Rupak Ltd. issued 10,000 shares of Rs. 100 each pa – Class 12 Accountancy

Numerical Questions · Q4

Rupak Ltd. issued 10,000 shares of Rs. 100 each payable:

Particulars	Amount (₹)
On Application (per share)	20
On Allotment (per share)	30
Balance in two calls of Rs. 25 per share

The application and allotment money were duly received. On first call, all members paid their dues except one member holding 200 shares, while another member holding 500 shares paid for the balance due in full. Final call was not made. Give journal entries and prepare cash book.

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Concept understanding — Share Capital Accounting

Let’s begin with something you already know from everyday life.

Imagine you and two friends decide to start a small business — say, a tiffin service. You each put in some money to buy utensils, a stove, and ingredients. That money you all contributed is the capital of the business. The business doesn’t own that money; it owes it back to you, the owners. In accounting, we call you the shareholders, and the money you put in is share capital.

Now scale that up to a company. A company needs huge amounts of money to build factories, buy machinery, or develop software. It raises this money by selling shares — small units of ownership. When you buy a share, you become a part-owner of that company. The total money collected from all shareholders is the company’s share capital.

Why does share capital matter in accounting?

Because the company is a separate legal person. It does not own the money — the shareholders do. So the company must record exactly how much it has collected from whom, and in what form. This affects the balance sheet (where share capital appears under Equity and Liabilities) and the cash flow (money coming in from shareholders is a financing activity).

The precise meaning (NCERT Class 12)

Share Capital is the money raised by a company by issuing shares to the public or to promoters. It is shown under the head Shareholders’ Funds in the Balance Sheet.

There are two main types of shares:

Equity shares – ordinary shares; owners get dividends only if the company makes profit.
Preference shares – owners get a fixed dividend before equity shareholders, but usually have no voting rights.

Accounting treatment — the journal entries

When a company issues shares, it follows a standard sequence. Let’s say a company issues 10,000 equity shares of ₹10 each at par (i.e., at face value). The money is received in two instalments: ₹4 on application, ₹6 on allotment.

Step 1: Application money received

Date	Particulars	Debit (₹)	Credit (₹)
	Bank A/c Dr.	40,000
	To Share Application A/c		40,000
(Being application money received on 10,000 shares @ ₹4 each)

Step 2: Transfer application money to Share Capital

Date	Particulars	Debit (₹)	Credit (₹)
	Share Application A/c Dr.	40,000
	To Share Capital A/c		40,000
(Being application money transferred to Share Capital)

Step 3: Allotment money due

Date	Particulars	Debit (₹)	Credit (₹)
	Share Allotment A/c Dr.	60,000
	To Share Capital A/c		60,000
(Being allotment money due on 10,000 shares @ ₹6 each)

Step 4: Allotment money received

Date	Particulars	Debit (₹)	Credit (₹)
	Bank A/c Dr.	60,000
	To Share Allotment A/c		60,000
(Being allotment money received)

Note

If shares are issued at a premium (e.g., ₹10 face value, issued at ₹12), the extra ₹2 goes to a separate account called Securities Premium Reserve A/c. It is not part of share capital.

The Balance Sheet format (as per NCERT)

Under Equity and Liabilities, share capital appears like this:

Particulars	Note No.	Amount (₹)
1. Shareholders’ Funds
(a) Share Capital	1	1,00,000
(b) Reserves and Surplus	2	20,000
2. Non-Current Liabilities	...	...
3. Current Liabilities	...	...

And Note 1 (Share Capital) is typically shown as:

Particulars	Amount (₹)
Authorised Capital
1,00,000 Equity Shares of ₹10 each	10,00,000
Issued Capital
80,000 Equity Shares of ₹10 each	8,00,000
Subscribed and Paid-up Capital
80,000 Equity Shares of ₹10 each fully paid	8,00,000

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Journal Entries in the Books of Rupak Ltd.

Particulars	Debit (₹)	Credit (₹)
Bank A/c Dr.	2,00,000
To Share Application A/c		2,00,000
(Being application money received on 10,000 shares @ ₹20 each)
Share Application A/c Dr.	2,00,000
To Share Capital A/c		2,00,000
(Being application money transferred to Share Capital)
Share Allotment A/c Dr.	3,00,000
To Share Capital A/c		3,00,000
(Being allotment money due on 10,000 shares @ ₹30 each)
Bank A/c Dr.	3,00,000
To Share Allotment A/c		3,00,000
(Being allotment money received)
Share First Call A/c Dr.	2,50,000
To Share Capital A/c		2,50,000
(Being first call money due on 10,000 shares @ ₹25 each)
Bank A/c Dr.	2,45,000
Calls-in-Arrears A/c Dr.	5,000
To Share First Call A/c		2,50,000
(Being first call money received except on 200 shares; 500 shares paid in advance)
Bank A/c Dr.	12,500
To Calls-in-Advance A/c		12,500
(Being final call money received in advance on 500 shares @ ₹25 each)

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Rupak Ltd. issued 10,000 shares of ₹100. Application and allotment were received in full; on the first call one member (200 shares) defaulted, and another member (500 shares) paid the final call in advance. As the final call was never made, that advance is held in Calls in Advance. Total cash received is ₹7,57,500, with Calls in Arrears of ₹5,000 and Calls in Advance of ₹12,500.

Concept and Accounting Treatment

Share money is collected in stages — application, allotment and calls — each recorded separately. When a member fails to pay a call, the shortfall is a Calls in Arrears (a deduction from called-up capital). When a member pays an instalment not yet called, the amount is a Calls in Advance (a liability), because the company has not yet made that call. Since the final call was never made, the money the 500-share member paid towards it stays in Calls in Advance.

Working Notes

Per share: Application ₹20, Allotment ₹30, First call ₹25, Final call ₹25 (the balance in two calls of ₹25 each).
First call: due 10,000 × ₹25 = ₹2,50,000; received on 9,800 shares = ₹2,45,000; unpaid on 200 shares = ₹5,000 (Calls in Arrears).
Calls in Advance: the member holding 500 shares paid the final call of ₹25 in advance = 500 × ₹25 = ₹12,500.
Total cash: ₹2,00,000 + ₹3,00,000 + ₹2,45,000 + ₹12,500 = ₹7,57,500.

Journal Entries in the Books of Rupak Ltd.

Particulars	Debit (₹)	Credit (₹)
Bank A/c ...Dr.	2,00,000
To Share Application A/c		2,00,000
(Application money on 10,000 shares @ ₹20)
Share Application A/c ...Dr.	2,00,000
To Share Capital A/c		2,00,000
(Application money transferred to Share Capital)
Share Allotment A/c ...Dr.	3,00,000
To Share Capital A/c		3,00,000
(Allotment due on 10,000 shares @ ₹30)
Bank A/c ...Dr.	3,00,000
To Share Allotment A/c		3,00,000
(Allotment money received in full)
Share First Call A/c ...Dr.	2,50,000
To Share Capital A/c		2,50,000
(First call due on 10,000 shares @ ₹25)
Bank A/c ...Dr.	2,57,500

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Concept and Accounting Treatment

Working Notes

Journal Entries in the Books of Rupak Ltd.

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