16. Resource is an economic activity or productive factor acquired to accomplish an activity.

17. Intangible resource covers a wide range of operational resources concerned with the

physical capability of an enterprise.

18. Organizations productivity is directly proportional to the quality and quantity of its

human resource.

19. Correct selection of personnel entirely depends upon the intuition of an entrepreneur.

20. Medium finance is required for meeting the working capital requirement of an

organisation.

21. Sources of generating finance are the first step an entrepreneur makes while assessing the

financial resources.

22. An entrepreneur can opt for long term finance for conducting research work.

23. An entrepreneur can command and sustain a higher margin with the association to a

strong brand.

24. Fixed capital decision is an irrevocable decision.

25. Managerial staff is the real group which converts the raw material into finished goods.

26. Fixed capital requirement is more when the firm deals in single type product range.

27. An entrepreneur employs more working capital during boom period.

28. Mr. A. who trades in readymade garments requires more working capital.

29. Mr. C sells goods on credit so he will have a larger requirement of working capital.

30. When the turnover rate of a firm is high more working capital will be required.

31. Human resource and knowledge are the only basic factors that act as Business resources

for an Enterprise.

32. A resource mobilization plan must follow closely, the vision, mission and goals of the

organization.

33. Physical resources are those that are naturally available for an Enterprise.

34. A job is carried out when work to be done is divided and grouped into packages.

35. Trained technical manpower is the brain box of the Enterprise.

36. Administrative manpower contributes to production directly along with assisting services

in the maintenance of the Enterprise.

37. Medium term finance is required to meet out the expansion or diversification plans of an

organization.

38. Collateral security is the prerequisite of releasing the loans from the banks for an

organization.

39. Fixed capital is not easy to withdraw for an entrepreneur.

40. Working capital forms the basis for income generation capacity of an Enterprise.

41. The more diversified products are manufactured by an enterprise, the more fixed capital

requirement is needed. 42. Working capital requirements are more during the depression period. 43. If the time gap between commencement and end of manufacturing process is more,

then more working capital is required. 44. Capital structure includes all the long term funds consisting of share capital, debentures,

bonds, loans and reserves. 45. Ramesh who is into weaving of Kota sarees, requires more of working capital.

Answers:

1. True, 2 False, 3 False, 4 False, 5 False, 6 True, 7 True, 8 False, 9 True, 10 False, 11

True, 12 False, 13 False, 14 False, 15 False, 16 True, 17 False, 18 True, 19 False, 20

False, 21 False, 22 True, 23 True, 24 True, 25 False, 26 False, 27 True, 28 False, 29 True,

30 False, 31 False, 32 True, 33 False, 34 True, 35 False, 36 False, 37 False, 38 False, 39

True, 40 False, 41 True, 42 False, 43 True, 44 True, 45 True

MATCH THE COLUMNS

1. Match the following terms to their correct source of finance A. Retained Profits I. Personal Financing

B. Deposits from Dealers II. Venture Capital

III. Equity Capital

2. Match the following features to any one or more suitable source of finance

A. No Charge over assets I. Debentures

B. Control over management by voting rights II. Preference Shares

III. Retained Earnings

IV. Equity Shares

3. Match the sources of finance in Side X to the correct terms in side Y. Side X Side Y

A. Demand Loans I. To avail this facility the customer should have

a

B. Overdraft current account.

C. Loans and Advances II. Loans are provided against security of

Fixed

Deposits Receipts

III. Bank encashes the customer’s bill

before they

become due

IV. Finance is given against the security

of certain

assets.

4. Match the following types of industry to its correct feature: A. Small Scale Industry I. Sell 50 percent of their output to a parent unit

B. Micro Business II. Investment in plant and machinery is up to 5

lakhs

C. Auxiliary Small Unit. III. Investment in plant and machinery is up to

25 lakhs

IV. Investment in plant and machinery is up to 5

crores

5. Match the following source of finance to its correct sub types A. Internal Funds I. Sale of old assets

B. External Funds II. Leasing rather than buying

III. Reducing Inventory

6. Match the following Debt financing instrument to their correct security deposit requirement A. Overdraft I. Certain Assets

B. Cash Credit II. Customer’s Personal Security

C. Demand Loans III. Bonds and other security

D. Loans and Advances IV. Fixed Deposits Receipts

7. Match the following by identifying the features of capital employed in a company.

A. Fixed capital I. It carries a high risk. B. Working capital. II. Forms the basis of income generation

III. Required for regular and uninterrupted operations of a firm

8. Match the following by identifying the resources with its features.

A. Material I. Conduct research work B. Intangible II. Size of unit and its installed capacity

III. Brands

9. Match the following human resource to its correct utilization.

A. Managerial staff I. Required for machinery selection B. Trained technical staff II. Converts raw material to finished goods

III. Framing the policies

10. Match the following resources with its proper example.

A. Physical resource I. Finance manager B. Human resource II. Roti making machine

III. Goodwill of a firm

11. Match the following Financial Resource with its types.

A. Owners funds I. Issue of debentures B. borrowed funds II. Seed money III. Fixed deposit

12. Match the following identifying the types of corporate securities:

A. Fixed yield bearing securities I. Bank loans B. Variable yield bearing securities II. Debentures III. Equity shares

13. Match the following types of human resource with the given categories:

A. Managerial Manpower I. CA B. Professional Manpower II. Skilled labour

III. Financial manager

14. Match the following types of human resource with the type of employment in a small

scale trading organization:

A. Sales Manager I. Permanent B. Lawyer II. Lease Basis

III. Per hour basis

15. Match the following on the basis of requirement of finance:

A. Medium term I. To buy the raw materials B. Long Term II. To meet modernization

requirements III. To conduct research work

16. Match the following type of intangible assets with its examples:

A. Brand I. Patent rights B. Intellectual Property II. Strong credit rating

III. Reliance Industries Ltd. IV. Location of the business

17. Categorize the industries to the volume of capital invested

A. Small scale I. Investment in plant and machinery is more than rupees 5 crores but less than rupees 10 crores

B. Medium scale II. Investment in plant and machinery does not exceed 5 crores

III. Investment in plant and machinery is more than 10 crores

18. Match the following identifying the sources of raising debt

A. Demand loan I. Loans extended for fixed period of time

J. Term loan II. Loans extended against security of fixed deposit receipts

III Deposit savings for a period not exceeding 36 months

19. Match the following identifying the sources of fund raising

A. Seed capital I. Priority in payment of dividend B. Equity share capital II. Company is under no obligation to

pay principal amount or dividend III. Initial basic capital

20. Match the following on the basis on source of finance

A. Venture Capitalist I. Early stage financing

b. Angel Investors II. Leveraged buyout financing

III. Development financing

Answers: 1. A – III, B – I 2. A and B – IV 3. A –II, B – I, C

– IV

4. A – IV, B – III, C – I 5. A – I, II and III 6. A -II, B -III, C-

IVand D –I

7. A-II; B-III 8. A-II B-III 9. A-III; B-I

10. A-II; B- III 11. A-II; B-I 12. A – II, B - III

13. A – III, B – I 14. A – I, B – III 15. A – II, B – III

16. A – III, B – I 17. A-II B-I 18. A-II B-I

19. A-III B-II 20. A – III, B – I

FILL IN THE BLANKS

1. A/An ___________ holder is given voting power to control the management of the

company.

2. ‘Ploughing Back of Profits’ is also termed as ___________.

3. A relatively small amount of funds needed to finance feasibility studies is termed as

____________.

4. An asset is used as _______ to obtain debt financing.

5. An overdraft is given on a _________ account.

6. A portion of the tax payer’s money given by the government to help and encourage

enterprise is called __________.

7. A credit period of ________ days is extended on trade credit for the purchases of

supplies.

8. Under Cash Credit interest is charged on the _________ amount withdrawn.

9. Fixed Deposit Receipts can be used as security to obtain ________ loan.

10. An Ancillary Small Unit supplies not less than ________ percent of its output to the

parent unit.

11. An Industry that runs with the full or partial help of the members of a family is known as

a ________ industry.

12. The sale of accounts receivables to a bank or finance company is known as

____________.

13. A Debenture carries a ________ rate of return.

14. The process of getting resource form resource provider to implement organisations work

to achieve goals is known as_________________.

15. Framing policies and objectives and goals are the work of ______________staff.

16. A period where finance is required for more than one year but less than five years is

called ___________.

17. The assets mortgaged with the institutions for the sanction of loan is called __________.

18. ___________ factor is the key commercial rights protected by patents and trademarks.

19. Financial planning’s two major areas of financial decision making are (a) Funds

requirement. (b)______________.

20. _____________is that part of the total capital of an enterprise which is invested in fixed

assets.

21. That part of capital which is needed for financing of current requirement of capital is

known as___________.

22. The total amount of long term funds received by a business from its shareholders and

creditors is known as ___________.

23. This decision making by the entrepreneur, well in advance regarding the future financial

aspects of an enterprise is known as ________.

24. An economic or productive factor required to accomplish an activity, achieve the desired

outcome is referred as _________________.

25. An entrepreneur must manage the resources efficiently and effectively as they are always

_________________ with reference to their demand.

26. Physical resources are those that are made by ___________ through his abilities and

skills.

27. The foremost concern for the entrepreneur is to assess the ____________ where the

Enterprise is going to be established.

28. The most important assets that a firm must have and that management must be most

concerned with, are the _______________ assets of the Enterprise.

29. The type of personnel required to fill the vacant position demands a careful planning,

persistence and__________________.

30. The brain box of the Enterprise is _______________ staff.

31. Finance is the _____________ to the process of production.

32. Single type of product range required__________ fixed capital in comparison to

diversified product range.

33. In labour intensive industries,_______________ working capital will be required than in

the highly mechanized .

34. When the entrepreneur sells goods on credit, he requires ______________working capital than the ones selling goods against cash.

35. Preference shares and debentures are ________________ yield bearing securities. 36. A customary source of personal financing wherein members form a club or committee is

known as _____________

37. An alternative form of equity financing for small enterprises is _____________

38. Retained profits are a technique wherein all _____________ of company are not

distributed amongst _____________ as dividend.

39. Borrowing funds from the private __________ is one of the oldest practices of availing finance.

40. Start up financing is involved in developing selling some ______ products to determine if commercial sales are feasible.

Answers:

1. Equity Share 2. Retained Profits 3. Seed Capital

4. Collateral 5. Current 6. Grants

7. 180 8. Actual 9. Demand

10. 50 11. Cottage 12. Factoring

13. Fixed 14. Resource mobilization. 15. Managerial

staff.

16. Medium term finance. 17. Collateral security. 18. Intellectual

property.

19. Financing decisions. 20.Fixed capital 21. Working

capital.

22. Capitalization. 23. Financial planning. 24. Resource

25. Scarce 26. Humans 27. Place

28. Human 29. Control 30. Managerial

31. Lubricator 32. Less 33. Large

34. More 35. Fixed 36. Chit funds

37. Venture capital finance 38. Profits; shareholders 39. Money

Lenders

40. Initial

MULTIPLE CHOICE QUESTIONS (MCQ)

1. Which of the following is not a source of raising debt a. Cash Credit b. Factoring

c. Retained Earnings d. Public Deposit

2. ‘Chit Fund’ comes under which source of financing. a. Equity Financing b. Personal Financing

c. Venture Capital Financing d. Debt Financing

3. Under which source of debt financing can a customer withdraw the amount as and when he requires. a. Public Deposit b. Demand Loans

c. Factoring d. Cash Credit

4. ‘Ploughing back of profits’ is also known as a. Retained Capital b. Equity Capital

c. Preference Share Capital d. Seed Capital

5. A source of Finance that dilutes the control of the owner on the management of the company. a. Preference Shares b. Equity Shares

c. Retained Earnings d. Debentures

6. It is the oldest practice of availing finance a. Loans from banks b. money lenders

c. Factoring d. Overdraft

7. Identify the resources made by human through his abilities and skills.

(a) Physical resource (b) financial resource

( c) Material resource (d) intangible resource.

8. Which human resource do not contribute directly to production but provides assistance?

(a) Managerial staff (b) administrative manpower.

(b) Trained technical staff (d) labourer

9. The following is not a capital structure preferred by a new company.

(a) Equity shares only (b) both equity and preference shares.

(b) Equity and debentures (d) retained earnings.

10. Following is not the characteristic of a fixed capital.

(a) Irrevocable decision (b) investment more than 5 years.

(b) Income generation capacity (d) Effortless withdrawal

11. Identify which source of funds is owners’ fund.

(a) Issue of debentures (b) loan from financial institution.

(b) Money lenders (d) seed money.

12. The most basic resource, for any enterprise is:

a) expertise b) capital

c) information d) energy

13. Which of these physical resources are not required by an organization:

a) Raw material b) Land and building

c) Goodwill d) Machinery

14. The advantages of selecting correct human resources for the firm are

a) Reduces inefficiencies b) saves cost of production

c) reduces labour turnover ratio d) modernization of the organization

15. This category is like the brain box of the Enterprise

a) Trained technical manager b) Administrative manpower

c) Non managerial staff d) Managerial staff

16. Long term finance is not required

a) To meet modernization plans b) To conduct fixed assets

c) To procure fixed assets d) To meet out diversification plans

17. A small scale industry unit can be known as ancillary small industrial unit if it supplies:

a) Not less than 30% of its production b) Not less than 50% of its production

c) Not less than 40% of its production d) Not less than 80% of its production

18. Ploughing back of profits is also known as:

a) Retained capital b) Equity capital

b) Seed capital d) Debenture

19. The basic initial capital which is like start-up capital of the enterprise.

a) Equity capital b) Seed Capital

c) Retained Earning d) Chit Fund

20. Business Resources cannot be grouped under which category.

a) Material b) Finance

c) Human d) Logistics

Answers:

1(c), 2(b), 3(d), 4(a), 5(b), 6(b), 7(a), 8(b), 9(d), 10(d), 11(d), 12(b), 13(c), 14.(d), 15(d),

16(a) 17 (b), 18 (a), 19(b), 20(d)

PICTORIAL QUESTIONS

Q1. Identify the source of finance from the pictures given below

Q2. Identify the source of finance

Q3. Identify the source of Finance

Q4. Identify the source of finance

Q5. Identify the business resource required for a business from the picture given below

Q6. Identify the business resource required for a business from the picture given below

Q7. Identify the factors affecting the fixed capital requirement under the

following conditions, also state who will require more fixed capital.

(a) Iron and steel company Housekeeping Services

(b) Iron and steel company Iron and steel company

(c)

Q8. Identify the category the following personnels would belong to if employed by a

company.

(a) (b) (c)

Q9. Identify the term period for which finance is required by an organisation for the

following cases:

(a) (b)

Answers:

1. Grant

2. Angel Investors

3. Venture Capitalists

4. Chit Fund

5. Human

6. Finance

7. a) Nature of Business b) Scale of operation c) Product Range

8. a) Non – Management Staff b) Professional Staff c) Management Staff

9. a) Long term finance b) Short term finance

ACCOUNTS:

SHARES ARE ISSUED

To Public for Cash To Vendor(s) for Other than Cash

On purchase of asset(s) On purchase of

running business

Before we start with the accounting treatment for issue of shares to public for cash, we should

make ourselves

aware that the Issue Price (either par or premium) of a share can be called in lumpsum

(pronounced as lum-sum,

‘p’ silent) or instalments. This can be understood by the following:

SHARES ARE ISSUED TO PUBLIC FOR CASH AND THE ISSUE PRICE

IS CALLED IN

Lumpsum Instalments

Allotment

Second Call

Application First Call

Under lumpsum, the full issue price is called by the company in one instalment only

and that is known as

‘Application’ money.

Under Instalments, the full issue price is called by the company in instalments and

these instalments are

‘Application’; ‘Allotment’; ‘First Call’; ‘Second Call’ and so on.

Points to be Noted:

The amount of money paid with various instalments represents the contribution to

share capital and should

ultimately be credited to ‘Share Capital Account’.

It must be noted that the application money should be at least 5% of the face value of

the share.

After receipt of minimum subscription and completion of certain legal formalities

related to allotment,

the directors of the company proceed to make the allotment of shares.

The amount called by company at the time of making allotment is called ‘Allotment

Money’.

Once allotment is made, the amount of application money received has to be

transferred to ‘Share Capital

Account’.

Calls play a vital role in making shares fully paid-up and for realising the full amount

of shares from the

shareholders.

The directors have the authority to ask for the remaining amount (if not fully called

till allotment) on

shares as and when they decide about the same.

There is a probability that the timing of the payment of calls by the shareholders is

determined at the time

of share issue itself and given in the prospectus.

The amount on any call should not exceed 25% of the face value of shares.

There must be an interval of at least one month between the making of two calls

unless otherwise provided

by the articles of association of the company.

A minimum of 14 days’ notice is given to the shareholders to pay the amount of any

call.

The words ‘and Final’ will also be added to the last call. For e.g.,

if the remaining balance after allotment is called by company in one call only,

it is to be termed as

the ’First and Final Call’.

if the remaining balance after allotment is called by company in two calls, i.e.,

the second call is the

lastcall it is to be termed as ‘Second and Final Call’.

The procedure for accounting for the issue of both equity and preference shares is the

same. So, to

differentiate between the two,it is mandatory that the words 'Equity’ and ‘Preference’

is prefixed to each

and every instalment.

ACCOUNTING TREATMENT FOR ISSUE OF SHARES AT PAR TO PUBLIC FOR

CASH

Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)

20XX

[Shares applied x Rate

of Application]

Bank A/c Dr.

To Equity Share Application A/c

XXX

XXX

(Being application money received for …….. equity

shares @ Rs………….. per share)

[Shares allotted x Rate

of Application]

Equity Share Application A/c Dr.

To Equity Share Capital A/c

(Being application money on ………. equity shares

transferred to Share Capital)

XXX

XXX


of Allotment]

Equity Share Allotment A/c Dr.


(Being allotment money due on ………. equity shares

@ Rs….. per share)

XXX

XXX

[Shares paid x Rate of

Allotment]

[Shares unpaid x Rate

of Allotment]

Bank A/c Dr.

Calls-in-Arrears A/c Dr.

To Equity Share Allotment A/c

(Being allotment money received on ……. equity

shares @ Rs…per share with the exception of ……..

shares)

XXX

XXX

XXX


of First Call]

Equity Share First Call A/c Dr.


(Being first call money due on ………. equity shares @

Rs….. per share)

XXX

XXX


First Call]


of First Call]

Bank A/c Dr.


To Equity Share First Call A/c

(Being first call money received on …….. equity shares

@ Rs…. per share with the exception of …….. shares )

XXX

XXX

XXX


of Second and Final

Call]

Equity Share Second and Final Call A/c Dr.


(Being second and final call money due on ……….

equity shares @ Rs….. per share)

XXX


Second and Final

Call]


of Second and Final

Call]

Bank A/c Dr.


To Equity Share Second and Final Call A/c

(Being second and final call money received on ……..

equity shares @ Rs…. per share with the exception of

…….. shares )

XXX

XXX

XXX

This process will go on until full issue price of a share has been called by the company. There

is an exception in

case if a company willingly has kept a portion of face value as reserve. This portion of face

value is called

as Reserve Capital.

NOTE: FOR BETTER UNDERSTANDING, WE SHOULD KNOW CATEGORIES

OF SHARE CAPITAL

OF A COMPANY THAT WILL BE DISCUSSED IN PART III.

SOME SOLVED ILLUSTRATIONS

Q 1. Roxy Ltd. offered 100 equity shares of Rs.10 each at par for public subscription.

Applications were

received for: (a) 90 shares (b) 100 shares

Pass the necessary journal entries for each of the above cases.

Sol. (a) 90 shares

Here, we can see that a company had offered 100 equity shares for subscription

whereas applications

were received for 90 equity shares which is less than the number of equity shares

offered. So, such a

case is called as case of ‘UNDER-SUBSCRIPTION’.

Moreover, since issue price of Rs.100 has not been called in instalments

therefore, the issue price has

been called in lumpsum (discussed earlier).

ACCOUNTING TREATMENT WILL BE AS FOLLOWS:

in the books of Roxy Ltd.

JOURNAL


20XX

[90 x10] Bank A/c Dr.


(Being application money received for 90 equity shares @

Rs.10 per share)

900

900

[90 x 10]



(Being application money on 90 equity shares transferred to

Share Capital)

900

900

(b) 100 shares

Here, we can see that a company had offered 100 equity shares for subscription and

applications

were received for 100 equity shares which is equal to the number of equity shares

offered. So, such a

case is called as case of ‘FULL-SUBSCRIPTION’.




ACCOUNTING TREATMENNT WILL BE AS FOLLOWS:


JOURNAL


20XX

[100 x 10] Bank A/c Dr.


(Being application money received for 100 equity shares @ Rs.10

per share)

1,000

1,000

[100 x 10]




Share Capital)

1,000

1,000

DO IT YOURSELF

Q 2. Moxy Ltd. offered 400 equity shares of Rs.20 each at par for public subscription.

Applications were

received for:

(a) 380 shares (b) 400 shares


Q 3. Boss Ltd. offered 1,000 equity shares of Rs.100 each at par for public subscription.

Public had applied for:

(a) 700 shares (b) 1,000 shares


Q 4. Abhi Ltd. offered 100 equity shares of Rs.100 each at parpayable as Rs.25 on

application, Rs.25 on

allotment and balance in two equal instalments of Rs.25 each for public subscription.

Applications were

received for: (a) 95 shares (b) 100 shares.


Sol. In this case, we can observe that the company has called issue price (Rs.100) in

instalments. These

instalments are Application (Rs.25) and Allotment (Rs.25). The total of these two

instalments is equal to

Rs.50 only which is less than the amount of issue price (Rs.100). So, there are two

possibilities regarding the

remaining amount

Either company has kept Rs.50 as Reserve Capital OR balance can be called in

further instalments.

Here, the question has also clarified that the balance will be called in two equal

instalments so, it means that

the two next instalments will be ‘First Call’ and ‘Second Call’.


(a) 95 shares

in the books of Abhi Ltd.

JOURNAL


20XX

[95 x 25] Bank A/c Dr.


(Being application money received for 95 equity shares @ Rs.25 per

share)

2,375

2,375

[95 x 25]



(Being application money on 95 equity shares transferred to Share

Capital)

2,375

2,375

[95 x 25] Equity Share Allotment A/c Dr.


(Being allotment money due on 95 equity shares @ Rs.25 per share)

2,375

2,375

[95 x 25]

Bank A/c Dr.


(Being allotment money received on 95equity shares @ Rs.25 per

share)

2,375

2,375

[95 x 25] Equity Share First Call A/c Dr.


(Being first call money due on 95 equity shares @ Rs.25 per share)

2,375

2,375



(Being first call money received on 95 equity shares @ Rs.25per

share)

2,375

2,375

[95 x 25] Equity Share Second and Final Call A/c Dr.


(Being second and final call money due on 95 equity shares @ Rs.25

per share)

2,375

2,375



(Being second and final call money received on 95 equity shares @

Rs.25 per share)

2,375

2,375

(b) 100 shares


JOURNAL


20XX

[100 x 25] Bank A/c Dr.



per share)

2,500

2,500

[100 x 25] Equity Share Application A/c Dr.



Capital)

2,500

2,500



(Being allotment money due on 100 equity shares @ Rs.25 per

share)

2,500

2,500

[100 x 25] Bank A/c Dr.


(Being allotment money received on 100 equity shares @ Rs.25 per

2,500

2,500

share)




2,500

2,500

[100 x 25] Bank A/c Dr.



share)

2,500

2,500



(Being second and final call money due on 100 equity shares @

Rs.25 per share)

2,500

2,500

[100 x 25] Bank A/c Dr.



Rs.25 per share)

2,500

2,500

DO IT YOURSELF

Q 5. Mauj Ltd. offered 400 equity shares of Rs.20 each at par for public subscription. The

issue price was

payable as Rs.3 on application, Rs.5 on allotment and the balance in three equal

instalments.

Applications were received for:



Q 6. Bruno Ltd. offered 1,000 equity shares of Rs.100 each at par payable as Rs.25 on


allotment and the balance on call. Public had applied for:



Q 7. Ajax Ltd. offered 1,500 equity shares of Rs.100 each at par payable as Rs.25 on


allotment and the balance as and when required / later on. Public had applied for:



NOTE: In Q 7., after allotment money for the balance amount the term ‘as and when

required’ or

‘later on’ has been used. In such a case, no entry will be passed for that balance

as we don’t know

how this amount will be called. It may be called in one call only or may be called

in two instalments

or may be called in three instalments. So, entry cannot be passed.

ALL THE ABOVE QUESTIONS STATED ‘ISSUE OF SHARES AT PAR’ AND THE

ISSUE PRICE WAS

CALLED EITHER IN LUMPSUM OR INSTALMENTS.

NOW, WE WILL START WITH ‘ISSUE OF SHARES AT PREMIUM’ AND THE ISSSUE

PRICE WILL BE

CALLED EITHER IN LUMPSUM OR INSTALMENTS. THEORY OF PREMIUM HAS

ALREADY BEEN

DISCUSSED ABOVE. WHENEVER SHARES ARE ISSUED AT PREMIUM, THE AMOUNT

OF PREEMIUM IS

TRANSFERRED TO A SEPARATE ACCOUNT called as ‘SECURITIES PREMIUM

RESERVE ACCOUNT’.

Point to be Noted:

The amount of premium can be called with any of the instalments or a small fraction /

portion of the

premium can be called at every instalment.

If a question states issue of shares at premium but there is no information given

regarding at what instalment

the amount of premium is to be paid, it is assumed to be payable at the time of

allotment.

Since the amount of premium is over and above capital, so it is a capital profit and

as per rule increase in

Profit is to be credited. Hence, Securities Premium Reserve Account will be

credited without taking into

consideration the instalment at which it has been called.

In entries where Bank Account has been debited, there will be no treatment for

Securities Premium i.e.,

in such entries, we won’t observe the term ‘Securities Premium Reserve Account’.

The term ‘Securities Premium Reserve Account’ will be shown under the title

‘EQUITY AND

LIABILITIES’ of the company’s balance sheet under the head ‘Reserves and

Surplus’.

‘Securities Premium Reserve’ can be used for the following five only purposes:

o To purchase of its own shares (i.e., buy – back of shares).

o To pay premium on the redemption of preference shares or debentures of the

company.

o To write off preliminary expenses of the company.

o To issue fully paid bonus shares to the extent not exceeding un-issued share

capital of the company.

o To write off the expenses of, or commission paid, or discount allowed on any

securities of the

Company.

Bonus Shares- Bonus Shares are shares distributed by a company to its current

shareholders as fully

paid shares free of charge out of company’s retained earnings or securities premium

reserve account. A bonus issue is usually based upon the number of shares that

shareholders already own.

Preliminary Expenses- Preliminary Expenses are the expenses incurred prior to the

incorporation

of a company.

Buy-back of Shares- When a company purchase its own shares, it is called ‘Buy-back

of Shares'.

Section 68 of The Companies Act, 2013 provides that the company can buy

their own shares from either from the free reserves, securities premium

reserve or from the proceeds of any other securities.

In case, shares are bought back out of free reserves, the

company must

transfer a sum equal to the nominal value of shares bought back to

'Capital Redemption Reserve Account’.

ACCOUNTING TREATMENT FOR ISSUE OFSHARES AT PREMIUMTO PUBLIC FOR

CASH


20XX

[Shares applied x Rate

of Application]

Bank A/c Dr.


(Being application money received for …….. equity

shares @ Rs………….. per share)

XXX

XXX


of Application]


of Premium]



To Securities Premium Reserve Account

(Being application money on ………. equity shares

transferred to Share Capital and Securities Premium

Reserve Account)

XXX

XXX

XXX

[Shares allotted x Rate Equity Share Allotment A/c Dr. XXX

of Allotment]


of Allotment (face

value)]


of Allotment

(Premium)]



(Being allotment money due on ………. equity shares


XXX

XXX


Allotment]


of Allotment]

Bank A/c Dr.



(Being allotment money received on ……. equity

shares @ Rs… per share with the exception of ……..

shares)

XXX

XXX

XXX


of First Call]


of First Call (face

value)]


of First Call

(Premium)]




(Being first call money due on ………. equity shares


XXX

XXX

XXX


First Call]


of First Call]

Bank A/c Dr.



(Being first call money received on ……. equity shares

@ Rs… per share with the exception of …….. shares)

XXX

XXX

XXX


of Second Call]


of Second Call (face

value)]


of Second Call

(Premium)]




(Being second and final call money due on ……….

equity shares @ Rs….. per share)

XXX

XXX

XXX


Second Call]


of Second Call]

Bank A/c Dr.



(Being second and final call money received on …….

equity shares @ Rs… per share with the exception of

…….. shares)

XXX

XXX

XXX

Q 8. Roxy Ltd. offered 100 equity shares of Rs.10 each at premium of Rs.15 per share for

public subscription.




Sol. (a) 90 shares

This is the case of ‘UNDER-SUBSCRIPTION’ as the number of applied shares are

lesser than the number

of shares offered.



been called in lumpsum (discussed earlier). So, the amount of premium will

adjusted at the time of

transfer of application money only.


JOURNAL


20XX

[90 x 110] Bank A/c Dr.



per share)

9,900

9,900

[90 x 110]

[90 x 100]

[90 x 10]





Share Capital @ Rs.100 per share and Securities Premium Reserve

Account @ Rs.10 per share)

9,900

9,000

900

(b) 100 shares

Here, we can see that number of applied shares is equal to the number of shares

offered for subscription.

So, such a case is called as case of ‘FULL-SUBSCRIPTION’.





JOURNAL


20XX

[100 x 110] Bank A/c Dr.



Rs.110 per share)

11,000

11,000

[100 x 110]

[100 x 100]

[100 x 10]





Share Capital @ Rs.100 per share and Securities Premium

Reserve Account @ Rs.10 per share)

11,000

10,000

1,000

DO IT YOURSELF

Q 9. Moxy Ltd. offered 400 equity shares of Rs.20 each at premium of Rs.30 per share

for public subscription.




Q 10. Boss Ltd. offered 1,000 equity shares of Rs.100 each at a premium of 40% for

public subscription. Public

had applied for:(a) 700 shares (b) 1,000 shares


Q 11. Abhi Ltd. offered 100 equity shares of Rs.100 each at premium of Rs.25 payable as

Rs.25 on application,

Rs.65 on allotment and balance as and when required. Applications were received

for:

(a) 95 shares (b) 100 shares.


Sol. Before we start with the solutions to above cases, we should understand the

following points:

Question is of premium but at what instalment, it is payable by

shareholders that is not given

in the question. Hence, as it has already been informed that in such a case

it is assumed to be

payable at allotment.

Question also states after allotment balance issue price i.e.,

[Rs.35 = Rs.100 (face value) + Rs.25 (premium) – Rs.25 (application) –

Rs.65 (allotment)]

will be called ‘as and when required’ by a company. As, we have already

discussed in this regard

that no entry will be passed for the balance amount.

Whenever question is of premium, make a division of issue price in the

following manner:

FACE VALUE + PREMIUM = ISSUE PRICE

100 + 25 = 125

25 + 0 Application (25)

40 + 25 Allotment (65)

BALANCE AS AND

WHEN REQUIRED(35)

Always remember that the price of face value only will be credited to Share

Capital Account.

(a) 95 shares


JOURNAL


20XX




per share)

2,375

2,375

[95 x 25]




Capital Account)

2,375

2,375

[95 x65]

[95 x 40]

[95 x25]





share)

6,175

3,800

2,375

[95 x 65] Bank A/c Dr. 6,175



share)

6,175

(a) 100 shares


JOURNAL


20XX

[100 x 25] Bank A/c Dr.



Rs.25 per share)

2,500

2,500

[100 x 25]




Share Capital Account)

2,500

2,500

[100 x65]

[100 x 40]

[100 x 25]





share)

6,500

4,000

2,500

[100 x 65]

Bank A/c Dr.


(Being allotment money received on 100 equity shares @ Rs.65

per share)

6,500

6,500

Q 12. Deva Ltd. issued a prospectus inviting applications for 2,000 equity shares of Rs.10

each at a premium of

Rs.4 payable as follows:

On Application Rs.3 (including premium Rs.1); On Allotment Rs.4 (including

premium Rs.1);

On First Call Rs.4 (including premium Rs.1); and balance on Second and Final Call.

The issue was fully subscribed. All the money was duly received.

Pass necessary journal entries.

Sol. First of all, we will prepare a division of the issue price in the following manner:


10 + 4 = 14


3 + 1 Allotment (4)

3 + 1 First Call (4)

2 + 1 Second and Final Call

(3)

The advantage of preparing the division chart is that we can easily observe the value with

which ‘Share Capital Account’ is to be credited because as discussed earlier that ‘Share

Capital Account’ gets filled in by face value only.

in the books of Deva Ltd.

JOURNAL


20XX

[2,000 x 3] Bank A/c Dr.


(Being application money received for 2,000 equity shares @ Rs.3

per share)

6,000

6,000

[2,000 x 3]

[2,000 x2]

[2,000 x1]




(Being application money on 2,000 equity shares transferred to



6,000

4,000

2,000

[2,000 x4]

[2,000 x3]

[2,000 x1]




(Being allotment money due on 2,000 equity shares @ Rs.4 per

share)

8,000

6,000

2,000

[2,000 x 4]

Bank A/c Dr.


(Being allotment money received on 2,000 equity shares @ Rs.4

per share)

8,000

8,000

[2,000 x4]

[2,000 x3]

[2,000 x 1]




(Being first call money due on 2,000 equity shares @ Rs.4 per

share)

8,000

6,000

2,000

[2,000 x 4]

Bank A/c Dr.


(Being first call money received on 2,000 equity shares @ Rs.4

per share)

8,000

8,000

[2,000 x3]

[2,000 x2]

[2,000 x 1]





share)

6,000

4,000

2,000

[2,000 x 3]

Bank A/c Dr.


(Being second and final call money received on 2,000 equity

shares @ Rs.4 per share)

6,000

6,000

DO IT YOURSELF

Q 13. Mouni Ltd. offered 4,000 equity shares of Rs.200 each at premium of Rs.50 per

share for public

subscription. The amount was payable as follows:

Rs.50 (including premium Rs.10) on Application; Rs.50 (including premium Rs.10)

on Allotment;

Rs.50 (including premium Rs.10) on First Call; Rs.50 (including premium Rs.10) on

Second Call; and

Balance on final call.


(a) 3,800 shares (b) 4,000 shares




The issue price was payable as 25% on application, 50% on allotment, 10% on first

call and the balance

on second call. Publichad applied for:



Since beginning of the topic, in every format you might have observed a term ‘Calls-

in-Arrear’.

Now, we are going to start with it.

CALLS-IN-ARREAR

If a shareholder fails in sending the called amount due on allotment or any calls (be it

First Call, Second Call

or any other), the amount not sent is called ‘Calls-in-Arrear’.

It is also termed as ‘Unpaid Calls’.

It will be presented / adjusted in ‘Notes to Accounts’ while preparing balance sheet of

a company.

The Articles of Association authorises the directors to charge interest at a stipulated

rate on the unpaid

amount, i.e., Calls-in-Arrear.

If the articles are silent in this regard, interest will be charged @ 10% p.a.(provided

by Table F) on the

unpaid amount, i.e., Calls-in-Arrear.

As per syllabus, no practical questions regarding interest will be asked but

theoretically, can be asked.

Q 15. Abhi Ltd. offered 100 equity shares of Rs.100 each at par payable as Rs.25 on


allotment and balance in two equal instalments of Rs.25 each for public subscription.

Applications were

received for: (a) 95 shares (b) 100 shares.

All the amounts were duly received except the amount ofcallsfrom a shareholder

holding 10 shares.


Sol. In this question, the word ‘Calls’ has been darkened as it represents plural sense. It

simply means that both

the calls have been unpaid on 10 shares.


(a) 95 shares


JOURNAL


20XX

[95 x 25] Bank A/c Dr. 2,375


(Being application money received for 95 equity shares @ Rs.25 per

share)

2,375

[95 x 25]




Capital)

2,375

2,375



(Being allotment money due on 95 equity shares @ Rs.25 per share)

2,375

2,375

[95 x 25]

Bank A/c Dr.


(Being allotment money received on 95equity shares @ Rs.25 per

share)

2,375

2,375




2,375

2,375

[85 x 25]

[10 x 25]

Bank A/c Dr.




share)

2,125

250

2,375



(Being second and final call money due on 95 equity shares @ Rs.25

per share)

2,375

2,375

[85 x 25]

[10 x 25]

Bank A/c Dr.




Rs.25 per share)

2,125

250

2,375

(b) 100 shares


JOURNAL


20XX

[100 x 25] Bank A/c Dr.



per share)

2,500

2,500

[100 x 25] Equity Share Application A/c Dr.



Capital)

2,500

2,500




share)

2,500

2,500

[100 x 25] Bank A/c Dr.



share)

2,500

2,500




2,500

2,500

[90 x 25]

[10 x 25]

Bank A/c Dr.




share)

2,250

250

2,500



(Being second and final call money due on 100 equity shares @

Rs.25 per share)

2,500

2,500

[90 x 25]

[10 x 25]

Bank A/c Dr.



(Being first call money received on 90 equity shares @ Rs.25 per

share)

2,250

250

2,500

DO IT YOURSELF

Q 16. Mauj Ltd. offered 400 equity shares of Rs.20 each at par for public subscription. The

issue price was

payable as Rs.3 on application, Rs.5 on allotment and the balance in three equal

instalments.



All amounts were duly received except from a shareholder Kevin holding 50 shares.

He failed to pay the

amount of last two calls.


Q 17. Bruno Ltd. offered 1,000 equity shares of Rs.100 each at par payable as Rs.25 on


allotment and the balance on call. Public had applied for:


A shareholder who had been allotted 200 shares failed to pay the amount due on

allotment and call.


Q 18. Ajax Ltd. offered 1,500 equity shares of Rs.100 each at par payable as Rs.25 on


allotment and the balance as and when required / later on. Public had applied for:


One of the shareholders holding 500 shares failed to pay allotment money due from

her.


Q 19. Deva Ltd. issued a prospectus inviting applications for 2,000 equity shares of Rs.10

each at a premium of

Rs.4 payable as follows:

On Application Rs.3 (including premium Rs.1); On Allotment Rs.4 (including

premium Rs.1);

On First Call Rs.4 (including premium Rs.1); and balance on Second and Final Call.

The issue was fully subscribed. All the moneys were duly received with the

exception of first call and

final call on 100 shares and 200 shares respectively.

Pass necessary journal entries.

Sol. First of all, we will prepare a division of the issue price in the following manner:


10 + 4 = 14


3 + 1 Allotment (4)

3 + 1 First Call (4)

2 + 1 Second and Final Call

(3)

The advantage of preparing the division chart is that we can easily observe the value with

which ‘Share Capital Account’ is to be credited because as discussed earlier that ‘Share

Capital Account’ gets filled in by face value only.

First of all, try to understand what has been written in the last line. The line states that the

‘First Call’ hasnot been

received on 100 shares and ‘Second and Final Call’ has not been received on 200 shares.

In such case, in the absence of any further information, it is assumed that the first call

defaulter won’t have

paid ‘Second and Final Call’ also. So, it means that Calls-in-Arrears on ‘Second and

Final Call’ will be

recorded by taking 300 shares ( = 100 shares + 200 shares) into consideration.

in the books of Deva Ltd.

JOURNAL


20XX

[2,000 x 3] Bank A/c Dr.


(Being application money received for 2,000 equity shares @ Rs.3

per share)

6,000

6,000

[2,000 x 3]

[2,000 x 2]

[2,000 x 1]




(Being application money on 2,000 equity shares transferred to



6,000

4,000

2,000

[2,000 x 4]

[2,000 x 3]

[2,000 x 1]




(Being allotment money due on 2,000 equity shares @ Rs.4 per

share)

8,000

6,000

2,000

[2,000 x 4] Bank A/c Dr. 8,000


(Being allotment money received on 2,000 equity shares @ Rs.4

per share)

8,000

[2,000 x 4]

[2,000 x 3]

[2,000 x 1]





share)

8,000

6,000

2,000

[1,900 x 4]

[100 x 4]

Bank A/c Dr.



(Being first call money received on 1,900 equity shares @ Rs.4

per share)

7,600

400

8,000

[2,000 x 3]

[2,000 x 2]

[2,000 x 1]





share)

6,000

4,000

2,000

[1,900 x 3]

[100 x 3]

Bank A/c Dr.



(Being second and final call money received on 2,000 equity

shares @ Rs.4 per share)

5,700

300

6,000

DO IT YOURSELF

Q 20. Mouni Ltd. offered 4,000 equity shares of Rs.200 each at premium of Rs.50 per

share for public

subscription. The amount was payable as follows:

Rs.50 (including premium Rs.10) on Application; Rs.50 (including premium Rs.10)

on Allotment;

Rs.50 (including premium Rs.10) on First Call; Rs.50 (including premium Rs.10) on

Second Call; and

Balance on final call.


(a) 3,800 shares (b) 4,000 shares

All the moneys were duly received with the exception of final call on 400 shares

and 900 shares

respectively.




The issue price was payable as 25% on application, 50% on allotment, 10% on first

call and the balance

on second call. Public had applied for:


All the moneys were duly received with the exception of final call on 200 shares

and 500 shares

respectively.


Sometimes, a combined account (for application and allotment) in the name of ‘Share

Application and Allotment’

Account is opened in the books of accounts of a company.

In such case the entries for ‘Share Application’ and ‘Share Allotment’ will not be passed

separately.

Instead one joint account in the name of ‘Share Application and Allotment’ Account will be

opened.

So, if a question is of lumpsum, the only instalment will be called as ‘Share Application and

Allotment’ Account.

And, if a question is of instalments, the instalments will be ‘Share Application and

Allotment’ Account;

‘Share First Call’ Account; ‘Share Second Call’ Account and so on.

OBJECTIVE TYPE QUESTIONS

Q 1. Interest on calls in arrears is charged according to Table F at the rate not exceeding:

(a) 10% p.a. (b) 6% p.a. (c) 8% p.a. (d) 11% p.a.

Q 2. Share application account is a personal account. (True /

False)?Give reason.

Q 3. When the called up amount is not paid by the shareholders then it will be transferred

to …………. Account.

Q 4. Shares Application and Allotment A/c is:

(a) Personal Account (b) Real Account(c) Nominal Account (d) Asset Account

Q 5. The amount of application money received is transferred to share capital account on

the date of receipt of

application money. (True /

False)?Give reason.

Q 6. Sometimes a combined account for share application and share allotment called

……….. is opened in the

books of a company. The combined account is based on the reasoning that

………………. .

Q 7. Gyansagar Ltd. issued 40,000 shares ofRs.10 each to the public for subscription

payable as Rs.4 on

application, Rs.3 on allotment and the balance on first and final call. The issue was

fully subscribed,

called-up and duly received. The company opens a combined account for share

application and share

allotment. Pass the required journal entry.

Q 8. The timing of the payment of calls by the shareholders is always determined at the

time of share issue itself

and given inthe prospectus. (True /

False)?Give reason.

Q 9. Two points are important regarding the calls on shares. First, the amount on any call

should not exceed

…….. ofthe face value of shares. Second, there must be an interval of …… between

the makings of two

callsunless otherwise provided by the articles of association of the of the company.

Q 10. If the whole balance after allotment of a share is collected in one call only, in that case

the first call itself,

shall be termedas the …………..

Q 11. The application money on issue of share capital should be at least ………. of the face

value of the share.

Q 12. A minimum of ……. days’ notice is given to the shareholders to pay the amount of

any call.

Q 13. When any shareholder fails to pay the amount due an allotment or any of the calls,

such amount is debited

to ………… account, which will appear as ……………

Q 14. A company always charges the interest @ 10% p.a. on all unpaid amounts on shares

for the period

intervening between the day fixed for payment and the time of actual payment

thereof.

(True /

False)?Give reason.

Q 15. When the full amount called on allotment and/or call (s) is not received from the

allottees / shareholders,

the amount not so received are cumulatively called ………………..

Q 16. It is not mandatory for a company to maintain a separate calls-in-Arrears Account.

(True /

False)?Give reason.

MATHS:

class 12 ( commerce ) business studies-1 · class 12 ( commerce ) business studies-1 chapter...

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