Issue of Shares | Basics | Part - 1 | Class 12 | Accounts

Summary

The video script is an educational lecture focusing on the basics of shares. It explains the concept of a company issuing shares to the public to raise capital, detailing the process and different types of shares including equity and preference shares. The lecture also covers the difference between authorized, issued, and subscribed share capital, and introduces terms like 'cold up' and 'paid up' capital. It further discusses the subscription process, including full, under, and over-subscription, and the concepts of calls in share capital. The instructor aims to clarify these financial terms to ensure a clear understanding of how shares work within a company.

Takeaways

• 😀 The session is a continuation of a series on 'Issue of Shares', focusing on the basics of shares and their categories.
• 📚 The presenter discussed the concept of 'Sapoj' as an example company needing funds and how it can raise capital by issuing shares to the public.
• 💼 The importance of understanding the difference between 'Equity Shares' and 'Preference Shares' was highlighted, with the former being entitled to dividends and the latter having priority in dividend and capital repayment.
• 📈 The presenter explained the process of issuing shares in parts, such as 'Application Money', 'Allotment Money', and 'Calls', which are payments made by shareholders at different stages of the share issuance.
• 🔢 The concept of 'Authorized Share Capital' was introduced, which refers to the maximum amount of share capital a company is authorized to issue as per its Memorandum of Association.
• 💹 'Issued Share Capital' was discussed, indicating the actual amount of capital that has been issued to the public for subscription.
• 📉 'Subscribed Share Capital' refers to the amount of shares that have been subscribed by the public, which may be less than what was issued, leading to 'Under Subscription' or more, leading to 'Over Subscription'.
• 🌐 The session also covered 'Cold' and 'Paid-up' capital, where 'Cold' refers to the amount called by the company and 'Paid-up' refers to the amount actually paid by the shareholders.
• 📝 The difference between 'Full Subscription', 'Under Subscription', and 'Over Subscription' was clarified, with examples to illustrate each scenario.
• 🔑 The presenter emphasized the importance of understanding these concepts to avoid confusion and to grasp the intricacies of share transactions.

Q & A

What is the primary topic discussed in the script?

The primary topic discussed in the script is the basics of shares, including the concept of share capital, different types of shares, and the process of issuing shares by a company.

What does the term 'Equity Share' mean in the context of the script?

In the script, 'Equity Share' refers to a type of share that represents an ownership stake in a company. Equity shareholders are entitled to a share of the company's profits and have voting rights.

What is the difference between 'Equity Shares' and 'Preference Shares' as mentioned in the script?

Equity Shares and Preference Shares are two types of shares. Preference shareholders get dividends before equity shareholders and are paid back before equity shareholders in case of liquidation. However, they usually have no voting rights, unlike equity shareholders.

What is 'Authorized Share Capital' as discussed in the script?

Authorized Share Capital is the maximum amount of share capital that a company is permitted to issue as per its Memorandum of Association. It is the limit up to which a company can issue shares to its shareholders.

What is 'Issued Share Capital' and how is it different from 'Subscribed Share Capital'?

Issued Share Capital refers to the capital represented by shares that have been offered to the public for subscription and have been issued by the company. Subscribed Share Capital is the portion of the issued capital that has been purchased by shareholders. The difference lies in the fact that issued capital includes all shares offered, while subscribed capital only includes those that have been bought by investors.

What does the term 'Full Subscription' mean in the context of the script?

Full Subscription in the script means that the total number of shares offered by the company for subscription has been fully taken up by the investors, meaning the demand for shares equals the supply offered.

What is 'Over Subscription' and how does it relate to the shares discussed in the script?

Over Subscription occurs when the demand for shares exceeds the supply offered by the company. In the script, it refers to a situation where more investors want to buy shares than the number of shares available for subscription.

What are 'Calls' in the context of share capital as mentioned in the script?

Calls in the script refer to the installments or partial payments made by shareholders towards the total amount due on the shares they have subscribed to. It is a method used by companies to collect the share capital in parts rather than in one lump sum.

What is the significance of 'Application Money' in the share issuance process?

Application Money is the initial payment made by investors when they apply for shares during an initial public offering (IPO). It is usually a small percentage of the total amount payable on the shares and signifies the investor's commitment to purchase the shares.

How does the script define 'Allotment Money' in relation to shares?

Allotment Money in the script refers to the amount paid by shareholders after their application for shares has been successful. It is the second installment paid towards the total amount due on the shares, following the application money.

What is the difference between 'Cold' and 'Paid-up' as terms used in the script?

In the script, 'Cold' refers to the amount of money called by the company that has not yet been paid by the shareholders. 'Paid-up', on the other hand, refers to the amount that has been fully paid by the shareholders for the shares they hold.