Issue of Shares — Lesson
1) Hook — A Fun Real-Life Example
Imagine Amar, a young entrepreneur from Pune, wants to start a tech company but needs ₹50 lakh to develop his app. Instead of borrowing from a bank, he decides to invite friends and family to become co-owners by buying shares of his company. Each share represents a small part of ownership. This process of inviting people to invest by selling shares is called the Issue of Shares. Just like Amar, many Indian companies raise funds through share issues to grow and innovate!
2) Core Concepts — What is Issue of Shares?
The Issue of Shares is the process by which a company offers its shares to the public or specific investors to raise capital. Shares can be issued at:
- Par Value (Face Value): The nominal value of a share (e.g., ₹10).
- At Premium: More than the face value (e.g., ₹12 on a ₹10 share).
- At Discount: Less than the face value (e.g., ₹8 on a ₹10 share) — allowed only in certain cases.
Types of Shares Issued:
| Type | Description | Example |
|---|---|---|
| Equity Shares | Shares representing ownership with voting rights. | ₹10 face value shares issued at ₹12. |
| Preference Shares | Shares with preferential rights on dividends and capital. | ₹100 preference shares issued at par. |
Steps in Issue of Shares:
- Board Meeting: Pass resolution to issue shares.
- Filing with Registrar: File necessary forms with ROC.
- Offer to Public/Investors: Issue prospectus or letter of offer.
- Application and Allotment: Receive applications and allot shares.
- Receipt of Money: Collect money on application, allotment, calls.
3) Key Formulas / Rules
Amount to be received on Shares issued at Premium:
Issue Price = Face Value + Premium
Example: Face Value = ₹10, Premium = ₹2 → Issue Price = ₹12
Journal Entry for Share Issue at Premium:
Bank A/c Dr. (Issue Price × No. of Shares)
Issue of Shares — Mcq
Issue of Shares — Mnemonic
Mnemonic 1: "SHARES" for Steps in Issue of Shares 📈💰
- S - Subscription (Apply for shares)
- H - Holding (Allot shares to applicants)
- A - Application Money (Receive initial payment)
- R - Refund (Return excess money if any)
- E - Entry (Pass journal entries)
- S - Securities (Issue share certificates)
“Subscribe, Hold, Apply, Refund, Entry, Securities – SHARES banti hai company ki pehchaan!” 🎉
Mnemonic 2: Hindi Rhyming Phrase for Types of Shares 🏦
“साधारण, привिलेज, बोनस, फॉरफीचर्ड – शेयरों के नाम याद रखो, बच्चे!”
- साधारण (Sadharan) – Ordinary Shares
- प्रिविलेज (Privilege) – Preference Shares
- बोनस (Bonus) – Bonus Shares
- फॉरफीचर्ड (Forfeited) – Forfeited Shares
“साधारण से प्रिविलेज तक, बोनस और फॉरफीचर्ड, शेयरों की दुनिया है बड़ी मज़ेदार!” 🎤🎶
Mnemonic 3: Funny Acronym for Documents Required in Issue of Shares 📄✍️
"PAAS" – Think of a student passing exams with flying colors!
- P – Prospectus
- A – Application Form
- A – Allotment Letter
- S – Share Certificate
“Just like a student wants to PAAS exams, a company needs PAAS documents to issue shares!” 🎓📚
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