by Issue of Share Capital refers to the process by which a company raises funds by offering its shares to the public, existing shareholders, or private investors. Share capital represents the ownership funds of a company and is divided into shares of a fixed nominal value. When shares are issued, investors contribute money to the company and become shareholders with rights such as voting and dividends. The issue of share capital is an important source of long-term finance and helps companies expand their business operations, purchase assets, and meet financial requirements.
Example of Issue of Shares
A company issues 1,000 shares of ₹10 each at par.
- Application money received: ₹5 per share
- On allotment: ₹3 per share
- On final call: ₹2 per share
Journal Entries:
- Bank A/c Dr. To Share Application A/c (₹5,000)
- Share Application A/c Dr. To Share Capital A/c
- Bank A/c Dr. To Share Allotment A/c (₹3,000)
- Bank A/c Dr. To Share Call A/c (₹2,000)
Objectives of Issue of Share Capital
- To Raise Long-Term Capital
The primary objective of issuing share capital is to raise long-term funds for the company. Share capital provides permanent financial resources that do not require repayment like loans or debentures. These funds remain in the business until it is wound up, making them ideal for long-term investments. Companies use this capital to finance expansion, purchase assets, and support large-scale operations. Unlike borrowed funds, there is no fixed interest burden. Therefore, raising long-term capital is a key objective of share capital issue because it ensures financial stability and supports continuous business growth and development.
- To Finance Business Expansion
Another important objective of issuing share capital is to finance business expansion activities. Companies require large amounts of funds to open new branches, enter new markets, increase production capacity, and adopt new technologies. Share capital provides the necessary financial support without increasing debt burden. This allows businesses to grow steadily and compete effectively in the market. Expansion funded through equity also reduces financial risk compared to borrowing. Therefore, financing expansion is a major objective of share capital issue because it helps companies increase their scale of operations and improve market presence.
- To Reduce Dependence on Borrowings
Issuing share capital helps companies reduce their dependence on borrowed funds such as loans and debentures. Excessive borrowing increases financial risk due to fixed interest and repayment obligations. By raising funds through shares, companies can strengthen their equity base and maintain a balanced capital structure. This reduces financial pressure and improves stability. Investors also gain confidence when a company relies on equity financing. Therefore, reducing dependence on borrowings is an important objective of share capital issue because it helps maintain financial flexibility and lowers the risk of financial distress.
- To Strengthen Financial Position
One of the key objectives of issuing share capital is to strengthen the financial position of the company. A strong equity base improves solvency, liquidity, and overall financial stability. It also enhances the company’s ability to absorb losses and withstand economic uncertainties. A well-capitalized company is viewed as financially sound by investors, creditors, and financial institutions. This improves credibility in the market. Therefore, strengthening the financial position is an important objective of share capital issue because it builds financial confidence and ensures long-term sustainability of business operations.
- To Acquire Assets and Resources
Companies issue share capital to acquire fixed assets such as land, buildings, machinery, and equipment required for business operations. These assets are essential for production and service delivery. Share capital provides the necessary funds without creating debt obligations. This allows companies to invest in infrastructure and improve operational efficiency. Asset acquisition also supports modernization and technological advancement. Therefore, acquiring assets and resources is a major objective of share capital issue because it enables companies to build a strong operational base and enhance productivity.
- To Enhance Creditworthiness
Issuing share capital improves the creditworthiness of a company in the financial market. A higher equity base indicates financial strength and reduces dependence on external borrowings. This makes lenders and financial institutions more willing to provide loans at favorable terms. Investors also trust companies with strong share capital because they are considered less risky. Improved creditworthiness helps in raising additional funds when required. Therefore, enhancing creditworthiness is an important objective of share capital issue because it strengthens financial reputation and improves access to future financing opportunities.
- To Distribute Ownership
Another objective of issuing share capital is to distribute ownership among a large number of shareholders. This helps spread financial risk and reduces the burden on a few individuals. When ownership is widely distributed, the company can raise large amounts of capital from many investors. It also improves public participation in business activities. Shareholders become part owners and share in profits through dividends. Therefore, distributing ownership is an important objective of share capital issue because it enables large-scale fund collection and reduces individual financial burden.
- To Ensure Business Continuity
Issuing share capital helps ensure long-term business continuity. Since share capital is permanent in nature, it provides a stable source of finance that supports ongoing operations. It helps companies survive economic fluctuations, losses, and unexpected financial challenges. Unlike loans, it does not require repayment during business operations, reducing financial pressure. This stability allows management to focus on growth and efficiency. Therefore, ensuring business continuity is a key objective of share capital issue because it provides financial security and supports uninterrupted business operations over time.
Types of Share Capital Issue
1. Authorised Share Capital
Authorised Share Capital is the maximum amount of capital that a company is legally permitted to issue as per its Memorandum of Association. It is also called nominal or registered capital. A company cannot issue shares beyond this limit unless it increases its authorised capital through legal procedures. This limit provides control over capital expansion and ensures proper regulation of company finance. It does not represent actual funds received but only the upper ceiling.
Example: If a company has authorised capital of ₹10,00,000 divided into 1,00,000 shares of ₹10 each, it can issue shares up to this limit only, not beyond it.
2. Issued Share Capital
Issued Share Capital refers to that part of authorised capital which the company actually offers to investors for subscription. It represents the shares that are issued to the public or selected investors for raising funds. Issued capital may be equal to or less than authorised capital. It shows the company’s intention to raise funds from shareholders. It becomes relevant only when shares are offered to investors.
Example: If a company has authorised capital of ₹10,00,000 but issues shares worth ₹6,00,000, then ₹6,00,000 is called issued share capital, while the remaining ₹4,00,000 remains unissued.
3. Subscribed Share Capital
Subscribed Share Capital is the portion of issued capital that is actually accepted and agreed to be taken by investors. It shows the actual demand for shares in the market. Subscribed capital may be fully or partially subscribed depending on investor interest. It is more realistic than issued capital because it reflects actual commitment from shareholders. It forms the basis for further accounting entries such as allotment.
Example: A company issues 60,000 shares of ₹10 each (₹6,00,000), but investors apply for only 50,000 shares. Therefore, subscribed capital is ₹5,00,000.
4. Called-Up Share Capital
Called-Up Share Capital refers to the portion of subscribed capital that the company demands from shareholders as payment. Companies do not usually collect full payment at once; instead, they collect in stages such as application, allotment, and calls. Called-up capital is the amount that shareholders are legally required to pay on their shares. It helps companies manage cash flow efficiently.
Example: If 50,000 shares of ₹10 each are issued and the company calls up ₹8 per share, then called-up capital is ₹4,00,000 (50,000 × ₹8).
5. Paid-Up Share Capital
Paid-Up Share Capital is the actual amount received by the company from shareholders against the called-up amount. It represents the real contribution of shareholders and is shown in the Balance Sheet. It may be equal to or less than called-up capital if some shareholders default in payment. Paid-up capital reflects the financial strength of a company.
Example: If ₹8 per share is called on 50,000 shares (₹4,00,000), but shareholders pay only ₹7 per share, then paid-up capital is ₹3,50,000.
6. Uncalled Share Capital
Uncalled Share Capital is the portion of subscribed capital that has not yet been demanded by the company. It remains unpaid until the company makes further calls on shares. This amount is not immediately due but may be called in future as needed. It provides financial flexibility to the company.
Example: If shares are of ₹10 each and the company has called up only ₹8 per share, then ₹2 per share remains uncalled capital. This amount may be demanded later by the company.
7. Reserve Share Capital
Reserve Share Capital is a portion of uncalled capital that a company decides to call only in the event of liquidation. It cannot be called during normal business operations. This amount is kept as a financial safeguard for creditors. It provides security in case the company is wound up. It is created by passing a special resolution.
Example: A company may decide that ₹1 per share out of uncalled capital will be reserved for liquidation purposes. This amount is not used for regular business funding.
8. Equity and Preference Share Capital
Equity Share Capital represents ownership in the company and carries voting rights. Equity shareholders receive dividends only after preference shareholders are paid. Preference Share Capital carries preferential rights in dividend distribution and capital repayment but usually does not have voting rights. These shares provide fixed returns and are less risky. Both types form important components of a company’s capital structure.
Example: A company issues ₹5,00,000 equity shares and ₹3,00,000 preference shares. Equity shareholders get ownership control, while preference shareholders receive fixed dividends before equity holders.
Stages in Issue of Share Capital
Stage 1. Issue of Prospectus
The first stage in the issue of share capital is the issue of a prospectus. A prospectus is an official document issued by a company inviting the public to subscribe to its shares. It contains detailed information about the company such as financial statements, objectives, capital structure, and risk factors. This document helps investors make informed decisions before investing. It must comply with legal requirements and be approved by regulatory authorities. Therefore, the issue of prospectus is an important stage as it initiates the public offering process and ensures transparency and investor awareness.
Stage 2. Receipt of Applications
In this stage, investors apply for shares by filling out application forms and paying application money. The company receives these applications during the subscription period. The application money is usually a portion of the total share price. This stage helps the company assess demand for its shares in the market. If applications exceed the number of shares offered, it may result in oversubscription. Therefore, receipt of applications is a crucial stage because it reflects investor interest and determines the level of demand for the company’s shares.
Stage 3. Allotment of Shares
Allotment of shares is the stage where the company officially distributes shares to applicants based on their applications. If shares are oversubscribed, allotment may be made on a proportionate basis or through a lottery system. Once shares are allotted, applicants become shareholders of the company. The application money is adjusted against the share capital during allotment. Therefore, allotment is a very important stage because it legally establishes the ownership relationship between the company and its shareholders and finalizes the distribution of issued shares.
Stage 4. Calls on Shares
Calls on shares refer to the process of collecting the remaining unpaid amount on shares in installments after allotment. These installments may include first call and final call. The company informs shareholders about the due amount and collects payments within a specified time. This ensures smooth cash flow for the company and reduces financial burden on investors. Therefore, calls on shares are an important stage because they help the company collect the full value of share capital in a systematic and planned manner.
Stage 5. Receipt of Call Money
After making calls, the company receives call money from shareholders. This completes the payment process for shares issued. The amounts received are recorded in the company’s books and transferred to share capital accounts. Timely receipt of call money is important for maintaining liquidity and financial stability. If shareholders fail to pay, the company may take action such as forfeiture of shares. Therefore, receipt of call money is a key stage because it ensures completion of capital collection and strengthens the company’s financial base.
Stage 6. Forfeiture of Shares (If Necessary)
If shareholders fail to pay call money, the company may forfeit their shares. Forfeiture means cancellation of shares and loss of money already paid by shareholders. These shares may later be reissued to other investors. This step ensures discipline in payment and protects the company’s financial interests. Therefore, forfeiture of shares is an optional but important stage in the issue process, as it enforces compliance and ensures proper collection of share capital.
Stage 7. Reissue of Forfeited Shares
After forfeiture, the company may reissue the shares to new investors at par, premium, or discount. The amount received from reissue is recorded in the books, and the forfeited amount may be transferred to capital reserve. This helps the company recover lost capital and maintain financial stability. Therefore, reissue of shares is an important stage because it allows the company to utilize forfeited shares effectively and restore its capital structure.
Stage 8. Completion and Reporting
The final stage is the completion of the issue process and proper reporting in financial statements. The company ensures that all share capital transactions are accurately recorded in the books of accounts. Disclosure is made in the Balance Sheet under share capital. This stage ensures compliance with legal and accounting standards. Therefore, completion and reporting is an essential stage because it provides transparency and finalizes the share capital issue process in a structured manner.
Methods of Issue of Share Capital
1. Public Issue of Shares
Public issue of shares is a method where a company offers its shares to the general public through a prospectus. It is widely used by companies to raise large amounts of capital from a broad investor base. The company invites applications from the public and lists its shares on a stock exchange. This method involves strict legal compliance and full disclosure of financial information to protect investors. It is suitable for large companies seeking long-term finance. Therefore, public issue is an important method because it helps companies raise substantial funds and increase market participation.
2. Initial Public Offer (IPO)
Initial Public Offer (IPO) is the first time a private company offers its shares to the public. It marks the transition of a private company into a public company. The IPO process includes valuation, prospectus issuance, subscription, and listing on stock exchanges. It helps companies raise significant capital for expansion and growth. It also increases brand visibility and credibility in the market. Therefore, IPO is an important method of share capital issue because it provides access to public investment and helps companies enter capital markets for the first time.
3. Follow-on Public Offer (FPO)
Follow-on Public Offer (FPO) refers to the issue of additional shares by a company that is already listed on the stock exchange. It is used to raise more capital after the IPO. Companies use FPO for expansion, debt repayment, or business restructuring. It allows both existing and new investors to participate in shareholding. This method strengthens the financial base of the company. Therefore, FPO is an important method of share capital issue because it helps listed companies raise additional funds from the public market when needed.
4. Private Placement
Private placement is a method in which shares are issued to a selected group of investors instead of the general public. These investors may include financial institutions, mutual funds, banks, or high-net-worth individuals. This method is faster and involves fewer regulatory requirements compared to public issues. It is suitable for companies needing quick access to funds. Therefore, private placement is an important method of share capital issue because it provides flexibility, speed, and targeted fundraising from trusted investors.
5. Rights Issue
Rights issue is a method where a company offers new shares to its existing shareholders in proportion to their current holdings. The shares are usually offered at a discounted price. This method helps companies raise additional capital while maintaining control among existing shareholders. It also prevents dilution of ownership. Therefore, rights issue is an important method of share capital issue because it allows companies to raise funds efficiently while rewarding and involving existing shareholders in business growth.
6. Bonus Issue
Bonus issue refers to the issuance of free additional shares to existing shareholders from accumulated profits or reserves. No cash is received from shareholders in this method. Instead, reserves are converted into share capital. Bonus shares are issued in a fixed ratio, such as 1:2 or 1:5. This method increases the number of shares without changing the total investment value. Therefore, bonus issue is an important method because it rewards shareholders and strengthens the company’s capital structure without affecting cash flow.
7. Preferential Issue
Preferential issue is a method where shares are issued to a select group of investors such as promoters, financial institutions, or strategic partners. It is used when companies want to raise funds quickly and strengthen relationships with key investors. This method is regulated by legal guidelines to ensure fairness and transparency. Therefore, preferential issue is an important method of share capital issue because it enables targeted fundraising and supports strategic investment decisions.
8. Sweat Equity Shares
Sweat equity shares are issued to employees or directors as a reward for their contribution to the company’s growth. These shares are issued at a discount or in exchange for services, intellectual property, or expertise. This method helps motivate employees and retain skilled talent. It also aligns employee interests with company performance. Therefore, sweat equity shares are an important method because they recognize contribution and improve employee loyalty and productivity.
Importance of Issue of Share Capital
- Provides Long-Term Finance
The issue of share capital is important because it provides long-term and permanent financial resources to the company. Unlike loans or debentures, share capital does not have a fixed repayment obligation, which reduces financial pressure on the business. These funds remain with the company until it is wound up. This makes share capital ideal for financing large-scale projects, expansion, and modernization. It ensures financial stability and supports continuous operations. Therefore, the issue of share capital is important because it offers a stable and permanent source of finance for long-term business growth and development.
- Supports Business Expansion
Share capital plays a crucial role in supporting business expansion activities. Companies require significant funds to open new branches, enter new markets, increase production capacity, and adopt advanced technology. Funds raised through shares allow businesses to grow without increasing debt burden. This improves competitiveness and market presence. Expansion through equity financing also reduces financial risk compared to borrowing. Therefore, the issue of share capital is important because it enables companies to expand their operations efficiently and achieve long-term growth objectives without relying heavily on external loans.
- Reduces Dependence on Borrowed Funds
One of the key benefits of issuing share capital is that it reduces dependence on borrowed funds such as loans and debentures. Excessive borrowing increases financial risk due to fixed interest and repayment obligations. By raising funds through shares, companies can maintain a balanced capital structure. This reduces financial stress and improves stability. It also helps companies avoid over-reliance on external lenders. Therefore, the issue of share capital is important because it reduces financial risk and ensures a healthier balance between equity and debt financing.
- Improves Financial Stability
Share capital strengthens the financial stability of a company by increasing its equity base. A strong capital base allows companies to absorb losses and withstand economic uncertainties. It improves solvency and liquidity positions, making the business more secure. Investors and creditors also view such companies as financially sound and reliable. A strong equity structure helps maintain confidence in the market. Therefore, the issue of share capital is important because it improves financial stability and ensures long-term sustainability of business operations.
- Facilitates Asset Acquisition
Companies issue share capital to acquire fixed assets such as land, buildings, machinery, and equipment required for operations. These assets are essential for production and service delivery. Equity financing allows companies to invest in assets without creating debt obligations. This improves operational efficiency and productivity. It also supports modernization and technological advancement. Therefore, the issue of share capital is important because it facilitates asset acquisition and helps companies build a strong operational foundation for business success.
- Enhances Creditworthiness
Issuing share capital improves the creditworthiness of a company. A higher equity base indicates strong financial health and reduces reliance on external borrowing. This increases trust among banks, financial institutions, and investors. As a result, companies can obtain loans at better interest rates and favorable terms. Good creditworthiness also improves market reputation. Therefore, the issue of share capital is important because it strengthens financial credibility and enhances the company’s ability to raise additional funds in the future.
- Encourages Public Participation
Share capital allows the public to participate in company ownership. When shares are issued to the public, individuals become shareholders and part-owners of the company. This spreads ownership among a large number of investors and encourages wider participation in business growth. It also helps companies raise large funds from small contributions by many investors. Therefore, the issue of share capital is important because it promotes public participation and broadens the ownership base of the company.
- Ensures Business Continuity
Share capital ensures continuity of business operations by providing stable and permanent financial resources. Since it does not require repayment during business operations, it reduces financial pressure and risk of insolvency. It helps companies survive during losses, economic downturns, and uncertain market conditions. A strong equity base supports long-term survival and growth. Therefore, the issue of share capital is important because it ensures business continuity and provides financial security for sustained operations over time.
Challenges in Issue of Share Capital
- High Cost of Issue
One of the major challenges in the issue of share capital is the high cost involved. Companies have to spend money on underwriting fees, brokerage, advertising, printing of prospectus, legal compliance, and listing charges. Public issue of shares especially involves significant expenses due to regulatory requirements and market procedures. Small and medium companies often find these costs burdensome. High issuance cost reduces the net funds available for business use. Therefore, high cost of issue is a major challenge because it increases financial burden and reduces overall efficiency of capital raising.
- Complex Legal Procedures
Issuing share capital involves complex legal and regulatory procedures. Companies must comply with company laws, SEBI guidelines, stock exchange regulations, and disclosure requirements. Preparation of prospectus, approval from authorities, and continuous reporting make the process lengthy and complicated. Any mistake in compliance can lead to penalties or rejection of the issue. These legal formalities require time and expertise, making the process difficult for new companies. Therefore, complex legal procedures are a major challenge because they increase time consumption, administrative burden, and compliance risk in raising share capital.
- Risk of Under-Subscription
Under-subscription occurs when the public does not fully subscribe to the shares issued by a company. This is a major risk in public issue of share capital. If investors show low interest, the company may fail to raise the required funds. This affects business expansion plans and financial stability. Market conditions, investor confidence, and company reputation influence subscription levels. Therefore, risk of under-subscription is a significant challenge because it can result in insufficient capital formation and delay in achieving business objectives.
- Market Fluctuations
Stock market fluctuations also create challenges in the issue of share capital. Share prices and investor sentiment are highly affected by economic conditions, political stability, and market trends. If market conditions are unfavorable, companies may not receive good response from investors. This can lead to lower valuation or failure of the issue. Therefore, market fluctuations are a major challenge because they create uncertainty in fundraising and affect the success of share capital issues.
- Dilution of Ownership
Issuing share capital leads to dilution of ownership among existing shareholders. When new shares are issued, control and voting rights are distributed among more shareholders. This may reduce the influence of original owners or promoters. In some cases, it may lead to conflicts in decision-making. Although it helps raise funds, it affects ownership control. Therefore, dilution of ownership is a major challenge because it reduces control of existing shareholders and may impact management decisions.
- Disclosure Requirements
Companies issuing share capital must provide full and transparent disclosure of financial and business information. This includes financial statements, risk factors, management details, and future plans. While transparency is necessary, it can expose sensitive business information to competitors. Preparing detailed disclosures also requires time, effort, and expert knowledge. Therefore, strict disclosure requirements are a challenge because they increase compliance burden and may expose strategic information of the company.
- Dependence on Market Conditions
The success of share capital issuance depends heavily on prevailing market conditions. In bullish markets, investor participation is high, but in bearish or unstable markets, companies may struggle to attract investors. Even financially strong companies may fail to raise funds if market sentiment is negative. This dependency creates uncertainty in financial planning. Therefore, dependence on market conditions is a major challenge because it makes capital raising unpredictable and uncertain.
- Investor Confidence Issues
Investor confidence plays a crucial role in the success of share capital issues. If investors doubt the company’s performance, management, or future prospects, they may avoid investing. Poor financial history or negative publicity can reduce subscription levels. Building and maintaining investor trust takes time and consistent performance. Therefore, lack of investor confidence is a major challenge because it directly affects demand for shares and overall success of capital raising efforts.
Accounting Treatment of Issue of Share Capital
1. Receipt of Share Application Money
| Particular | Journal Entry | Example |
|---|---|---|
| Application money received | Bank A/c Dr. To Share Application A/c | ₹1,00,000 received as application money |
2. Transfer of Application Money to Share Capital
| Particular | Journal Entry | Example |
|---|---|---|
| On allotment of shares | Share Application A/c Dr. To Share Capital A/c | Application money adjusted after allotment |
3. Receipt of Share Allotment Money
| Particular | Journal Entry | Example |
|---|---|---|
| Allotment money received | Bank A/c Dr. To Share Allotment A/c | ₹60,000 received as allotment money |
4. Transfer of Allotment Money to Share Capital
| Particular | Journal Entry | Example |
|---|---|---|
| Transfer to capital | Share Allotment A/c Dr. To Share Capital A/c | Allotment adjusted in capital account |
5. Receipt of Share Call Money
| Particular | Journal Entry | Example |
|---|---|---|
| First/Final call received | Bank A/c Dr. To Share Call A/c | ₹40,000 received as final call |
6. Transfer of Call Money to Share Capital
| Particular | Journal Entry | Example |
|---|---|---|
| Call transferred | Share Call A/c Dr. To Share Capital A/c | Final call adjusted to capital |
7. Forfeiture of Shares
| Particular | Journal Entry | Example |
|---|---|---|
| Shares forfeited | Share Capital A/c Dr. To Share Forfeiture A/c | Non-payment of ₹2,000 call money |
8. Reissue of Forfeited Shares
| Particular | Journal Entry | Example |
|---|---|---|
| Reissue of shares | Bank A/c Dr. Share Forfeiture A/c Dr. To Share Capital A/c | 100 shares reissued at ₹8 per share |
9. Transfer of Forfeiture Balance
| Particular | Journal Entry | Example |
|---|---|---|
| Transfer to capital reserve | Share Forfeiture A/c Dr. To Capital Reserve A/c | Profit on reissue transferred |
10. Bonus Issue (From Reserves)
| Particular | Journal Entry | Example |
|---|---|---|
| Bonus shares issued | General Reserve A/c Dr. To Share Capital A/c | 1:1 bonus issue from reserves |
11. Rights Issue of Shares
| Particular | Journal Entry | Example |
|---|---|---|
| Rights issue received | Bank A/c Dr. To Share Capital A/c | Shares issued at ₹10 per share |
12. Buy-Back of Shares
| Particular | Journal Entry | Example |
|---|---|---|
| Buy-back of shares | Equity Share Capital A/c Dr. To Bank A/c | 1,000 shares bought back at ₹10 |
Illustrations on Issue of Share Capital
1. Issue of Shares at Par
| Particular | Journal Entry | Example |
|---|---|---|
| Issue of shares at face value | Bank A/c Dr. To Share Application A/c | 10,000 shares × ₹10 = ₹1,00,000 received |
| Transfer to share capital | Share Application A/c Dr. To Share Capital A/c | Application money transferred to capital |
2. Issue of Shares at Premium
| Particular | Journal Entry | Example |
|---|---|---|
| Issue of shares at premium | Bank A/c Dr. To Share Capital A/c To Securities Premium A/c | 5,000 shares × ₹12 (₹10 + ₹2 premium) = ₹60,000 |
3. Issue of Shares in Installments
| Particular | Journal Entry | Example |
|---|---|---|
| Application money received | Bank A/c Dr. To Share Application A/c | ₹5 per share × 10,000 shares = ₹50,000 |
| Allotment money received | Bank A/c Dr. To Share Allotment A/c | ₹3 per share × 10,000 shares = ₹30,000 |
| Call money received | Bank A/c Dr. To Share Call A/c | ₹2 per share × 10,000 shares = ₹20,000 |
4. Forfeiture of Shares
| Particular | Journal Entry | Example |
|---|---|---|
| Shares forfeited | Share Capital A/c Dr. To Share Forfeiture A/c | 100 shares forfeited (₹8 called, ₹6 received) |
5. Reissue of Forfeited Shares
| Particular | Journal Entry | Example |
|---|---|---|
| Reissue of shares | Bank A/c Dr. Share Forfeiture A/c Dr. To Share Capital A/c | 100 shares reissued at ₹8 each |
6. Bonus Issue
| Particular | Journal Entry | Example |
|---|---|---|
| Bonus shares issued | General Reserve A/c Dr. To Share Capital A/c | 1:1 bonus issue from reserves |
7. Rights Issue
| Particular | Journal Entry | Example |
|---|---|---|
| Rights issue received | Bank A/c Dr. To Share Capital A/c | 2,000 shares × ₹10 = ₹20,000 |
8. Buy-Back of Shares
| Particular | Journal Entry | Example |
|---|---|---|
| Buy-back of shares | Equity Share Capital A/c Dr. To Bank A/c | 1,000 shares × ₹10 = ₹10,000 |
