Q.Shri Ganga Ltd. was registered with an authorised capital of ₹7,00,000 divided into equity shares of ₹10 each. It offered to the public for subscription 50,000 equity shares. The amount was payable as follows : On application : ₹4 per share On allotment : ₹4 per share On first and final call : Balance The issue was fully subscribed. All the amounts were duly received except the first and final call money on 4,000 equity shares. Show the Share Capital in the Balance Sheet of the company as per Schedule III, Part I of the Companies Act, 2013. Also prepare 'Notes to Accounts' for the same.
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Start your 14-day free trial to unlock the full solution →Shri Ganga Ltd.'s Share Capital in the Balance Sheet shows Issued, Subscribed and Fully Paid-up Capital of ₹4,92,000 (49,200 shares of ₹10 each fully paid) and Subscribed but Not Fully Paid-up Capital of ₹8,000 (800 shares of ₹10 each, ₹8 paid-up), totaling ₹5,00,000; calls-in-arrears of ₹8,000 is deducted to arrive at the net Share Capital.
Concept: Share Capital Accounting and Schedule III Presentation
When a company issues shares, it collects the face value in stages—application, allotment, and calls. The Share Capital account is credited with the full face value of shares allotted, while the corresponding debits go to Share Application, Share Allotment, and Share Call accounts as money is received. If any shareholder defaults on a call, the amount unpaid is termed Calls-in-Arrears and is shown as a deduction from Share Capital in the Balance Sheet.
Under Schedule III, Part I of the Companies Act, 2013, Share Capital must be disclosed in the Balance Sheet under the head "Equity and Liabilities" with detailed Notes to Accounts. The presentation distinguishes between:
- Authorised Capital: the maximum capital the company can raise as per its Memorandum.
- Issued Capital: the portion of authorised capital offered to the public.
- Subscribed Capital: the portion actually subscribed by shareholders, further split into:
- Subscribed and Fully Paid-up
- Subscribed but Not Fully Paid-up
- Calls-in-Arrears: unpaid call money, deducted from subscribed capital to arrive at the net figure.
The accounting treatment is straightforward: Share Capital is always shown at face value. When calls remain unpaid, we do not reduce the Share Capital account itself; instead, we show the shortfall as a separate deduction line in the Balance Sheet.
Solution
Working Notes
W.N. 1: Calculation of Amounts per Share
| Stage | Amount per Share (₹) |
|---|---|
| On Application | 4 |
| On Allotment | 4 |
| On First and Final Call | 2 (Balance: ₹10 – ₹4 – ₹4) |
| Total Face Value | 10 |
W.N. 2: Total Shares and Call Default
- Shares offered and subscribed: 50,000 shares
- Shares on which first and final call is unpaid: 4,000 shares
- Shares fully paid-up: 50,000 – 4,000 = 46,000 shares
W.N. 3: Calls-in-Arrears
Calls-in-Arrears = Number of defaulting shares × Call amount unpaid per share
= 4,000 shares × ₹2 = ₹8,000
W.N. 4: Share Capital Classification
For Schedule III presentation, we split the subscribed capital:
- Subscribed and Fully Paid-up: 46,000 shares × ₹10 = ₹4,60,000
- Subscribed but Not Fully Paid-up: 4,000 shares × ₹10 = ₹40,000 (These shares have a face value of ₹10 each, but only ₹8 per share has been paid: ₹4 application + ₹4 allotment. The ₹2 call is in arrears.)
However, the standard practice under Schedule III is to show the total subscribed capital at face value and then deduct calls-in-arrears separately. So:
- Total Subscribed Capital = 50,000 shares × ₹10 = ₹5,00,000
- Less: Calls-in-Arrears = ₹8,000
- Net Share Capital = ₹4,92,000
Alternatively, for detailed disclosure in Notes to Accounts, we can show:
- Fully Paid-up: 46,000 shares × ₹10 = ₹4,60,000
- Not Fully Paid-up (paid ₹8 per share): 4,000 shares × ₹8 = ₹32,000
- Total paid-up = ₹4,92,000
But the cleaner and more common format is to show subscribed capital at face value and deduct arrears.
Balance Sheet of Shri Ganga Ltd. (Extract)
as per Schedule III, Part I of the Companies Act, 2013
| Particulars | Note No. | Amount (₹) |
|---|---|---|
| I. EQUITY AND LIABILITIES | ||
| 1. Shareholders' Funds | ||
| (a) Share Capital | 1 | 4,92,000 |
| (b) Reserves and Surplus | — | |
| … |
Notes to Accounts
Note 1: Share Capital
| Particulars | Amount (₹) |
|---|---|
| Authorised Capital: | |
| 70,000 Equity Shares of ₹10 each | 7,00,000 |
| Issued Capital: | |
| 50,000 Equity Shares of ₹10 each | 5,00,000 |
| Subscribed and Paid-up Capital: | |
| 50,000 Equity Shares of ₹10 each, fully called-up | 5,00,000 |
| Less: Calls-in-Arrears (First and Final Call on 4,000 shares @ ₹2 per share) | (8,000) |
| Total Subscribed and Paid-up Capital | 4,92,000 |
Alternatively (more detailed breakdown):
| Particulars | Amount (₹) |
|---------------------------------------------------------------------------------|----------------| …
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