09/09/2025
Accountancy XII
Class 12,ย
Accounting for Share Capital
Share Capital is the amount of money a company raises by issuing shares to the public (shareholders). It represents the ownership money invested in the company by shareholders.
Share Capital = Funds raised by the company through shares (ownership money, not borrowed money like loans).
So, the company now has โน10 lakh as Share Capital, contributed by shareholders.
Figuring out share capital can feel like learning a new language. But it’s really just about tracking a company’s money at different stages. Let’s break it down from the top.
Think of this as the company’s spending limit, set by its own rulebook. It’s the absolute maximum amount of money the company is legally permitted to raise by selling shares. They can’t issue shares beyond this cap without officially changing their documents.
The company doesn’t have to issue all its authorised shares at once. Issued capital is the chunk of that authorised limit they actually decide to offer to investors for purchase.
This is just the leftover portion. It represents the remaining shares from the authorised limit that the company is holding back for now. They can issue these later when they need to raise more funds.
Sometimes the public snaps up all the issued shares, sometimes they don’t. Subscribed capital is the portion of the issued shares that investors have actually agreed to buy.
This is the awkward gap. It’s the part of the issued share offering that investors passed on and didn’t buy. It represents capital the company hoped to raise but couldn’t.
A company doesn’t always ask for the full share price upfront. They might just ask for a portion of it now and the rest later. The called-up amount is the part of the share’s value they are formally requesting from shareholders.
This is the flip side of called-up capital. It’s the portion of the money for subscribed shares that the company hasn’t asked for yet. It’s a promise of future payment that shareholders are liable for.
This is the real money in the bank. It’s the actual cash shareholders have paid so far against the company’s calls. This is the money the company truly has to work with.
This is the outstanding bill. It’s the amount that has been called by the company but hasn’t been paid by the shareholders by the due date. It’s essentially money owed to the company.
This is a special safety net. It’s a portion of the uncalled capital that the company formally decides it can only demand in a worst-case scenarioโspecifically if the company is being shut down (wound up). It cannot be called during normal business.
This is the company’s “ready-to-go” funding pool. It refers to any part of the authorised capital that hasn’t been earmarked, reserved, or issued yet. It’s the shares still sitting on the shelf, fully available for the company to issue to the public whenever they need to.
Share Capital is the lifeline of a companyโs finances, representing the money raised from shareholders in exchange for ownership. By dividing capital into different categoriesโlike authorised, issued, subscribed, called-up, paid-up, and reserveโthe company can track its funds at every stage of the journey, from the maximum allowed to the actual cash in hand.
Understanding these types helps us see:
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