Identify correct sequence in reference to Issue of Shares.

(A) Receipt of Application
(B) Forfeiture of shares
(C) Allotment of shares
(D) Issue of prospectus
(E) Call in arrears

Choose the correct answer from the options given below :

(D), (A), (C), (E), (B)

The correct answer is Option (2) - (D), (A), (C), (E), (B)

The correct sequence of accounting events for share capital: 

(D) Issue of prospectus- The company issues a prospectus to the public, which is a document that provides information about the company and the shares it is issuing. The prospectus is an invitation to the public to subscribe to the shares.

(A) Receipt of Application- Prospective investors who wish to purchase shares in the company submit applications along with the application money. The application money is deposited into a scheduled bank as specified in the prospectus. The company must receive the minimum subscription amount within 120 days of issuing the prospectus. If the company does not receive the minimum subscription amount within this time period, it cannot proceed with the allotment of shares and must return the application money to investors within 130 days of issuing the prospectus.

(C) Allotment of shares- If the company receives the minimum subscription amount, it may proceed with the allotment of shares after fulfilling certain legal formalities. The company sends letters of allotment to investors who have been allocated shares and letters of regret to investors who have not been allocated shares. Once shares have been allotted, a valid contract is formed between the company and the investors, who are now shareholders of the company.

(E) Call in arrears- Calls are important for making shares fully paid-up and for collecting the full amount of shares from shareholders. After shares are allotted, a company can make calls. If shares are not fully called up by the time allotment is complete, the directors can ask for the remaining amount on shares whenever they decide to do so. It is also possible that the timing of call payments by shareholders is determined at the time of share issue and is given in the prospectus. If shareholders fail to pay the call amount, the outstanding or unpaid calls become known as "calls in arrears."As per Companies Act, 2013, the maximum rate of interest on calls in arrears is 10% p.a.

(B) Forfeiture of shares: If the calls in arrears are not paid within the stipulated time, the company may decide to forfeit the shares of the defaulting shareholders. The company typically issues a notice to shareholders to inform them about payment otherwise there shares will be forfeited. Forfeiture involves canceling the shares and removing the shareholder's rights.