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Class 12 Accountancy Chapter 1

Accounting for Share Capital + Important Questions 2026-27

Q: What is the weightage of the Share Capital chapter in the CBSE Class 12 board exam?

Historically, the unit 'Accounting for Share Capital and Debentures' holds significant weightage. The Share Capital chapter alone can be expected to contribute around 12-16 marks, including a long-answer question.

Ready to master company accounts? This guide on Accounting for Share Capital provides complete Updated NCERT Solutions and Important Questions for the 2026-27 board exams. A crucial chapter for CBSE and CUET, we make learning journal entries for issuing shares simple and fun. Let's begin!

Chapter NameAccounting for Share Capital

SubjectAccountancy (Book 2: Company Accounts)

ClassClass 12

BoardCBSE

Important TopicsIssue of Shares, Oversubscription, Pro-rata, Forfeiture

Difficulty LevelHigh (Requires conceptual clarity and practice)

Exam Weightage~12-16 Marks (Very High Importance)

Learning Objectives

After completing this chapter, you will be able to:

Explain the concept and features of a company.
Differentiate between Preference Shares and Equity Shares.
Understand the meaning of Share Capital and its types (Authorised, Issued, Subscribed).
Record the journal entries for the issue of shares at par and at a premium.
Handle accounting for Calls-in-Arrears and Calls-in-Advance.
Master the accounting treatment for Oversubscription and Pro-rata Allotment.
Correctly pass journal entries for the Forfeiture and Re-issue of shares.
Prepare the Balance Sheet of a company as per Schedule III of the Companies Act, 2013, showing share capital.

Key Concepts and Definitions

Here are some of the most important terms you'll encounter in this chapter.

Company: An artificial person created by law, having a separate legal entity, perpetual succession, and a common seal.
Share: A share is one of the equal parts into which a company's capital is divided, entitling the holder to a proportion of the profits.
Share Capital: The capital raised by a company through the issue of shares. It is categorized into:
- Authorised Capital: The maximum amount of capital a company is authorized to raise.
- Issued Capital: The part of the authorised capital that the company offers to the public for subscription.
- Subscribed Capital: The part of the issued capital that the public has applied for and has been allotted.
Issue of Shares at Par: When the issue price of a share is equal to its face value (e.g., a ₹10 share issued for ₹10).
Issue of Shares at Premium: When the issue price of a share is more than its face value (e.g., a ₹10 share issued for ₹12). The extra ₹2 is the Securities Premium.
Oversubscription: When the number of shares applied for by the public is more than the number of shares offered by the company.
Pro-rata Allotment: A method of allotting shares during oversubscription, where shares are allotted proportionately to all applicants.
Calls-in-Arrears: The amount called up by the company but not yet paid by the shareholders.
Forfeiture of Shares: The cancellation of shares by the company due to non-payment of allotment or call money.
Re-issue of Shares: Selling the forfeited shares to new shareholders. These can be re-issued at par, premium, or discount.

Full NCERT Solutions for Class 12 Accountancy Chapter 1

This section provides detailed, step-by-step solutions for all the exercise questions from your NCERT textbook for the chapter Accounting for Share Capital.

(Note: The number of questions and their content may vary slightly based on the NCERT edition. The following solutions are based on the latest available textbook structure. We will cover a representative set of questions covering all key concepts.)

Question 1: What is a share?

Step 1: Define the term. A share is the smallest unit into which the total share capital of a company is divided.
Step 2: Explain its purpose. It represents the ownership of the shareholder in the company. Holding a share makes a person a part-owner of the company.
Step 3: Provide an example. For example, if a company's total capital of ₹10,00,000 is divided into 1,00,000 units of ₹10 each, then each unit of ₹10 is called a share.

Question 2: A company issued 50,000 shares of ₹10 each, payable as follows: ₹3 on Application, ₹3 on Allotment, ₹2 on First Call, and ₹2 on Final Call. All shares were subscribed and all money was duly received. Pass the necessary journal entries.

In the Books of the Company

JOURNAL

Particulars	Debit (₹)	Credit (₹)
(i) On receipt of Application Money
Bank A/c Dr. To Equity Share Application A/c (Being application money received for 50,000 shares @ ₹3 per share)	1,50,000	1,50,000
(ii) On Allotment of Shares
Equity Share Application A/c Dr. To Equity Share Capital A/c (Being application money transferred to share capital account on allotment)	1,50,000	1,50,000
(iii) On Allotment Money becoming due
Equity Share Allotment A/c Dr. To Equity Share Capital A/c (Being allotment money due on 50,000 shares @ ₹3 per share)	1,50,000	1,50,000
(iv) On receipt of Allotment Money
Bank A/c Dr. To Equity Share Allotment A/c (Being allotment money received)	1,50,000	1,50,000
(v) On First Call becoming due
Equity Share First Call A/c Dr. To Equity Share Capital A/c (Being first call money due on 50,000 shares @ ₹2 per share)	1,00,000	1,00,000
(vi) On receipt of First Call Money
Bank A/c Dr. To Equity Share First Call A/c (Being first call money received)	1,00,000	1,00,000
(vii) On Final Call becoming due
Equity Share Final Call A/c Dr. To Equity Share Capital A/c (Being final call money due on 50,000 shares @ ₹2 per share)	1,00,000	1,00,000
(viii) On receipt of Final Call Money
Bank A/c Dr. To Equity Share Final Call A/c (Being final call money received)	1,00,000	1,00,000

Question 3: X Ltd. issued 20,000 shares of ₹10 each at a premium of ₹2 per share. The amount was payable as: ₹4 on Application (including premium), ₹4 on Allotment, and ₹4 on First & Final Call. All shares were subscribed. A shareholder holding 500 shares failed to pay the call money. Pass journal entries.

In the Books of X Ltd.

JOURNAL

Particulars	Debit (₹)	Credit (₹)
(i) On Application
Bank A/c Dr. To Equity Share Application A/c (Application money on 20,000 shares @ ₹4)	80,000	80,000
Equity Share Application A/c Dr. To Equity Share Capital A/c To Securities Premium Reserve A/c (Application money transferred. Capital: 20,000 x ₹2, Premium: 20,000 x ₹2)	80,000	40,000 40,000
(ii) On Allotment
Equity Share Allotment A/c Dr. To Equity Share Capital A/c (Allotment money due on 20,000 shares @ ₹4)	80,000	80,000
Bank A/c Dr. To Equity Share Allotment A/c (Allotment money received)	80,000	80,000
(iii) On First & Final Call
Equity Share First & Final Call A/c Dr. To Equity Share Capital A/c (Call money due on 20,000 shares @ ₹4)	80,000	80,000
Bank A/c Dr. Calls-in-Arrears A/c Dr. To Equity Share First & Final Call A/c (Call money received on 19,500 shares, 500 shares failed to pay)	78,000 2,000	80,000

Working Notes:

Total Call Money Due: 20,000 shares x ₹4 = ₹80,000
Calls-in-Arrears: 500 shares x ₹4 = ₹2,000
Money Received on Call: ₹80,000 - ₹2,000 = ₹78,000

Question 4: (Forfeiture & Re-issue) - S Ltd. forfeited 200 shares of ₹10 each, fully called up, held by Ram, for non-payment of allotment money of ₹3 per share and first call of ₹2 per share. He had paid application money of ₹5 per share. These shares were reissued to Shyam as fully paid-up for ₹8 per share. Pass journal entries.

In the Books of S Ltd.

JOURNAL

Particulars	Debit (₹)	Credit (₹)
(i) Entry for Forfeiture of Ram's Shares
Equity Share Capital A/c Dr. (200 x ₹10) To Share Forfeiture A/c (200 x ₹5) To Equity Share Allotment A/c (200 x ₹3) To Equity Share First Call A/c (200 x ₹2) (Being 200 shares forfeited for non-payment of allotment and call money)	2,000	1,000 600 400
(ii) Entry for Re-issue of Forfeited Shares
Bank A/c Dr. (200 x ₹8) Share Forfeiture A/c Dr. (200 x ₹2) To Equity Share Capital A/c (200 x ₹10) (Being 200 forfeited shares reissued to Shyam for ₹8 per share, fully paid-up)	1,600 400	2,000
(iii) Entry for transferring profit on re-issue to Capital Reserve
Share Forfeiture A/c Dr. To Capital Reserve A/c (Being the balance in Share Forfeiture A/c on re-issued shares transferred to Capital Reserve)	600	600

Working Note for Capital Reserve:

Total amount forfeited on 200 shares = ₹1,000
Discount on re-issue of 200 shares (loss) = ₹400
Profit on re-issue (transferred to Capital Reserve) = ₹1,000 - ₹400 = ₹600

Extra Important Questions (Board Exam Style 2026-27)

Here are some extra questions to strengthen your preparation for the Board Exam Questions 2026.

Multiple Choice Questions (MCQs)

Q1. The part of the uncalled capital to be called only in the event of winding up of the company is known as:

(a) Authorised Capital
(b) Reserve Capital
(c) Capital Reserve
(d) Issued Capital

Correct Answer: (b) Reserve Capital
Explanation: Reserve capital is specifically reserved to be called up only at the time of the company's liquidation.

Q2. Securities Premium Reserve cannot be used for:

(a) Issuing fully paid bonus shares
(b) Writing off preliminary expenses
(c) Paying dividends to shareholders
(d) Writing off discount on issue of debentures

Correct Answer: (c) Paying dividends to shareholders
Explanation: As per Section 52(2) of the Companies Act, 2013, securities premium can be used for specified purposes, but paying dividends is not one of them.

Short Answer Questions

Q3. Differentiate between Calls-in-Arrears and Calls-in-Advance.

Basis	Calls-in-Arrears	Calls-in-Advance
Meaning	Amount called by the company but not paid by shareholders.	Amount received from shareholders before it is called up by the company.
Interest	Company can charge interest on it (as per Articles of Association).	Company is liable to pay interest on it.
Balance Sheet	Shown as a deduction from the 'Subscribed but not fully paid-up Capital'.	Shown as a separate item under 'Other Current Liabilities'.

Q4. A company forfeited 100 shares of ₹10 each (fully called up) for non-payment of final call of ₹3. What is the maximum discount at which these shares can be re-issued?

Step 1: Calculate amount paid per share. Amount paid by the shareholder = ₹10 (Face Value) - ₹3 (Unpaid Call) = ₹7 per share.
Step 2: Calculate total forfeited amount. The amount already received on forfeited shares is ₹7 x 100 = ₹700.
Step 3: Determine maximum discount. The maximum permissible discount on re-issue is equal to the amount forfeited.
Conclusion: Therefore, the maximum discount is ₹7 per share or a total of ₹700.

Long Answer Questions

Q5. (Pro-rata Allotment) ABC Ltd. invited applications for 1,00,000 equity shares of ₹10 each. The public applied for 1,50,000 shares. Applications for 30,000 shares were rejected and the rest were allotted on a pro-rata basis. The money was payable as: Application: ₹3, Allotment: ₹4, First & Final Call: ₹3. All money was duly received except from Mohan, who was allotted 2,000 shares, failed to pay the allotment and call money. Pass necessary journal entries.

Working Notes:

Pro-rata Ratio:
- Shares Applied: 1,50,000 - 30,000 (rejected) = 1,20,000 shares
- Shares Allotted: 1,00,000 shares
- Ratio = 1,20,000 : 1,00,000 or 6:5.
Mohan's Calculation:
- Shares Allotted to Mohan = 2,000
- Shares Applied by Mohan = (2,000 / 5) * 6 = 2,400 shares
- Application money paid by Mohan = 2,400 x ₹3 = ₹7,200
- Application money due on allotment = 2,000 x ₹3 = ₹6,000
- Excess application money from Mohan = ₹7,200 - ₹6,000 = ₹1,200
Allotment money due from Mohan:
- Due = 2,000 x ₹4 = ₹8,000
- Less: Excess application money adjusted = ₹1,200
- Amount not paid by Mohan on Allotment (Calls-in-Arrears) = ₹6,800
Call money not paid by Mohan:
- 2,000 x ₹3 = ₹6,000

Journal Entries:

(The student should then proceed to pass the full set of journal entries, including receipt of application money, adjustment of excess application money, allotment due, receipt of allotment money showing Mohan's arrears, call due, and receipt of call money showing Mohan's arrears.)

Case-Based Question

Innovate Tech Ltd. is a new-age robotics company that decided to go public to fund its expansion. They issued a prospectus inviting applications for 2,00,000 equity shares of ₹10 each at a premium of ₹5 per share. The issue was oversubscribed, and applications for 3,00,000 shares were received. The directors decided to allot as follows:
Category A (Applicants for 1,60,000 shares): Allotted 1,60,000 shares.

Category B (Applicants for 1,40,000 shares): Allotted 40,000 shares on a pro-rata basis.
Amounts were payable as:
On Application: ₹4 (including ₹1 premium)

On Allotment: ₹6 (including ₹2 premium)

On First & Final Call: Balance Amount
Based on the above information, answer the following:

Q6. What is the balance amount payable on the First & Final Call?

Step 1: Calculate total price per share. Total Share Price = ₹10 (Face Value) + ₹5 (Premium) = ₹15.
Step 2: Calculate amount called till allotment. Amount called = ₹4 (App) + ₹6 (Allot) = ₹10.
Step 3: Find the balance. Balance on First & Final Call = ₹15 - ₹10 = ₹5 per share.

Q7. Calculate the excess application money received from Category B that will be adjusted towards allotment.

Step 1: Calculate money received from Category B. Application money received = 1,40,000 shares x ₹4 = ₹5,60,000.
Step 2: Calculate money due from Category B. Application money due = 40,000 shares x ₹4 = ₹1,60,000.
Step 3: Calculate excess amount. Excess application money = ₹5,60,000 - ₹1,60,000 = ₹4,00,000.

Q8. If Rohan from Category B, who was allotted 400 shares, failed to pay the allotment money, calculate his Calls-in-Arrears on allotment.

Step 1: Calculate shares applied by Rohan. Shares applied by Rohan = (400 / 40,000) * 1,40,000 = 1,400 shares.
Step 2: Calculate Rohan's excess application money. Excess money = (1,400 - 400) x ₹4 = 1,000 x ₹4 = ₹4,000.
Step 3: Calculate allotment money due from Rohan. Allotment due = 400 x ₹6 = ₹2,400.
Step 4: Determine Calls-in-Arrears. Since the excess application money (₹4,000) is more than the allotment money due (₹2,400), Rohan has NIL Calls-in-Arrears on allotment. The remaining excess of ₹1,600 will be refunded or adjusted against calls.

Common Mistakes Students Make

Forgetting Narrations: Journal entries without narrations lose marks. Always write a brief explanation for each entry.
Incorrect Forfeiture Calculation: Students often debit the Share Capital account with the paid-up amount instead of the called-up amount during forfeiture. Remember, it's always (No. of shares x Called-up value per share).
Mixing Capital Reserve and Securities Premium: The profit on the re-issue of forfeited shares goes to Capital Reserve, not Securities Premium Reserve.
Pro-rata Calculation Errors: Always create clear working notes for pro-rata allotment to calculate the excess application money and the actual amount of calls-in-arrears on allotment.
Balance Sheet Format: Not presenting the Share Capital in the Balance Sheet as per Schedule III of the Companies Act, 2013. Practice the vertical format.

Exam Preparation Tips for 2026-27

Master the Pro-rata: The pro-rata allotment, forfeiture, and re-issue combination is the most important and frequently asked long-answer question. Practice at least one such question daily.
Focus on Concepts: Don't just rote-learn journal entries. Understand the logic behind why an account is being debited or credited.
Working Notes are Key: For long questions, always make clear and comprehensive working notes. They carry marks and help the examiner understand your calculations.
Time Management: This chapter's questions can be lengthy. Time yourself while practicing to improve your speed. Aim to complete an 8-mark question in 15-18 minutes.
Revise Theory: Don't ignore theory questions like the difference between share types, the meaning of reserve capital, or the uses of securities premium.

Frequently Asked Questions (FAQs)

Q1. What is pro-rata allotment in simple words?

Pro-rata allotment is a method used during oversubscription where the company allots fewer shares than what people applied for, in a fixed ratio. For example, if you applied for 5 shares and got 3, this is a pro-rata allotment.

Q2. How do you calculate the amount transferred to Capital Reserve on re-issue?

The formula is: (Total amount forfeited on the re-issued shares) - (Discount given on re-issue). Only the profit from the shares that have been re-issued is transferred to Capital Reserve.

Q3. Is Accounting for Share Capital difficult for Class 12 students?

It is considered one of the more challenging chapters due to its length and the complexity of questions involving pro-rata and forfeiture. However, with consistent practice and clear concepts, it can be mastered easily.

Q4. What is the journal entry for forfeiture of shares?

The general entry is:
Share Capital A/c Dr. (With called-up amount)
Securities Premium A/c Dr. (If premium was not received)
To Share Forfeiture A/c (With amount already received)
To Calls-in-Arrears A/c (or individual unpaid calls)

Q5. What is the weightage of the Share Capital chapter in the CBSE Class 12 board exam?

Historically, the unit "Accounting for Share Capital and Debentures" holds significant weightage. The Share Capital chapter alone can be expected to contribute around 12-16 marks, including a long-answer question.

Conclusion: Congratulations on making it through this detailed guide! Accounting for Share Capital is the bedrock of company accounts. It might seem daunting, but it's all about logic and practice. Remember, consistency is the key. Keep solving different types of problems, revise the concepts regularly, and practice with previous year question papers. You are now one step closer to acing your CBSE Class 12 Accountancy Board Exam!

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