Definitions [2]
- “A Joint Stock Company is a voluntary association of individuals for profit having capital divided into transferable Shares, the ownership of which is the condition on membership.” – Prof. L. H. Haney.
- “A Company is a person, artificial, invisible, intangible, and existing only in the eyes of the law. Being a mere creature of law, it possesses only those properties which the charter of its creation confers upon it, either expressly or as incidental to its very existence.” – Chief Justice Marshal
- According to The Companies Act 2013, Section 2 (20), the term “Company” means “a Company incorporated under the Companies Act 2013 or any previous Company law.”
As per Section 2(84) of the Companies Act 2013, “Share is the share in the capital of a company and includes stock as well.”
Key Points
- Meaning: A Joint Stock Company is a business organisation where ownership is divided into transferable shares held by shareholders.
- Origin: It emerged during the Industrial Revolution to overcome the limitations of partnerships, such as unlimited liability and limited capital, by raising funds from the public.
- Legal Status: A Joint Stock Company is an artificial legal person with a separate legal identity and perpetual succession, created under company law.
- Merits: It provides benefits like large capital, limited liability, expert management, public confidence, and better scope for expansion.
- Types: Companies can be Chartered, Statutory, or Registered, and further classified as Public, Private, Limited, or Unlimited.
- Share Capital is the total money raised by issuing shares, representing ownership in the company.
- Authorised Capital is the maximum amount a company can issue, as stated in its Memorandum of Association.
- Issued Capital is the part of the authorised capital offered to the public for subscription.
- Subscribed Capital is the portion of issued capital that investors agree to take.
- Called-up Capital is the amount demanded by the company, and Paid-up Capital is what shareholders actually pay; the difference is called Calls-in-Arrears.
- Reserve Capital is the part of subscribed capital to be called only during winding up.
- A Prospectus invites the public to buy shares, and the company must receive at least 90% subscription before allotting shares.
| Basis | Authorised Capital | Issued Capital |
|---|---|---|
| Meaning | Maximum capital a company can issue | Part of authorised capital offered to public |
| Disclosure | Stated in the Memorandum of Association | Stated in the Articles of Association |
| Limit | It is equal to or more than the issued capital. | It is equal to or less than the authorised capital. |
A. When the Issue Price is Payable in Lump Sum:
1. On Receiving Application Money:
Bank A/c ...Dr.
To Shares Application A/c / Shares Application and Allotment A/c
(Being the application money received in a lump sum)
Or if a joint account is used:
Bank A/c ...Dr.
To Shares Application and Allotment A/c
(Being the application and allotment money received in a lump sum)
2. On Allotment of Shares (Transfer of Application Money):
Shares Application A/c / Shares Application and Allotment A/c ...Dr.
To Share Capital A/c
(Being the transfer of application money to share capital on allotment)
Or (if joint account used):
Shares Application and Allotment A/c ...Dr.
To Share Capital A/c
(Being the application and allotment money transferred to share capital)
B. When Issue Price is Payable in Instalments:
1. On Receipt of Application Money:
Bank A/c ...Dr.
To Shares Application A/c
(Being the application money received)
2. On Allotment of Shares (Transfer of Application Money):
Shares Application A/c ...Dr.
To Share Capital A/c
(Being application money transferred to share capital on allotment)
3. On Amount Due on Allotment:
Shares Allotment A/c ...Dr.
To Share Capital A/c
(Being allotment money due)
4. On Receipt of Allotment Money:
Bank A/c ...Dr.
To Shares Allotment A/c
(Being the allotment money received)
5. On Amount Due on First Call:
Shares First Call A/c ...Dr.
To Share Capital A/c
(Being the amount due on the first call)
6. On Receipt of First Call Money:
Bank A/c ...Dr.
To Shares First Call A/c
(Being the amount received on the first call)
7. (Optional) On Amount Due on Second Call:
Shares Second Call A/c ...Dr.
To Shares Capital A/c
(Being the amount due on the second call)
8. Bank A/c ...Dr.
To Shares Second Call A/c
(Being the amount received on the second call)
C. Other Related Entries:
1. For Money Refunded on Rejected Application:
Share Application A/c ...Dr.
To Bank A/c
(Being refund of application money on rejected shares)
2. For Adjustment of Excess Application Money towards Allotment:
Share Application A/c ...Dr.
To Share Allotment A/c
(Being excess application money adjusted towards allotment)
3. Combined Entry (Refund + Adjustment):
Share Application A/c ...Dr.
To Share Allotment A/c
To Bank A/c
(Being excess application money adjusted and balance refunded)
