Active learning ideas
Accounting for Share Capital introduces students to the corporate world, focusing on how Indian companies raise funds from the public. It covers the lifecycle of a share, from the prospectus and application to allotment and calls. Students learn about the Companies Act, 2013, and the specific accounting entries for issuing shares at par or premium.
Activity 01
Students act as a company issuing 10,000 shares while the rest of the class 'applies' for 15,000 shares. The 'company' must then perform a pro-rata allotment and calculate the excess application money to be adjusted against calls.
What are the different categories of share capital?
Activity 02
Set up stations with different scenarios: shares forfeited for non-payment of first call, shares issued at premium and forfeited, and shares reissued at a discount. Students rotate to pass the journal entries and calculate the transfer to Capital Reserve.
How is over-subscription of shares handled through pro-rata allotment?
Activity 03
Students are given a company's financial notes. They must identify Authorised, Issued, Subscribed, and Paid-up capital. They then pair up to discuss how these figures would be presented in the Notes to Accounts of a Balance Sheet.
What is the accounting entry for the forfeiture of shares?
A few notes on teaching this unit
Watch Out for These Misconceptions
Students often think that the Securities Premium Account can be used for any business expense.
Under Section 52(2) of the Companies Act, 2013, Securities Premium has very specific uses, like issuing bonus shares or writing off preliminary expenses. A collaborative investigation into the Act helps students list these specific restricted uses.
Confusing 'Subscribed but not fully paid' with 'Calls-in-Arrears'.
While related, they are presented differently in the balance sheet. Using a gallery walk with different balance sheet extracts helps students see how calls-in-arrears are deducted from the subscribed capital.
Methods used in this brief
Issue of Debentures
Understanding debentures as a source of borrowed funds and their types. Accounting entries for the issue of debentures for cash and for consideration other than cash.
8 methodologies
Financial Statements of a Company
Preparation of the Statement of Profit and Loss and Balance Sheet as per Schedule III of the Companies Act, 2013. Focus on major headings and sub-headings.
8 methodologies