ISSUE OF SHARES

&
DEBENTURE
SHARES
 Types of shares
1. Preference shares –

Cum. Pref. Share, Non Cum. Pref. Share,

redeemable Pref. Share, Non participating pref.
Share, Participating pref. Share

2. Equity shares-

Company’samendment Act,2000- shares with

differential voting rights permissible
 ISSUE OF SHARE
• Issue of prospectus

• Application money at least 5% of face value of shares

• Minimum subscription of 90% mandatory as per sebi ; refund to the

applicants within 42 days of the closure of issue; delayed refund –
interest @ 15% p.a.

• Allotment money and subsequent calls- min. 1 month period

• Sebi rules- size of issue up to 500 crores- shares are fully paid
within 12 months of the date of allotment

• Min. Application money paid by the applicant 25% of the issue price
 STEPS FOR THE ISSUE OF SHARE

1. TO ISSUE PROSPECTUS

2. TO RECEIVE APPLICATIONS

3. TO MAKE ALLOTMENTS

4. TO MAKE CALLS
 Accounting entries for issue of
share
Application received:

Bank A/c Dr.

To Equity Share Application A/c

Allotment :

Equity Share Application A/c Dr.

To Equity Share Capital A/c
Contd…
Amount due on allotment:

Equity Share Allotment A/c Dr.

To Equity Share Capital A/c

Allotment money received:

Bank A/c Dr.

To Equity ShareAllotment A/c
Contd…
First call due:

Equity Share First Call A/c Dr.

To Equity Share Capital A/c

Receipt of call money:

Bank A/c Dr.

To Equity Share Capital A/c
Issue of shares :

• Full subscription

• Under subscription

• Over subscription
- Rejection and full allotment
- Proportional (pro-rata allotment
Over subscription

Excess application money

• Adjusted against allotment money.

• Any surplus still remaining is either refunded or treated as

“calls in advance” which is a separate item – between share
capital & reserves; Interest @ 6% p.a. Paid by the Co.

Calls in advance A/c Dr.

Bank (balance if needed) Dr.
To Call (1,2,final) A/c
 Issue of shares at premium (sec 78)
• Issue price > par (face) value
• Share premium receivable along with allotment
• Capital reserve

Utilization of share premium

• Issue of fully paid bonus shares to members

• Writing off preliminary expenses of the co.
• Writing off discount on the issue of shares /debentures
• Providing premium on the redemption of preference shares
• Buy back of shares

Share application a/c dr.

To share capital a/c
To share premium a/c
 Issue of shares at a discount: (sec 79)

• Issue price < par (face) value

• Issue must be of a class of shares already issued
• Issue permissible - one year since the date of
commencement of business
• Max . Discount @ 10% or higher rate as CLB permits
• Issue within 2 months of the sanction

Share allotment a/c dr.

Discount a/c dr.
To share capital a/c
DEBENTURES
 DEBENTURE

It is a certificate which acknowledges that

the company owes to the persons a sum
of money ,promises that a stated rate of
interest will be paid periodically to the
person named in the certificate .
 KINDS OF DEBENTURES

• Redeemable / Iredeemable

• Secured/ Unsecured

• Full convertible debenture's, Partial

Convertible debenture’s, Non convertible
debenture’s
 KEY POINTS
• Debt- servicing on issue of debentures
– Payment of interest
– Repayment to debenture holders at

redemption including premium if any

• Tax deducted at source on interest and net interest

paid to holders
Debenture Interest a/c Dr.
To TDS payable
To bank (net receipt)
REDEMPTION OF DEBENTURES

• Expiry of fixed period

• Drawing of lots

• Purchase of own debentures in the

open market