NCERT Book Class 12 Accountancy (Part 2) Chapter 1 Accounting for Share Capital

Accounting for Share Capital 1

A company form of organisation is the third stage
in the evolution of forms of organisation. Its
capital is contributed by a large number of persons
called shareholders who are the real owners of the
LEARNING OBJECTIVES company. But neither it is possible for all of them to
After studying this chapter, participate in the management of the company nor
you will be able to : considered desirable. Therefore, they elect a Board
• explain the basic nature of Directors as their representative to manage the
of a joint stock company affairs of the company. In fact, all the affairs of the
as a form of business company are governed by the provisions of the
organisation and the
various kinds of
Companies Act, 2013. A company means a company
companies based on incorporated or registered under the Companies Act,
liability of their 2013 or under any other earlier Companies Acts.
members; According to Chief Justice Marshal, “a company is
• describe the types of a person, artificial, invisible, intangible and existing
shares issued by a only in the eyes of law. Being a mere creation of law,
company;
• explain the accounting
it possesses only those properties which the charter
treatment of shares of its creation confers upon it, either expressly or as
issued at par, at incidental to its very existence”.
premium and at A company usually raises its capital in the form of
discount including shares (called share capital) and debentures (debt
oversubsription; capital.) This chapter deals with the accounting for
• outline the accounting
for forfeiture of shares
share capital of companies.
and reissue of forfeited
shares under varying 1.1 Features of a Company
situations;
• workout the amounts to
A company may be viewed as an association of
be transferred to capital person who contribute money or money’s worth to
reserve when forfeited a common inventory and use it for a common
shares are reissued; and purpose. It is an artificial person having corporate
prepare share forfeited legal entity distinct from its members (shareholders)
account ; and has a common seal used for its signature. Thus,