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Share Capital

Raghavendra (Employement) (29 Points)

23 January 2010

Hi,

If shareholders of the Pvt Ltd Company fail to bring paid up capital as per MoA, either in cash or in kind, before 31st of March, how to prepare balance sheet as on 31st of March ?

Ex : XYZ Pvt Ltd incorporated on 25.12.2008 with subscribed capital of Rs 10,00,000/- (as per MoA). But shareholders of the company have not brought any money or assets in to the company against their subscripttion. And there is no any other transactions in the company till 31st March 2009. in this case, how to prepare the balance sheet as on 31st March 2009 ?

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6 Replies

Reuben (CA->IPCC student) (35 Points)
Replied 23 January 2010

Subscribed capital is nothing but CASH

in my view the balance sheet might look like this

Liability side: subscribed capital 10,00,000

Asset side: Cash at bank or hand 10,00,000

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Varun.T.K (CA Final, CS Executive) (365 Points)
Replied 23 January 2010

But how could we say that cash is received under Bank/Cash? The capital still not have been paid up.

Dhruv (Chartered Accountant) (308 Points)
Replied 24 January 2010

When shares are suscribed and alloted and are supposed to be fully paid up during allotment as per MoA, the initial entry is Share Allotment Account (Dr) and Equity Share Capital A/C (Cr.) . Now , since no money/assets have been paid , then in that case , the balance of Share Alottment Account is transfered to Calls in Arrear A/C.

The subsequent entry is Calls in Arrear (Dr) and Credit the Share Allotment A/C . The balance sheet will then represent (on the liabilities side ) -- > Equity Share Capital (Cr). Less Calls in Arrear, the balance of the liabilities side will come to zero.