Issue of Shares | All basics in the easiest way | Class 12 | Part 17

Rajat Arora2 minutes read

The text discusses the importance of presenting Share Capital in the balance sheet, detailing various types of share capital such as Authorized, Issued, and Subscribed shares, using a scenario to explain the impact of unpaid shares on total payments. It emphasizes the need to understand the balance sheet presentation process, including the issuance of shares to the public and the calculation of total capital without premium considerations for simplification.

Insights

  • Understanding share capital in balance sheets is crucial for exams, with distinctions between authorized, issued, and subscribed shares being essential.
  • The balance sheet presentation focuses on scenarios like shareholders not paying final calls, illustrating the impact on total shares and payments, emphasizing practical application over theoretical complexities.

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Recent questions

  • What is the importance of teaching balance sheet in shares issue?

    Understanding the balance sheet in shares issue is crucial for exams as it helps in comprehending the financial health of a company. It allows individuals to analyze the company's equity and liabilities, specifically focusing on the shareholders' funds and share capital. By learning how to present share capital in a balance sheet, students can grasp the different types of share capital such as authorized, issued, and subscribed shares. This knowledge is essential for evaluating a company's financial structure and performance.

  • How are different types of share capital defined?

    Share capital is categorized into authorized, issued, and subscribed shares. Authorized share capital refers to the maximum amount of capital that a company is allowed to issue. Issued shares are the shares that have been distributed to shareholders, while subscribed shares are the portion of issued shares that shareholders have agreed to purchase. Understanding these distinctions is crucial for investors and analysts to assess a company's financial standing and potential for growth.

  • Can you explain the balance sheet presentation for share capital?

    The balance sheet presentation for share capital typically includes the particulars of share capital, note numbers, current year figures, previous year figures, and the corresponding amounts. It falls under the category of equity and liabilities, specifically under shareholders' funds. The format usually showcases the breakdown of authorized, issued, and subscribed shares, providing a clear overview of the company's capital structure. By analyzing this presentation, stakeholders can gain insights into the company's financial stability and capital adequacy.

  • What is the significance of the share subscription process in balance sheet presentation?

    The share subscription process plays a vital role in the balance sheet presentation as it reflects the shareholders' commitment to the company. Subscribed shares represent the portion of issued shares that shareholders have agreed to purchase, either fully paid or not fully paid. This process demonstrates the level of investor confidence in the company and influences the overall share capital structure. By understanding the share subscription process, individuals can assess the company's financial health and potential for future growth.

  • How does the alteration of a scenario impact share capital calculations?

    Altering a scenario, such as a shareholder not paying the final call amount, can significantly impact share capital calculations. In the given example, a shareholder failing to pay the final call of Rs 20 results in a decrease in total shares and payments received by the company. This alteration showcases the real-world implications of incomplete payments on the company's financial position and highlights the importance of managing share capital effectively. By analyzing such scenarios, individuals can gain a deeper understanding of share capital dynamics and their impact on a company's financial performance.

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Summary

00:00

"Understanding Share Capital in Balance Sheets"

  • December explosion of accounts starting today, focusing on shares.
  • Teaching balance sheet in shares issue, crucial for exams.
  • Presentation of Share Capital in Balance Sheet topic.
  • Extract of balance sheet shows only share capital, not complete.
  • Format: Particulars, Note number, Current year, Previous year, Amount.
  • Equity and Liabilities, Shareholders Funds, Share Capital.
  • Types of share capital: Authorized, Issued, Subscribed.
  • Authorized Share Capital in MO, not in balance sheet.
  • Issued shares not in balance sheet, only shown.
  • Subscribed and fully paid, and not fully paid shares explained.

17:07

"Share Subscription Process and Capital Breakdown"

  • The balance sheet presentation is demonstrated, with a focus on case number one and the share subscription process.
  • A scenario is altered to include a shareholder not paying the final call of Rs 20, affecting the total shares and payments.
  • The authorized capital of the company is detailed, with 5 lakh shares offered to the public, leading to a breakdown of shares and payments received.
  • The final calculation results in 4 crores 8 lakhs, excluding any forfeited shares, with a note to ignore premium in share capital questions for simplification.
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