The correct answer is Option (1) → C, A, E, B, D
The correct sequence of accounting events for share capital:
*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.
* Receipt of Applications: 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.
* 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.
*Calls in advance- Before making calls, some shareholders pay the money in advance which is called calls in advance. When the due date for the calls arrives and the amount of "Calls in Advance" needs to be adjusted against the specific calls for which it was received, the correct journal entry is:
Calls in Advance A/c Dr.
To Particular Call A/c..
Since the amount of "Calls in Advance" is being adjusted and utilized to pay for the specific calls that are now due, the "Calls in Advance" liability decreases and the specific "Particular Call" account for which the advance payment was received. This entry reflects that the company is using the funds previously received in advance to cover the payment of the specific calls.
* Making Calls: 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. |
