Issue and Forfeiture of Shares notes: ISC Class 12 Accounts

1. Issue of shares at par and at a premium

A company issues shares under the Companies Act, 2013. Each share has a face (nominal) value; share capital is always credited at that value. The money is usually collected in instalments: application, allotment and calls.

Entries (issue at par)

Bank A/c Dr. To Equity Share Application A/c (application money received)
Equity Share Application A/c Dr. To Equity Share Capital A/c (on allotment)
Equity Share Allotment A/c Dr. To Equity Share Capital A/c (allotment money due)
Bank A/c Dr. To Equity Share Allotment A/c (allotment money received)
Equity Share First Call A/c Dr. To Equity Share Capital A/c; Bank A/c Dr. To Equity Share First Call A/c

Issue at a premium: the instalment that carries the premium is split: Equity Share Allotment A/c Dr. To Equity Share Capital A/c, To Securities Premium A/c. Under Section 52, securities premium may be used only for capital purposes (writing off preliminary expenses, writing off the expenses, commission or discount on an issue of securities, the premium payable on redemption of preference shares or debentures, buy-back of own securities); never for dividends.

Check: capital parts of all instalments = face value; instalment accounts close at nil.

Not in the ISC 2027 syllabus for this chapter: bonus shares, rights shares, private placement, sweat equity shares and employee stock option schemes; reservations for small individual participants and minimum tradable lots.

Table of entries for an issue at par: application money received is debited to bank; on allotment the application account is transferred to share capital; allotment and each call are first made due to share capital and then received into the bank
Event	Entry
Application money received	Bank A/c Dr. To Equity Share Application A/c
Shares allotted	Equity Share Application A/c Dr. To Equity Share Capital A/c (and To Bank A/c for any refund)
Allotment money due	Equity Share Allotment A/c Dr. To Equity Share Capital A/c
Allotment money received	Bank A/c Dr. To Equity Share Allotment A/c
Call made	Equity Share First Call A/c Dr. To Equity Share Capital A/c
Call money received	Bank A/c Dr. To Equity Share First Call A/c

Journal of Yaman Bicycle Rims Ltd for 60,000 shares of ten rupees at par: application, allotment and first and final call money each received and transferred to equity share capital, totalling 6,00,000
Particulars	Dr (₹)	Cr (₹)
Bank A/c Dr.	1,80,000
To Equity Share Application A/c		1,80,000
(Being application money received on 60,000 shares)
Equity Share Application A/c Dr.	1,80,000
To Equity Share Capital A/c		1,80,000
(Being application money on 60,000 shares transferred to share capital)
Equity Share Allotment A/c Dr.	2,40,000
To Equity Share Capital A/c		2,40,000
(Being allotment money due on 60,000 shares)
Bank A/c Dr.	2,40,000
To Equity Share Allotment A/c		2,40,000
(Being allotment money received)
Equity Share First and Final Call A/c Dr.	1,80,000
To Equity Share Capital A/c		1,80,000
(Being first and final call money due on 60,000 shares)
Bank A/c Dr.	1,80,000
To Equity Share First and Final Call A/c		1,80,000
(Being first and final call money received)

Table on securities premium under section fifty-two: it is the amount above face value, credited to the securities premium account and shown under reserves and surplus; it may be used for capital purposes such as writing off preliminary or issue expenses, premium on redemption and buy-back, but not for dividends
Securities premium (Section 52)	Rule
What it is	Amount received above face value on an issue of shares
Account	Securities Premium A/c (credit), not share capital
In the balance sheet	Reserves and Surplus, under Shareholders' Funds
May be used to	write off preliminary expenses; write off expenses, commission or discount on an issue; provide premium on redemption of preference shares or debentures; buy back own shares
May not be used to	pay dividends (it is a capital receipt)

Equity share capital account of Bageshri Glass Bangles Ltd: credited with ten rupees per share in three instalments, closing at 4,50,000; the premium of 1,35,000 goes to the securities premium account instead
Dr: Particulars	₹	Cr: Particulars	₹
To Balance c/d	4,50,000	By Equity Share Application A/c	1,35,000
		By Equity Share Allotment A/c	1,35,000
		By Equity Share First and Final Call A/c	1,80,000
Total	4,50,000	Total	4,50,000

Column heights are drawn to scale from the instalments.

Key terms

Face value: The nominal value of a share stated in the memorandum; share capital is credited at this amount.
Securities premium: The amount received on an issue of shares above their face value; a capital receipt kept in the Securities Premium Account.

2. Journal proper, cash book and ledger accounts

When a company keeps a cash book, every receipt and payment through the bank is recorded in its bank column; the journal proper keeps only entries that move no cash.

In the cash book	In the journal proper
Application, allotment and call money received	Application money transferred to share capital
Refund of application money	Allotment money due; call money due
Arrears and calls in advance received	Forfeiture; transfer to capital reserve

A mixed entry (application money transferred with a refund) is split: the transfer stays in the journal proper and the refund is a payment in the cash book.

Ledger accounts: Equity Share Capital A/c (credit balance = amount called up), instalment accounts (close at nil), Calls in Arrears A/c (debit), Calls in Advance A/c (credit), Securities Premium A/c (credit), Share Forfeiture A/c (credit).

Table showing where each share-issue entry goes when a cash book is kept: money received or refunded through the bank goes to the cash book; the transfer of application money and amounts falling due go to the journal proper
Entry	Journal proper	Cash book (bank column)
Application money received	—	Receipt: To Equity Share Application A/c
Application money transferred to capital	Yes	—
Refund of application money	—	Payment: By Equity Share Application A/c
Allotment or call money due	Yes	—
Allotment or call money received	—	Receipt: To Equity Share Allotment (or Call) A/c

The journal proper keeps only the three non-cash entries.
Receipts	₹	Payments	₹
To Equity Share Application A/c	1,80,000	By Balance c/d	6,00,000
To Equity Share Allotment A/c	2,40,000
To Equity Share First and Final Call A/c	1,80,000
Total	6,00,000	Total	6,00,000

Key terms

Journal proper: The journal used for entries that do not pass through cash or bank when a cash book is kept.
Cash book (bank column): The book of original entry for receipts and payments through the bank; its balance is cash at bank.

3. Shares for consideration other than cash

To promoters for their services: Incorporation Costs A/c (or Goodwill A/c) Dr. To Equity Share Capital A/c.

To underwriters for their commission: Underwriting Commission A/c Dr. To Underwriters' A/c; Underwriters' A/c Dr. To Equity Share Capital A/c (and Securities Premium A/c). Commission on shares may not exceed 5% of the issue price or the rate authorised by the articles, whichever is less.

To vendors for assets: Sundry Assets A/c Dr. To Vendor's A/c; Vendor's A/c Dr. To Equity Share Capital A/c, To Securities Premium A/c (and To Bank A/c for any cash part).

For a business: Business Purchase A/c Dr. To Vendor's A/c; Assets A/cs Dr., Goodwill A/c Dr. (consideration > net assets) To Liabilities A/cs, To Business Purchase A/c, To Capital Reserve A/c (consideration < net assets).

Number of shares = amount payable in shares ÷ issue price per share (face value + premium).

Table of entries for shares issued for consideration other than cash: to promoters through incorporation costs or goodwill; to underwriters through underwriting commission and the underwriters account; to a vendor through the vendor account, for assets or for a whole business with goodwill or capital reserve as the balancing figure; the number of shares is the amount payable divided by the issue price
Shares issued to	Entries
Promoters, for their services	Incorporation Costs A/c (or Goodwill A/c) Dr. To Equity Share Capital A/c
Underwriters, for their commission	Underwriting Commission A/c Dr. To Underwriters' A/c; Underwriters' A/c Dr. To Equity Share Capital A/c (and Securities Premium A/c)
Vendor, for assets	Sundry Assets A/c Dr. To Vendor's A/c; Vendor's A/c Dr. To Equity Share Capital A/c (and Securities Premium A/c)
Vendor, for a business	Business Purchase A/c Dr. To Vendor's A/c; Assets A/c Dr. (Goodwill Dr. or Capital Reserve Cr. as the balance) To Liabilities A/c, To Business Purchase A/c; Vendor's A/c Dr. To Share Capital (and Premium)
Number of shares to a vendor	Amount payable in shares ÷ issue price per share

Journal of Darbari Leaf Plates for the business of Baldev Areca Crafts: business purchase of 4,50,000; assets and creditors taken over with goodwill of 50,000; vendor paid 30,000 by cheque and 35,000 shares at twelve rupees, capital 3,50,000 and premium 70,000
Particulars	Dr (₹)	Cr (₹)
Business Purchase A/c Dr.	4,50,000
To Baldev Areca Crafts A/c		4,50,000
(Being business of Baldev Areca Crafts purchased)
Machinery A/c Dr.	2,80,000
Stock A/c Dr.	90,000
Debtors A/c Dr.	70,000
Goodwill A/c Dr.	50,000
To Creditors A/c		40,000
To Business Purchase A/c		4,50,000
(Being assets and liabilities taken over; goodwill as the balancing figure)
Baldev Areca Crafts A/c Dr.	4,50,000
To Bank A/c		30,000
To Equity Share Capital A/c		3,50,000
To Securities Premium A/c		70,000
(Being vendor paid by cheque and by 35,000 equity shares of ₹10 at ₹12)

Journal of Bhupali Precision Tools: 4,000 shares to promoters debited to incorporation costs; underwriting commission of 48,000 settled by 3,200 shares at fifteen rupees, capital 32,000 and premium 16,000
Particulars	Dr (₹)	Cr (₹)
Incorporation Costs A/c Dr.	40,000
To Equity Share Capital A/c		40,000
(Being 4,000 fully paid shares allotted to the promoters for their services)
Underwriting Commission A/c Dr.	48,000
To Umang and Co. (Underwriters') A/c		48,000
(Being commission at 4% of the issue price due to the underwriters)
Umang and Co. (Underwriters') A/c Dr.	48,000
To Equity Share Capital A/c		32,000
To Securities Premium A/c		16,000
(Being 3,200 fully paid shares allotted to the underwriters at ₹15)

Key terms

Purchase consideration: The price agreed to be paid to a vendor for assets or a business, in cash, shares or both.
Underwriting commission: Payment to underwriters for undertaking to take up shares the public does not subscribe; limited by law.

4. Calls in arrears and calls in advance, with interest

Calls in arrears: call money not paid by the due date. Calls in Arrears A/c Dr. To Equity Share Call A/c; on receipt, Bank A/c Dr. To Calls in Arrears A/c. Debit balance; deducted from subscribed capital in the Note on Share Capital.

Calls in advance: money received for a call not yet made. Bank A/c Dr. To Calls in Advance A/c; when the call is made, Calls in Advance A/c Dr. To Equity Share Call A/c. Credit balance; Other Current Liabilities.

Interest (as per the articles; if they are silent, Table F of Schedule I):

On calls in arrears, up to 10% p.a. from the due date to the date of payment (the Board may lower or waive it): Sundry Shareholders A/c Dr. To Interest on Calls in Arrears A/c; Bank A/c Dr. To Sundry Shareholders A/c; at the year end Interest on Calls in Arrears A/c Dr. To Statement of Profit and Loss.
On calls in advance, up to 12% p.a. from the date of receipt to the date the call is due (unless the general meeting directs otherwise): Interest on Calls in Advance A/c Dr. To Sundry Shareholders A/c; Sundry Shareholders A/c Dr. To Bank A/c; at the year end Statement of Profit and Loss Dr. To Interest on Calls in Advance A/c.

Formula: interest = amount × rate/100 × months/12.

Table on interest under Table F: on calls in arrears up to ten per cent a year from the due date to payment, an income charged to shareholders and closed to the statement of profit and loss; on calls in advance up to twelve per cent a year from receipt to the due date, an expense paid to shareholders and closed to the statement of profit and loss
Interest (Table F, unless the articles say otherwise)	Calls in arrears	Calls in advance
Rate	Up to 10% p.a. (the Board may waive or lower it)	Up to 12% p.a. (unless the general meeting directs otherwise)
Period	From the due date to the date of payment	From the date of receipt to the date the call is due
Entry when due	Sundry Shareholders A/c Dr. To Interest on Calls in Arrears A/c	Interest on Calls in Advance A/c Dr. To Sundry Shareholders A/c
Settled	Bank A/c Dr. To Sundry Shareholders A/c	Sundry Shareholders A/c Dr. To Bank A/c
At the year end	Interest on Calls in Arrears A/c Dr. To Statement of Profit and Loss	Statement of Profit and Loss Dr. To Interest on Calls in Advance A/c

Table on calls in arrears: unpaid call money is debited to a calls in arrears account; it is cleared when the money is received; the balance is money called up but not received and is deducted from subscribed capital in the note on share capital
Calls in arrears	Entry or rule
Call money not received on the due date	Calls in Arrears A/c Dr. (with Bank A/c Dr. for the rest) To Equity Share Call A/c
Arrears received later	Bank A/c Dr. To Calls in Arrears A/c
Nature	Debit balance: money called up but not received
Balance sheet	Deducted from subscribed capital in the Note on Share Capital

Table on calls in advance: money received before a call is credited to a calls in advance account and adjusted when the call is made; the balance is owed to shareholders and is shown under other current liabilities
Calls in advance	Entry or rule
Money received before a call is made	Bank A/c Dr. To Calls in Advance A/c
Call made later	Calls in Advance A/c Dr. (with Bank A/c Dr. for the rest) To Equity Share Call A/c
Nature	Credit balance: owed to shareholders until the call is made
Balance sheet	Other Current Liabilities (with any interest accrued on it)

Interest working for Tilang Water Purifiers: Manorama's advance of six thousand rupees for three months at twelve per cent gives 180; Jaideep's arrears of 8,000 for three months at ten per cent gives 200
Tilang Water Purifiers (imagined)	Amount (₹)	Period	Rate	Interest (₹)
Manorama: call paid in advance on 1,500 shares	6,000	1 June to 1 September: 3 months	12% p.a.	180
Jaideep: call in arrears on 2,000 shares	8,000	1 September to 1 December: 3 months	10% p.a.	200

Bar lengths are drawn to scale in months.

Journal of Tilang Water Purifiers for interest: interest of 180 on calls in advance due and paid; interest of 200 charged to Jaideep and received with his arrears of 8,000; both interest accounts closed to the statement of profit and loss on thirty-one March
Date	Particulars	Dr (₹)	Cr (₹)
1 September 2026	Interest on Calls in Advance A/c Dr.	180
	To Sundry Shareholders A/c		180
	(Being interest at 12% per annum for 3 months due on calls in advance of ₹6,000)
1 September 2026	Sundry Shareholders A/c Dr.	180
	To Bank A/c		180
	(Being interest on calls in advance paid)
1 December 2026	Sundry Shareholders A/c Dr.	200
	To Interest on Calls in Arrears A/c		200
	(Being interest at 10% per annum for 3 months charged on calls in arrears of ₹8,000)
1 December 2026	Bank A/c Dr.	8,200
	To Calls in Arrears A/c		8,000
	To Sundry Shareholders A/c		200
	(Being calls in arrears and interest received)
31 March 2027	Interest on Calls in Arrears A/c Dr.	200
	To Statement of Profit and Loss		200
	(Being interest on calls in arrears transferred to the Statement of Profit and Loss)
31 March 2027	Statement of Profit and Loss Dr.	180
	To Interest on Calls in Advance A/c		180
	(Being interest on calls in advance transferred to the Statement of Profit and Loss)

Key terms

Calls in arrears: Amount called up on shares but not paid by the due date.
Calls in advance: Amount received from a shareholder for a call that has not yet been made.

5. Over-subscription, under-subscription and pro-rata allotment

Minimum subscription: a public issue may be allotted only if at least 90% of it is subscribed; otherwise all application money is refunded.

Under-subscription (at least 90%): record every entry on the number of shares actually applied for and allotted.

Over-subscription:

Reject some applications: refund their money.
Pro rata: excess application money is adjusted towards the money due on allotment (first the capital part, then any premium due); any surplus is refunded, or, if the articles permit, credited to Calls in Advance.
A combination of rejection, full allotment and pro rata.

Transfer entry: Equity Share Application A/c Dr. To Equity Share Capital A/c (and Securities Premium A/c if premium is on application), To Equity Share Allotment A/c (excess adjusted), To Bank A/c (refund).

Working: shares applied by an allottee = shares allotted × applied ÷ allotted in the group; excess = (applied − allotted) × application money per share.

Table of subscription cases: an under-subscribed issue with at least ninety per cent applied for is allotted on the shares applied for; below ninety per cent all money is refunded; over-subscription is handled by rejecting some applications with refunds, or by pro-rata allotment with the excess adjusted towards allotment and any surplus refunded or held as calls in advance
Situation	Treatment
Under-subscription, at least 90% applied for	Allot the shares applied for; record entries on that number
Under-subscription, below 90%	No allotment; refund all application money
Over-subscription: reject some applications	Refund their money in full
Over-subscription: pro-rata allotment	Excess application money adjusted towards allotment (capital, then premium due); surplus refunded or, if the articles allow, held as calls in advance

Working table for Malkauns Cotton Quilts: 85,000 shares applied for; applications for 10,000 rejected and refunded; the remaining 75,000 allotted 50,000 shares pro rata, so their excess of 1,00,000 is adjusted towards allotment money of 2,00,000
Malkauns Cotton Quilts (imagined)	Applied	Allotted	Paid on application (₹)	To capital (₹)	Adjusted to allotment (₹)	Refunded (₹)
Rejected	10,000	0	40,000	0	0	40,000
Pro rata (3 : 2)	75,000	50,000	3,00,000	2,00,000	1,00,000	0
Total	85,000	50,000	3,40,000	2,00,000	1,00,000	40,000

Journal of Malkauns Cotton Quilts for application and allotment: application money of 3,40,000 received; transferred to capital 2,00,000, adjusted towards allotment 1,00,000 and refunded 40,000; allotment money due including premium, and 1,00,000 received
Particulars	Dr (₹)	Cr (₹)
Bank A/c Dr.	3,40,000
To Equity Share Application A/c		3,40,000
(Being application money received on 85,000 shares)
Equity Share Application A/c Dr.	3,40,000
To Equity Share Capital A/c		2,00,000
To Equity Share Allotment A/c		1,00,000
To Bank A/c		40,000
(Being application money on 50,000 shares transferred to share capital; excess adjusted towards allotment; money on rejected applications refunded)
Equity Share Allotment A/c Dr.	2,00,000
To Equity Share Capital A/c		1,00,000
To Securities Premium A/c		1,00,000
(Being allotment money due on 50,000 shares including premium)
Bank A/c Dr.	1,00,000
To Equity Share Allotment A/c		1,00,000
(Being allotment money received)

Segment widths are computed from the working.

Key terms

Minimum subscription: The least amount that must be subscribed before a company may allot shares in a public issue: ninety per cent of the issue.
Pro-rata allotment: Allotment of shares to applicants in proportion to the shares they applied for.

6. Forfeiture of shares

The directors may forfeit the shares of a member who fails to pay a call after notice, as the articles allow. Forfeiture cancels the shares.

Shares issued at par: Equity Share Capital A/c Dr. (amount called up) To Calls in Arrears A/c (amount unpaid), To Share Forfeiture A/c (amount received).

Shares issued at a premium:

premium received: same entry; Securities Premium A/c is not touched;
premium not received: also Securities Premium A/c Dr. with the premium unpaid (it is cancelled).

Pro-rata allottees: excess application money adjusted towards allotment counts as money received, so it is included in the amount forfeited.

Check: amount forfeited = money received on those shares − premium received.

Table of the forfeiture entry: share capital is debited with the amount called up; securities premium is debited only if the premium was not received; the unpaid amount is credited to calls in arrears; the amount received, excluding any premium received, is credited to share forfeiture
In the forfeiture entry	Shares issued at par	Shares issued at a premium
Equity Share Capital A/c Dr.	Amount called up	Amount called up
Securities Premium A/c Dr.	—	Only if the premium has not been received
To Calls in Arrears A/c (or the call accounts)	Amount unpaid	Amount unpaid, including any unpaid premium
To Share Forfeiture A/c	Amount received	Amount received, excluding premium received

Journal of Khamaj Solar Lanterns from application to the call: application money on 54,000 shares, 12,000 refunded on rejected applications; allotment due with premium, received 2,51,000 after Rudra's default and Nandita's advance; call due, received 1,91,600 with the advance adjusted and arrears of Rudra and Tushita debited to calls in arrears
Date	Particulars	Dr (₹)	Cr (₹)
20 April 2026	Bank A/c Dr.	1,62,000
	To Equity Share Application A/c		1,62,000
	(Being application money received on 54,000 shares)
1 May 2026	Equity Share Application A/c Dr.	1,62,000
	To Equity Share Capital A/c		1,50,000
	To Bank A/c		12,000
	(Being application money on 50,000 shares transferred to share capital; money on rejected applications refunded)
1 May 2026	Equity Share Allotment A/c Dr.	2,50,000
	To Equity Share Capital A/c		1,50,000
	To Securities Premium A/c		1,00,000
	(Being allotment money due on 50,000 shares including premium)
1 May 2026	Bank A/c Dr.	2,51,000
	Calls in Arrears A/c Dr.	3,000
	To Equity Share Allotment A/c		2,50,000
	To Calls in Advance A/c		4,000
	(Being allotment money received; unpaid amount debited to calls in arrears; later calls received in advance)
1 August 2026	Equity Share First and Final Call A/c Dr.	2,00,000
	To Equity Share Capital A/c		2,00,000
	(Being first and final call money due on 50,000 shares)
1 August 2026	Bank A/c Dr.	1,91,600
	Calls in Advance A/c Dr.	4,000
	Calls in Arrears A/c Dr.	4,400
	To Equity Share First and Final Call A/c		2,00,000
	(Being first and final call money received; unpaid amount debited to calls in arrears; calls in advance adjusted)

Journal of Khamaj Solar Lanterns for the forfeiture of Rudra's 600 shares: share capital debited 6,000, securities premium debited 1,200 because the premium was not received, calls in arrears credited 5,400 and share forfeiture credited 1,800
Date	Particulars	Dr (₹)	Cr (₹)
1 November 2026	Equity Share Capital A/c Dr.	6,000
	Securities Premium A/c Dr.	1,200
	To Calls in Arrears A/c		5,400
	To Share Forfeiture A/c		1,800
	(Being 600 shares forfeited for non-payment of allotment and first and final call money)

Key terms

Forfeiture of shares: Cancellation of shares for non-payment of calls, with the money already paid kept by the company.
Share Forfeiture Account: Account credited with the money received on forfeited shares (excluding premium received).

7. Reissue of forfeited shares and capital reserve

Forfeited shares may be reissued at par, at a premium or at a discount, as fully paid or partly paid.

Bank A/c Dr. (price), Share Forfeiture A/c Dr. (discount) To Equity Share Capital A/c (amount credited as paid up), To Securities Premium A/c (any excess over that amount).
Limit: discount per share ≤ amount forfeited per share.
Capital reserve: Share Forfeiture A/c Dr. To Capital Reserve A/c with (amount forfeited on the shares reissued − discount on them).
The amount forfeited on shares not yet reissued stays in the Share Forfeiture Account.

Working: forfeited per share × shares reissued − discount = capital reserve.

Table on reissue: at a discount the discount is debited to share forfeiture; at par or premium bank is debited and capital, with any premium, credited; the discount can never exceed the amount forfeited on those shares; the remaining gain on reissued shares goes to capital reserve, while the balance on shares not reissued stays in share forfeiture
Reissue of forfeited shares	Entry
At a discount	Bank A/c Dr., Share Forfeiture A/c Dr. (discount) To Equity Share Capital A/c
At par	Bank A/c Dr. To Equity Share Capital A/c
At a premium	Bank A/c Dr. To Equity Share Capital A/c, To Securities Premium A/c
Limit	Discount ≤ amount forfeited on the shares reissued
Gain	Forfeited on reissued shares − discount: Share Forfeiture A/c Dr. To Capital Reserve A/c
Not yet reissued	Balance stays in Share Forfeiture A/c; added to share capital in the balance sheet

Journal of Khamaj Solar Lanterns for the reissue of 400 forfeited shares at nine rupees as fully paid: bank 3,600, discount 400 debited to share forfeiture; then 800 transferred from share forfeiture to capital reserve
Date	Particulars	Dr (₹)	Cr (₹)
1 December 2026	Bank A/c Dr.	3,600
	Share Forfeiture A/c Dr.	400
	To Equity Share Capital A/c		4,000
	(Being 400 forfeited shares reissued at ₹9 per share as ₹10 paid up)
1 December 2026	Share Forfeiture A/c Dr.	800
	To Capital Reserve A/c		800
	(Being gain on reissue of 400 forfeited shares transferred to capital reserve)

Column heights are computed from the account.

Key terms

Reissue: Sale of forfeited shares to a new holder, at par, premium or discount.
Capital reserve: Reserve created from capital profits, such as the gain on reissue of forfeited shares; not available for dividends.

8. Disclosure of share capital (Schedule III Part I)

Balance sheet (vertical form): I. Equity and Liabilities → 1. Shareholders' Funds → (a) Share Capital (Note), (b) Reserves and Surplus (Note); Current Liabilities → Other Current Liabilities (calls in advance and interest accrued on them).

Note on Share Capital: authorised capital and issued capital (for information); subscribed capital split into subscribed and fully paid up and subscribed but not fully paid up; less calls in arrears (calls unpaid); add forfeited shares (amount originally paid up).

Reserves and Surplus: Securities Premium, Capital Reserve.

Check: share capital = Share Capital A/c balance − calls in arrears + Share Forfeiture A/c balance.

Table of disclosure under Schedule Three: authorised and issued capital are shown in the note for information; subscribed capital, less calls in arrears and plus forfeited shares, is the share capital; securities premium and capital reserve go to reserves and surplus; calls in advance go to other current liabilities
Balance	Schedule III Part I
Authorised and issued capital	Note on Share Capital, for information (not added)
Subscribed and fully paid; subscribed but not fully paid	Note on Share Capital → Share Capital under Shareholders' Funds
Calls in arrears (calls unpaid)	Deducted from subscribed capital in the note
Share Forfeiture A/c (shares not reissued)	Added in the note as forfeited shares
Securities premium; capital reserve	Reserves and Surplus under Shareholders' Funds
Calls in advance (and interest accrued on it)	Other Current Liabilities

Format of the note on share capital: authorised and issued capital for information; subscribed capital split into fully paid and not fully paid, less calls in arrears, plus forfeited shares, giving the total carried to the balance sheet
Note on Share Capital (format)	₹
Authorised capital: … equity shares of ₹… each	…
Issued capital: … equity shares of ₹… each	…
Subscribed capital
Subscribed and fully paid up: … shares of ₹… each	…
Subscribed but not fully paid up: … shares of ₹… each, ₹… called up	…
Less: Calls in arrears (calls unpaid)	(…)
Add: Forfeited shares (amount originally paid up)	…
Total (to the balance sheet)	…

Note on share capital of Khamaj Solar Lanterns: authorised one lakh shares and issued fifty thousand shares of ten rupees; subscribed and fully paid 49,300 shares; 500 shares not fully paid less calls in arrears of 2,000; add forfeited shares 600; total 4,96,600
Note 1: Share Capital	₹	₹
Authorised capital
1,00,000 equity shares of ₹10 each		10,00,000
Issued capital
50,000 equity shares of ₹10 each		5,00,000
Subscribed capital
Subscribed and fully paid up: 49,300 equity shares of ₹10 each		4,93,000
Subscribed but not fully paid up: 500 equity shares of ₹10 each, fully called up	5,000
Less: Calls in arrears (calls unpaid)	(2,000)	3,000
Add: Forfeited shares (Share Forfeiture A/c)		600
Total		4,96,600

Note 2, Reserves and Surplus: securities premium and capital reserve.
Balance Sheet of Khamaj Solar Lanterns Ltd as at 31 March 2027 (extract)	Note No.	₹
I. Equity and Liabilities
Shareholders' Funds
(a) Share Capital	1	4,96,600
(b) Reserves and Surplus	2	99,600
Total		5,96,200
II. Assets
Current Assets
(a) Cash and Cash Equivalents (cash at bank)		5,96,200
Total		5,96,200

Key terms

Subscribed capital: The part of issued capital taken up by shareholders.
Paid-up capital: Called-up capital less calls unpaid; the amount actually received on the shares.

Exam tips

Common mistakes

Crediting the premium to share capital, or treating it as profit.
Refunding the whole excess on pro-rata allotment instead of adjusting it towards allotment first.
Putting receipts in the journal when the question says a cash book is kept.
Dividing the vendor's amount by the face value instead of the issue price.
Paying underwriting commission above five per cent of the issue price.
Debiting Securities Premium on forfeiture when the premium was received.
Transferring the whole Share Forfeiture balance to Capital Reserve when only some shares are reissued.
Showing calls in advance as share capital; they are a current liability.
Taking the wrong period for interest on calls.

How marks are usually awarded (SOYL chapter tests on the ISC default pattern)

1 mark: objective items.
2 marks: two or three entries (forfeiture and reissue, interest), or a Note on Share Capital.
3 marks: a set of entries for an issue (pro rata, premium, vendor), a cash book with the journal proper, or a balance sheet extract.
5 marks in parts, e.g. (a) 2 + (b) 3: working and entries, entries and a ledger account, or entries and a balance sheet.
Full practical (practice, 8 marks): working notes 1–2, journal 4–5, ledger account or balance sheet 2. The ISC 2027 weightage for Issue of Shares in Paper I is 11 marks.

Figures in SOYL practice are imagined; your board paper will give its own.

1. Issue of shares at par and at a premium

Key terms

2. Journal proper, cash book and ledger accounts

Key terms

3. Shares for consideration other than cash

Key terms

4. Calls in arrears and calls in advance, with interest

Key terms

5. Over-subscription, under-subscription and pro-rata allotment

Key terms

6. Forfeiture of shares

Key terms

7. Reissue of forfeited shares and capital reserve

Key terms

8. Disclosure of share capital (Schedule III Part I)

Key terms

Exam tips

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