财务会计教学课件

Lecture 1Shareholders Equity(Part 1)1COMMONWEALTH OF AUSTRALIACOPYRIGHT REGULATIONS 1969WARNINGThis material has been copied and communicated to you by or on behalf of Curtin University of Technology pursuant to Part VA of the Copyright Act 1968(the Act)The material in this communication may be subject to copyright under the Act.Any further copying or communication of this material by you may be the subject of copyright protection under the Act.Do not remove this notice2ObjectivesDistinguish between different forms of corporate entities.Distinguish between different type of shares.Account for share issues fully payable on application and by installments.Account for oversubscriptions.Account for share forfeiture and reissue.3Types of companiesListed vs unlistedLimited,unlimited,vs no-liability Public companiesOwnership is widely spreadMany company law provisions are directed at public companiesProprietary companiesLimited membershipRestrictions on raising fundsLarge vs small distinction is common4Key features of the corporate structureA company is a legal entityLimited liabilityShare capital ledger account reflects the companys ownershipEach share represents a proportional right to the companys net assetsCompanies can issue different types of sharese.g.ordinary or preference shares 5Types of sharesOrdinary shares:Most basic and common type.Payment of dividends rank after preference shareholders.Preference shares:Preferential as to the payment of dividends and/or as to a return of capital in a winding-up.Holders are entitled to a fixed annual rate of dividend.Accounting entries are the same in both issues ordinary and preference.6Issue of public company sharesA prospectus is required for a public issue.Minimum subscription may be required.Issue can be underwritten.Share issue costs are treated as a reduction in share capital(Dr Share issue costs).What if the issue is oversubscribed?Shares issued may have a par value or no par value.7Accounting for share issuesNo accounting entries are prepared when the invitation to subscribe is madeAccounting commences on receipt of application forms and moniesAccounts involved:Cash Trust(for monies received before shares are issued/allotted)Application Share CapitalCall(if payable by 2 or more instalments)CashCalls in Advance8Receipt of application moniesOn receipt of application monies:Cash trustDryApplicationCry(Monies received$x per share)Before issue/allotment of shares:Application account is a liability.Application monies received before shares are issued must be held in a separate trust account.If a minimum subscription level has been set and is not reached:Application monies must be refunded by reversing the above entry.9Allotment of sharesIf a minimum subscription has been set and reached,the directors allot the shares.ApplicationDryShare capitalCry(No.shares x application amount per share)The share capital account records the equity contributed by shareholders.10Allotment of sharesAfter allotment the following entries may be required:1.Refund to unsuccessful applicants:ApplicationDry Cash trustCry(Refund to unsuccessful applicants)2.Transfer of excess application monies:ApplicationDry Calls in advanceCry(Transfer of excess application monies)3.Transfer cash to companys bank account:CashDry Cash trustCry(Transfer of cash from cash trust account)11Issue of shares fully payable on application 20191 MarXY Ltd issued a prospectus inviting subscription for 200,000 ordinary shares at an issue price of$1.50 each,payable in full on application.31 MarApplications closed and 200,000 shares were received.14 AprDirectors allotted the shares.Required:Prepare the journal entries to record the share issue.12Issue of shares fully payable on application 201931 Mar Cash trustDr300,000 ApplicationCr300,000(money received on application held in trust)(Application account is a liability before allotment of shares.)14 AprApplicationDr300,000 Share capitalCr300,000(allotment of 200,000 shares)Cash Dr300,000 Cash trustCr300,000(transfer of cash from trust account to normal bank account)13Call entriesOnly made if shares are payable by instalments1.Make call:CallDry Share capitalCry(Call of$x per share x no.shares)2.Transfer relevant amount of calls in advance:Calls in advanceDry CallCry(Transfer of calls in advance)3.Receipt of call monies:CashDry CallCry(Receipt of call monies)14Issue of shares payable by instalments 20191 MarXY Ltd issued a prospectus inviting subscription for 200,000 ordinary shares at an issue price of$1.50 each,payable$1.30 on application and 20c in a future call.31 MarApplications closed and 200,000 shares were received.14 AprDirectors allotted the shares.200924 MayCall of 20c per share was made.All call money was received by 1 June.Required:Prepare the journal entries to record the share issue.15Issue of shares payable by instalments201931 MarCash trustDr260,000 ApplicationCr260,000(money received on application held in trust)14 AprApplicationDr260,000 Share capitalCr260,000(allotment of 200,000 shares)Cash Dr260,000 Cash trustCr260,000(transfer of cash to normal bank account)16Issue of shares payable by instalments200924 MayCallDr 40,000 Share capitalCr 40,000(call of 20c on 200,000 shares)1 JunCashDr 40,000 Call Cr40,000(receipt of call money)17OversubscriptionMore applications for shares are received than there are shares to be issuedDirectors may allot the shares:On a first-come-first-serve or pro-rata basisTreatment of excess application monies depends on prospectus terms or companys constitutionFirst-come-first-serve allotment:Refunds are made to unsuccessful applicantsPro-rata allotment:Common for companies to retain the excess Excess is transferred to Calls in advance accountTreated as part of share capitalIf there are no future calls,excess is refunded18Oversubscription20191 MarXY Ltd offered for subscription 200,000 ordinary shares at an issue price of$1.50 each,payable$1.00 on application and 50c in a call as required.31 MarApplications closed and 250,000 shares were received.14 AprShares were allotted.Directors retained excess application money as an advance on future calls.200924 MayA call for 50c per share was made.1 JunAll money due on the call was received.19Oversubscription201931 MarCash trustDr250,000 ApplicationCr250,000(money received on application held in trust)14 AprApplicationDr250,000 Calls in AdvanceCr50,000 Share capitalCr200,000(allotment of 200,000 shares&transfer of excess application monies)Cash Dr250,000 Cash trustCr250,000(transfer of cash to normal bank account)20Oversubscription200924 MayCallDr100,000 Share CapitalCr100,000(call of 50c on 200,000 shares)Calls in AdvanceDr50,000 Call Cr50,000(calls in advance monies transferred)1 JuneCash Dr50,000 CallCr50,000(receipt of call monies)21Oversubscription20191 MarXY Ltd offered for subscription 200,000 ordinary shares at an issue price of$1.50 each,payable in full on application.31 MarApplications closed and 250,000 shares were received.14 AprShares were allotted.Directors refundedexcess application money.22Oversubscription201931 MarCash trustDr375,000 ApplicationCr375,000(money received on application held in trust)14 AprApplicationDr300,000 Share capitalCr300,000(allotment of 200,000 shares)Cash Dr300,000ApplicationDr75,000 Cash trustCr375,000(transfer of cash&refund of excess application money)23Forfeiture and reissue of sharesIf allowed by the constitution,directors can forfeit shares for non-payment of calls.On forfeiture:The shares and unpaid call receivable are cancelled.Any paid amount is transferred to the Forfeited Shares account.Forfeited monies can be used to fund any reissue of the shares by offering them at a discount and/or meeting reissue costs.The remaining forfeited shares account balance may,depending on the constitution,either be retained or refunded to the former shareholders.24Forfeiture and reissue entries1.Forfeiture of shares:Share capital(no.x amt called)Dry Call(no.x call)Cry Forfeited shares(no.x amt paid)Cry(Shares forfeited)2.Reissue of shares at a discount:Cash(amt received)DryForfeited shares(no.x discount)Dry Share capital(no.x issue price)Cry(Reissue of shares at a discount)3.Classification of the forfeited shares account:Equity(reserve),if balance is retained by companyLiability,if balance is refunded25Forfeiture and reissue entries200924 MayA call for 20c per share was made on 200,000 shares with an issue price of$1.50 each,paid to$1.30.1 JunAll money due on the call was received except a parcel of 20,000 shares.12 JunThe 20,000 shares were forfeited.25 JunThe 20,000 shares were reissued for$1.20,paid to$1.50.Expenses of reissue amounted to$1,000.The constitution provided for refund of forfeited shares to former shareholders.26Forfeiture and reissue entries200924 MayCallDr40,000 Share capitalCr40,000(call of 20c on 200,000 shares)1 JunCash Dr36,000 CallCr36,000(receipt of 20c on 180,000 shares)12 JunShare capitalDr30,000 CallCr 4,000 Forfeited shares liabilityCr 26,000(forfeiture of 20,000 shares)27Forfeiture and reissue entries25 Jun Cash Dr24,000Forfeited shares liabilityDr 6,000 Share capitalCr30,000(reissue of shares)Forfeited shares liabilityDr 1,000 CashCr 1,000(expenses of reissue)Forfeited shares liabilityDr19,000 Cash Cr19,000(return of surplus to ex-s/holders)(NOTE:If the surplus on forfeited shares is kept by the company,it is treated as part of equity-the forfeited shares reserve account is used.)28Other types of share issuesIn the next lecture,we will examine:private placement;rights issue;option;bonus issue Can be issued in lieu of payment of dividends.29