Class 12 Accountancy Notes · GSEB
Issue of Shares — Framework & Conditions
Issue of Shares Framework — Revise every rule and condition the GSEB Class 12 Accountancy MCQs and VSQs are built on, from SEBI permissions to calls-in-advance. GSEB Class 12 Commerce Accountancy notes.
Last updated: 29 Sep 2026
Notes
Steps for Issue of Equity Shares
Eight steps, in order — walk through them, then pin the two application-money rules.
① Permission for issue
The Capital Issues (Control) Act 1947 was repealed in 1991. Since then SEBI verifies the offer document before permission is granted.
⭐ The two application-money rules
Private placement (skim)
No public offer → no prospectus. Instead a Statement in Lieu of Prospectus is filed with the registrar at least 3 days before the first allotment, and allottees are placed under a lock-in period.
Relatable version: a chai stall owner raising ₹ 4 lakh from four known regulars never prints an advertisement — but the paperwork still goes on record before the first unit is handed over.
What your MCQ tests here
Over-Subscription and Under-Subscription
| Aspect | Over-subscription | Under-subscription |
|---|---|---|
| Applications vs issued | Applications > shares issued | Applications < shares issued |
| Allotment | Cannot allot more than issued — excess rejected/adjusted | All applicants get shares (issue still valid) |
| Excess money | Refunded (or adjusted towards allotment/calls) | No excess — nothing to refund |
| Validity | Normal — must not exceed issued capital | Valid only if ≥ 90% of called-up amount subscribed |
✗ Wrong way — 600 tickets, 700 buyers
A college fest issues 600 passes but 700 students apply, and the committee prints 100 extra passes to keep everyone happy. The issue is now over-issued — illegal, and the accounts will not balance.
✓ Right way: allot 600, refund or adjust the excess money from the other 100.
✓ Right way — the money never lies
Every rupee received is either converted into capital, adjusted against a stage due, or returned. Keep that three-way split visible and the transfer entry writes itself.
Over-subscription is normal and healthy — it only means demand exceeded supply.
Minimum subscription rules (SEBI)
The company must receive application money for at least ⭐ 90% of the amount called up by public subscription (MCQ 4 → 90%).
Minimum subscription must be received within 30 days of the date of the prospectus.
If it is not received → the company cannot allot any share; the total amount is returned within 15 days.
Failure to return within 15 days → interest at 15% p.a. for each day of delay.
Three allotment alternatives under over-subscription
(i)
Full allotment to applicants
Everyone who applied gets exactly what they asked for.
(ii)
Not a single share to some applicants
Some applicants are rejected outright; excess money refunded.
(iii)
Pro-rata allotment
Shares allotted in proportion to the application — covered in the Pro-rata topic.
What your questions test here
Calls-in-Arrears and Calls-in-Advance
Two opposite situations, two different accounts. Pick a tab — each lists its entries and the statutory notes.
Method (i) — without opening a calls-in-arrears account: only the actual receipt is booked — Bank A/c Dr / To Share first call A/c for what comes in. The call account itself shows a debit balance equal to the unpaid amount.
Method (ii) — by opening a calls-in-arrears account: the receipt entry splits — Bank A/c Dr (received) + Calls-in-arrears A/c Dr (unreceived) / To Share first call A/c (full due). Later receipt: Bank A/c Dr / To Calls-in-arrears A/c.
⭐ Shown in the Balance Sheet as a deduction from ‘subscribed but not fully paid up’. Articles may charge interest on arrears; absent articles → Table F: 10% p.a. (directors may waive it). Interest calculation and its accounting effects are not in the syllabus.
Worked comparison — Illustration 3: Jay Ltd first call ₹ 2 on 50,000 shares; a 1,000-share holder pays late
| Row | Entry | Amount (₹) |
|---|---|---|
| Due entry (both methods) | Share first call A/c Dr To Share capital A/c | 1,00,000 |
| Receipt — method (i) | Bank A/c Dr To Share first call A/c | 98,000 |
| Receipt — method (ii) | Bank A/c Dr 98,000 + Calls-in-arrears A/c Dr 2,000 To Share first call A/c | 1,00,000 |
| Arrears received — (i) | Bank A/c Dr To Share first call A/c | 2,000 |
| Arrears received — (ii) | Bank A/c Dr To Calls-in-arrears A/c | 2,000 |
The pair to memorise
Arrears
Table F → 10% p.a. (allowed, waivable)
Deducted from ‘subscribed but not fully paid up’ in the Balance Sheet.
Advance
Table F → max 12% p.a. (compulsory)
A current liability — not share capital, so no dividend on it.
MCQ 7 lives in this pair
IPO, FPO and Syllabus Notes
Not examined — kept for the curious
Key Takeaways
Key Takeaways
- A public issue needs SEBI’s permission on the offer document; the prospectus is what invites the public.
- Application money ≥ 5% of face value (Sec 39) AND ≥ 25% of issue price (SEBI).
- Minimum subscription 90% within 30 days; refund within 15 days or 15% p.a. interest.
- Over-subscription → refund or adjust; under-subscription → valid only at ≥ 90%.
- Discount on issue is banned (Sec 53) except sweat equity; premium has no rate limit.
- Arrears (Table F 10%, waivable, deducted from subscribed capital) vs Advance (Table F max 12%, compulsory, current liability) — the two rates your MCQ will try to swap.