The document discusses accounting for share capital, specifically the issue of shares at a premium. It provides examples of journal entries for issuing shares at a premium where the amount is payable in lump sum or installments. It also shows how share capital is presented in the balance sheet as per the Companies Act, 2013 including reserves and surplus for securities premium. The examples illustrate the accounting entries for receipt and allotment of application money, premium, and call money at different stages of share issuance at a premium.

1. Company Accounts-
Accounting for Share Capital
Issue Of Shares at premium for cash

2. • Issue of shares at premium means shares have been
issued at a value that is more than its normal(face)value.
• For example- a share with nominal(face) value of Rs. 10
is issues at Rs. 15, premium being Rs. 5.

3. Requirement of the Companies Act ,2013
• The Companies Act 2013(Section 52(1)) prescribes that the amount of the
premium received on securities be credited to Securities Premium Account,
i.e., Securities Premium Reserve Account.
• Securities Premium Account v/s Securities Premium Reserve Account
Section 52(1)of the Companies Act,2013 requires that the amount of premium received
on securities to be credited to ‘Securities Premium Account’. Schedule III(Form of
Balance Sheet) of the companies act 2013 has given the head ‘Securities Premium Reserve’

4. Presentation in the Balance Sheet
• Premium received being a capital receipt is credited to Securities Premium
Reserve Account and is shown in the Equity and Liabilities part of Balance
Sheet under the head ‘ Shareholders`s Funds’ and sub heads ‘Reserves
and Surplus’ as Securities Premium Reserves.

5. Utilisation of Securities Premium Reserve
Section 52(2) of the Companies Act, 2013 restricts the use of the
amounts received as premium on securities for the following purposes:
(i) Issuing fully paid bonus shares to the members;
(ii) Writing off preliminary expenses of the company;
(iii) Writing off the expenses of, or the commission paid or discount allowed
on any issue of securities or debentures of the company;
(iv) Providing for the premium payables on the redemption of any redeemable
Preference Shares or of any debentures of the company;
(v) In purchasing its own shares(buy-back).

6. Accounting Entries for Issue of Shares a
Premium
TRANSACTION JOURNAL ENRTRIES AMOUNT
On receipt of Application
Money
Bank A/C ..Dr.
To Shares Application A/C
(With the total application money
received including premium)
On Allotment of Shares Shares Application A/C ..Dr.
To Share Capital A/C
To Securities Premium
Reserve A/C
(With total application money)
(With amount paid towards share
capital)
(With amount of premium
received with application of
money)

7. Amount Due on
Allotment
Share capital A/C ..Dr.
To Share Capital A/C
To Securities Premium Reserve A/C
(With money due on allotment)
(With amount due towards share
capital)
(With amount due towards
premium)
On receipt of Allotment
Money
Bank A/C ..Dr.
Calls in Arrears A/C ..Dr.
To Shares Allotment A/C
(With amount received against
allotment money)
(With amount not received against
allotment of money)
Amount Due on First Call Shares First Call A/C ..Dr.
To Share Capital A/C
To Securities Premium Reserve A/C
(With the amount due on first call)
(With the amount due towards
share capital)
(With the amount due towards
premium)
On Receipt of First Call Bank A/C ..Dr.
Calls in Arrears A/C ..Dr.
To Shares First Call A/C
(With the amount received against
first call)
(With the amount not received
against first call money due)

8. Example 1:
(Issue of Shares at Premium, Fully Subscribed, Amount Payable in Lump Sum)
Wye Ltd. Issued 20,000 Equity Shares of Rs. 10 each at a premium of Rs. 10 each at
a premium of Rs.2 payable along with the application. All the shares were applied
and duly allotted. Pass necessary journal entries and also draw Balance Sheet of
the Company.

9. Date Particulars L.F. Dr. Cr.
Bank a/c Dr.
To Equity Shares Application and Allotment a/c
(Being the application money on 20,000 Equity Shares
received @rs 12 per sheet)
2,400,000
2,40,000
Equity Shares Application and Allotment a/c Dr.
To Equity Share Capital a/c
To Security Premium Reserve a/c
(Being the Equity Share allotted to the applicants
and the amount transferred to Equity Share Capital
and Security Premium Reserve Account)
2,40,000
2,00,000
40,000
In The Books of Wye Ltd.
JOURNEL
SOLUTION:

11. Example 2:
(Issue of Shares at Premium, Fully Subscribed, Amount Payable in Instalments)
Fine Craft Ltd. Issued 50,000 equity shares pf Rs. 10 each at premium pf Rs. 2 per share
payable as follows:
Rs. 3 on application, Rs 6 on allotment, Rs.3 on first and final call .
All the shares were applied for and duly allotted. Pass necessary Journal Entries.

12. In The Books of Fine Craft Ltd.
JOURNAL
SOLUTION:
Date Particulars L.F. Dr. Cr.
Bank a/c Dr.
To Equity Shares Application a/c
(Being the application money on 50,000 equity share @rs.3
per share)
1,50,000
1,50,000
Equity Shares Application a/c Dr.
To Equity Share Capital a/c
(Being the transfer of application money to Equity share
Capital Account on allotment)
1,50,000
1,50,000
Equity Shares Allotment a/c Dr.
To Equity Share Capital a/c
To Security Premium Reserve a/c
(Being the allotment money due)
3,00,000
2,00,000
1,00,000

13. Bank a/c Dr.
To Equity Shares Allotment a/c
(Being the receipt of rs.6 per share on 50,000 equity
share)
3,00,000
3,00,000
Equity Shares First and Final Call a/c Dr.
To Equity Share Capital a/c
(Being the amount due on 50,000 equity share @rs3
per share)
1,50,000
1,50,000
Bank a/c Dr.
To Equity Shares First and Final Call a/c
(Being the receipt of rs.3 per share on 50,000 equity
share)
1,50,000
1,50,000

14. Example 3:
(Issue of Shares at Premium, Fully Subscribed, Amount Payable in Instalments)
‘Tractors India Ltd.’ is registered with an authorised capital of Rs. 10,00,000 divided
into 1,00,000 equity shares of Rs. 10 each. The company issued Rs. 50,000 equity
shares at a premium of Rs.5 per share. Rs.2 per share were payable with application,
Rs. 8 per share(including premium) on allotment and the balance sheet on first and
final call. The issue was finally subscribed and all the allotment due was received
except the first and final call money on 500 shares allotted to Balram.
Present the ‘Share Capital’ in the Balance Sheet of ‘Tractors India Ltd.’ As per Schedule
III, Part 1 of the companies Act, 2013. Also prepare Note to Accounts for the same.

15. Tractor India Ltd.
BALANCE SHEET(Extract)
as at
SOLUTION:
PARTICULARS Note No. Rs.
1. EQUITY AND LIABILITIES
Shareholders’ Fund
share capital 1 4,97,500

17. Example 4:
(Issue of Shares at Premium, Fully Subscribed, Amount Payable in Instalments)
New India Ltd. was registered with a capital of Rs.1,00,000 in equity shares of Rs. 100
each. It issued a prospectus inviting applications for 20,000 shares at 40percent
premium payable as follows:
On Application Rs.50(including Rs.10 premium);
On Allotment Rs. 40 (including Rs.10 premium);
On First Call Rs. 30(including Rs.10 premium);
On Second Call and Final Call Rs. 20(including Rs. 10 premium).
Applications were received for 20,000. The amount due was received.
Pass the necessary Journal entries and also show how ‘Share Capital’ will be shown in
the Balance Sheet of the Company.

18. In The Books of New India Ltd.
JOURNAL
SOLUTION:
Date Particulars L.F. Dr. Cr.
Bank a/c Dr.
To Equity Shares Application a/c
(Being the application money on 20,000 equity share @rs.50
per share)
10,00,000
10,00,000
Equity Shares Application a/c Dr.
To Equity Share Capital a/c
To Security Premium Reserve a/c
(Being the application money adjusted)
10,00,000
8,00,000
2,00,000
Equity Shares Allotment a/c Dr.
To Equity Share Capital a/c
To Security Premium Reserve a/c
(Being the allotment money due)
8,00,000
6,00,000
2,00,000

19. Bank a/c Dr.
To Equity Shares Allotment a/c
(Being the allotment money received)
8,00,000
8,00,000
Equity Shares First Call a/c Dr.
To Equity Share Capital a/c
To Security Premium Reserve a/c
(Being the first call due on 20,000 shares)
6,00,000
4,00,000
2,00,000
Bank a/c Dr.
To Equity Shares First Call a/c
(Being the share first call received)
6,00,000
6,00,000
Equity Shares Second and Final Call a/c Dr.
To Equity Share Capital a/c
To Security Premium Reserve a/c
(Being the second and final call money due on 20,000
shares)
4,00,000
2,00,000
2,00,000
Bank a/c Dr.
To Equity Shares Second and Final Call a/c
(Being the share second and final call money received)
4,00,000
4,00,000