issue of shares class 12 sk singh solutions questions 1,2,3 & 4A sbpd publication
Summary
TLDRThis video explains the process of issuing shares and managing share capital in a company. It covers how share applications work, the collection of application money, and how that money is transferred into the company’s share capital. The speaker uses practical examples, including share premiums and allotments, to simplify complex concepts like equity shares and share capital. Viewers will gain an understanding of how companies raise funds through share issuance, how funds are allocated, and the accounting entries involved in the process. The goal is to provide a clear explanation of these fundamental financial processes.
Takeaways
- 😀 A company may issue shares at a price (e.g., ₹10 per share) and collect application money from investors before the shares are allotted.
- 😀 The total amount collected from share applications (e.g., ₹20 lakh) is transferred into the company's share capital account once the shares are allotted.
- 😀 It is essential for companies to follow the correct procedure of allotment and the proper recording of application money in the share capital.
- 😀 When shares are subscribed by the public, and more funds are collected than needed (e.g., ₹4.8 lakh for 48,000 shares), excess funds are handled carefully and transferred into the capital accounts.
- 😀 The application money collected should be recorded in the share capital account, which increases the company's equity.
- 😀 Companies sometimes offer shares at a premium, where the price exceeds the nominal value of the share (e.g., ₹120 per share instead of ₹100). This premium is part of the collected funds.
- 😀 In case of an oversubscription, where the demand exceeds the available shares, a company allocates shares according to the available quantity and the value paid by the applicants.
- 😀 The company's share capital is updated as soon as the application and allotment processes are completed, reflecting the funds raised through share issuance.
- 😀 Understanding the concept of 'equity capital' is vital for investors, as it reflects the ownership in a company that shares are tied to.
- 😀 This lesson emphasized the importance of properly recording financial transactions related to equity shares and share capital for both the company's and investors' benefit.
Q & A
What is the main topic discussed in the video script?
-The video discusses the process of issuing shares by a company, the application and allotment of shares, and how the company handles its capital through accounting entries.
What does the company do when it issues shares to the public?
-The company offers shares to the public at a set price, and the public applies for the shares by paying an application amount. For example, in the script, a company issues 2 lakh shares at ₹10 each.
How is the application money handled in share allotment?
-The application money paid by investors is recorded as an 'application money' entry. Once the shares are allotted, the money is transferred into the company’s share capital.
What happens to the application money after the allotment?
-After allotment, the application money is transferred into the share capital account, increasing the company’s share capital.
What is the significance of share capital in this process?
-Share capital represents the money raised from the public through the issuance of shares, and it is recorded in the company’s accounts as share capital once the allotment is completed.
How does the script explain the concept of premium in share allotment?
-The script refers to a situation where shares are issued at a premium, meaning the price of the share is higher than its face value. For instance, shares might be issued at ₹120 when the face value is ₹100.
What is the accounting entry made when shares are issued with premium?
-The entry would reflect the amount received from the issue of shares at a premium, where the share capital is recorded at face value, and the premium is recorded separately as a premium on shares.
Why does the company collect more money than the face value of the share?
-The company collects more money than the face value when shares are issued at a premium. This typically happens when the company is perceived to be valuable, and investors are willing to pay more than the nominal value of the shares.
What role do the application and allotment processes play in this scenario?
-The application process involves the public applying for shares and submitting application money. The allotment process determines which applicants receive the shares and ensures that the money is transferred to the company’s capital accounts.
How does the script emphasize the importance of understanding accounting entries in share capital transactions?
-The script highlights that understanding the correct accounting entries, such as transferring application money to share capital, is crucial for proper financial recordkeeping and for the company’s financial health.
Outlines

This section is available to paid users only. Please upgrade to access this part.
Upgrade NowMindmap

This section is available to paid users only. Please upgrade to access this part.
Upgrade NowKeywords

This section is available to paid users only. Please upgrade to access this part.
Upgrade NowHighlights

This section is available to paid users only. Please upgrade to access this part.
Upgrade NowTranscripts

This section is available to paid users only. Please upgrade to access this part.
Upgrade NowBrowse More Related Video
5.0 / 5 (0 votes)