ISSUE OF SHARES AND TYPES OF SHARE CAPITAL

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ISSUE OF SHARES AND TYPES OF SHARE CAPITAL

ISSUE OF SHARES

A company needs money to start  a business.

IF A person wants to start a business it can start a business as sole proprietorship where he alone do the business and invest his own money but it if needs funds than it can convert it to partnership business where 2 or upto 50 people can do business But limit of the partnership is 50. Now If the person wants to have more funds than he can turn business of partnership  into Company now it can have unlimited number of members and company can rase funds from bank or any financial institution and most important a company can raise money from public also.

Now if the public invest a money in company now the people who are invested in money is a capital and is known as share capital and in lieu of which a public will get a part known as share capital.

If a company needs 50,0000 lakhs rupees hence, they are divided into small part such as 500000 means  5000000/500000 = 10 value of share is Rs. 10.  

This particular process is known as shares.

Now company can ask to pay money in installment of the share from public if they want or even in one go.

Share capital

Now company can ask to pay money in installment of the share from public if they want or even in one go.

Now if company want money in parts than this Rs 10 is further divided to raise the fund from public by breaking its amount such as 3+3+2+2

The money taken by company after certain period of time from public  by dividing Rs 10 share  are given in list below

 

Division of share

Rs 10

3

Application money

3

Allotment money

2

Calls (first call)

2

Calls  (second call)

Total 10

 

 

Here take an example Rajesh purchased 100 share of company share value Rs 10 each total value of share 10X100=10000 now company will take money  in the list given below

Money invested in company

Date

Division of share

Rs 10

100X3=3000

1 Jan

3

Application money

100X3=3000

3 march

3

Allotment money

100X2=2000

6 June

3

Calls (first call)

100X2=2000

10 July

2

Calls  (second call)

Total money paid 10,000

 

10

 

 

 

Therefore, we can understand that Share capital is money in form of share collected from public

Types of share capital

  • Authorized share capital
  • Issued capital
  • Subscribed capital : a) Subscribed capital and fully paid b) Subscribed and not fully paid

 

Authorized share capital 

 is given in memorandum of association of company it gives information about how much money company can raised through public through share capital.

 

Issued capital

It is the amount which company has issued to public for raising share capital.

 

Subscribed capital :

The share buy by pubic is called as subscribed capital

 

Subscribed and fully paid if the share is fully paid by public .Example  suppose company issue share Rs 10 and paid by public in parts if it fully paid then it is subscribed and fully paid.

Example given below

Division of share

Rs 10

status

3

Application money

paid

3

Allotment money

paid

2

Calls (first call)

paid

2

Calls  (second call)

paid

Total 10

If its fully paid then

Subscribed and Fully paid

 

 

 

Subscribed and not fully paid: if share is not fully paid by pubic such are known as subscribed an dnot fully paid.

example given below

 

Division of share

Rs 10

status

3

Application money

paid

3

Allotment money

paid

2

Calls (first call)

Not paid

2

Calls  (second call)

Not paid

Total 10

If its fully paid then

Subscribed and not Fully paid

 

 

 

 

How share can be issued

  • Share at par
  • Share at premium

Share at par :

Suppose a company has a share of Rs. 10 each and is issuing it at Rs 10 each to the public it is known as share at par.

Share at premium

But some company has goodwill in the market they charge more for the share and the extra amount which the company gets is known as share at a premium. Example A company has a share value of Rs 10 but it issues to the public at Rs 15 this 5 Rs is a premium which is a profit for the company.

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