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UPMSP Vocational Accountancy & Auditing study materials
UPMSP Vocational Accountancy & Auditing study resources

UPMSP Vocational Accountancy & Auditing: Company Accounts

UPMSP Vocational Accountancy & Auditing · Work through your exam, one topic at a time.

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Company Accounts

What this domain tests

Company accounts questions deal with share capital, issue of shares at par and premium, pro-rata allotment, calls in arrears and advance, forfeiture and reissue of shares, and the basic rules on debentures and reserves.

Core rules

  • Share capital categories: authorised, issued, subscribed, called-up and paid-up. Calls in arrears are deducted from called-up capital; calls in advance are a separate liability, not part of share capital.
  • Application money must be at least 5% of the nominal value; SEBI requires 90% minimum subscription for a public issue.
  • Oversubscription leads to pro-rata allotment; excess application money is adjusted towards allotment and subsequent calls, and any balance is refunded.
  • Forfeiture: Share Capital A/c is debited with the called-up amount, Share Forfeiture A/c is credited with the amount actually received, and Calls in Arrears A/c is credited with the unpaid amount.
  • Reissue of forfeited shares: the discount allowed cannot exceed the amount forfeited; the remaining balance in Share Forfeiture is transferred to Capital Reserve.
  • Securities premium is credited to a separate account and may be applied only to the purposes listed in Section 52 of the Companies Act, 2013.

Worked example

10,000 shares of ₹10 each issued at par; application ₹3, allotment ₹4, first call ₹3. An applicant for 4,000 shares was allotted 2,000 and paid nothing further. Application received = 4,000 × 3 = ₹12,000; application due on 2,000 shares = ₹6,000; excess ₹6,000 is adjusted to allotment, leaving ₹2,000 of allotment unpaid plus ₹6,000 of call = ₹8,000 in arrears. Forfeiture: Share Capital A/c Dr 20,000; To Share Forfeiture A/c 12,000; To Calls in Arrears A/c 8,000. On reissue at ₹8: Bank A/c Dr 16,000; Share Forfeiture A/c Dr 4,000; To Share Capital A/c 20,000. Balance in Share Forfeiture = 12,000 − 4,000 = ₹8,000, transferred to Capital Reserve.

Traps

Crediting the full called-up amount to Share Forfeiture; ignoring excess application money; transferring the forfeiture balance to General Reserve; treating securities premium as revenue income.