ALTERATION OF SHARE CAPITAL

ALTERATION OF SHARE CAPITAL CONSOLIDATE AND SUB-DIVISION OF SHAREConsolidate shares into shares of larger amountIn consolidation, number of shares are combined into one new share, in such a way that the nominal value of new share is equal to the aggregate value of consolidated shareThe company has to power for consolidation Of share of small value into shares of higher value.When the shares are consolidated, a resolution has to be passed in the general meeting of the company.Example of consolidation of shares50,000 equity shares of Rs.10 each are consolidated into 5,000 equity shares of 100 Rs. Each. Pass entry.Equity share capital A/c (Rs. 10) Dr. 5,00,000 To equity share capital account ( Rs.100 ) 5,00,00020,000 equity shares of Rs.10 each are consolidated into 2,000 equity shares of 100 Rs. Each. Pass entryRs.6,00,000 equity shares of 10 each consolidated in to 100 Rs. eachIf the articles of company permit (permission), then company can sub-divide its share of bigger amt. into shares of small amt.If company sub-divided its share from bigger amt. to smaller amt. then, pass journal entry in the books of company.1000 shares of Rs.100 each are sub-divided into 10,000 shares of 10 each.Share capital A/c (Rs.100) Dr. 1,00,000 To share capital A/c (Rs.10) 1,00,000SUB-DIVISION OF SHARESThe share capital of a company is divided into 20,000 fully paid shares of Rs.50 each. The directors of the company decided to sub-divide the share into 3 equity share of 10 Rs. Each and 2 pref. shares of Rs. 10 each 20,000*50=10,00,00030:203:2=5Equity share10,00,000*3/5=6,00,000Pref. share capital 10,00,000*2/5=4,00,000Equity share capital A/c (Rs.50) Dr.10,00,000 To Equity share capital A/c (Rs.10) 6,00,000 To Pref. share capital A/c (Rs.10) 4,00,000Ahmadabad transport company ltd. having a capital of 8,000 equity shares of Rs.10 each fully paid and resolve to sub-divide it into 7 equity shares of 10Rs. Each and 3 Pref. share of Rs.10 each fully paid.8000*10=80,00070:307:3=10Equity share 80,000*7/10=56,000Pref. share 80,000*3/10=24,000Equity share capital A/c (Rs.10) Dr.80,000

To equity share capital (Rs.7) 56,000To pref. share capital (Rs.3) 24,000Anju ltd. With share capital of 700 equity shares of Rs. 100 each fully paid up, decided to sub-divide the share into 5,000 equity shares of Rs.10 each and 2000 8% pref. share of Rs.10 each. The share capital of the company consist 50,000 eq. shares of 100 Rs each. The company has passed resolution to subdivide its each eq. share of Rs.100 each into 6 eq. shares of Rs.10 each and 8 pref. share of Rs. 5 each.50,000*100=50,00,00060:406:4=10Equity share capital50,00,000*6/1030,00,000 Rs.Prf. Share capital 50,00,000*4/1020,00,000 Rs.CONVERSION OF SHARES IN TO STOCKCompany can convert its share into stock but before that company have to pass resolution of it in company general meeting.Company can make conversion of its share into stock if article of company permit it. Company have to pass entry for conversion into stock as under,

Equity share capital A/c Dr. To equity stock A/c

Equity StockEquity shareDiscount on issue of stock Eq. share capital a/c Dr.Discount on issue of stock a/c Dr.To eq. stock A/c

A company convert its 10 eq. shares of rs.10 each into eq. stock of Ra.105. the entry as under:

Eq. share capital a/c Dr. 100Discount on issue of stock a/c Dr. 05To eq. stock A/c 105

Equity StockEquity sharePremium on issue of stock

Eq. share capital a/c DR.To eq. stock A/c To Premium on issue of stock a/c

A company convert its 10 eq. shares of rs.10 each into eq. stock of RS.95. the entry as under:

Eq. share capital a/c Dr. 100 To eq. stock A/c 95 To Premium on issue of stock a/c 05