Types
of Shares
(1) Ordinary Share
– these are the risk takers
(2)
Preference
Shares – to be paid first because they are co-owners of
the company and also take part in management
We
have four types of preference shareholders:
a.
Redeemable
– the company are obliged to pay
b.
Unredeemable
– the company is not obliged to pay
c.
Accumulative
preference shareholder –
this, the company will pay even if they did not pay in the current
year. Thereby it will accumulate and
carried over to the next year where they will pay the accruals.
d.
Non
accumulative preference shareholder –
Type Of Issues
1.
Public
Issues – this is the type that is made public to everyone
and subscribers can verify the prospectus to know if the company is strong
enough. There is always 5 years financial statement
2.
Private
placement – this is to selected persons
3.
Right
issue – this is an issue of shares to shareholder of the
company. Those that are already have
shares with the company.
4.
Bonus
issue – this is like jara – compensating the existing
share holders with more shares.
Shares
could be sold at:
i.
At Par – this is the original price in
the memo of association
ii.
At Premium – selling above At Per
SOME
TERMS:
1. Issue Price
– the price for the share – the price it will be issued
2. Per Value or nominal value
– this is the original or face value stated in the company memo of association
3. Right Price
– this is the price or the right issue that are issued to existing holders.
This price is for the existing shareholders only.
4. Premium
– Company Allied Matters Acts CAMA 1990 section 120 support (At per
Premium). It is the price above the At
Per
5. At discount
– selling at a price below the At Per and CAMA 1990 section 121 support this.
Note:
Ex-Div is when you are selling your
shares but you still maintain your dividend while Cum-Div is when you sell but you don’t maintain your dividend.
Debenture:
- is when a company collects loan from an Individual. It is a credit like a loan. The money an individual lend to a company is
called Debenture: The individual will be paid interest on a regular basis. But if the company cannot pay, it could be
converted to share if accepted by the lender.
When converted, it is called conversion issue.
FORFEITURE OF SHARES
If
a shareholder failed to pay a call or installment on the due date, the directors
of the company are empowered by section 140 of CAMA to forfeit the shares
provided the defaulting shareholder have been served at least a 14 days’ notice.
ACCOUNTING ENTERING FOR PUBLIC
ISSUE AND PRIVATE PLACEMENT
1. Application
monies is received:
Dr. Bank A/c with total application monies
received
Cr. Application A/c
2. Refund
to rejected applicant:
Dr.
Application with the amount refunded
Cr.
Bank:
Note:
in accounting, you have to debit before you credit.
3. Closure
of application A/C at the end of application:
Dr.
Application A/C with credit balance on
the application acct.
Cr.
Allotment A/C
4. Shares
Allotted:
Dr.
Allotment A/C with the value
(application installment +
Cr.
Share Capital A/C allotment
installment – premium of any)
5. Monies
received on allotment:
Dr.
Bank A/C with the amount
received on allotment
Cr. Allotment A/C (+ i.e. cash due on allotment – excess
application monies if any)
6. Calls
made: - 1st , 2nd
and final calls:
Dr.
Call A/C with the
nominal value due on the call
Cr.
Share Capital A/C
7. Monies
Received on Calls:
Dr.
Bank A/C with the actual amount
received on call.
Cr.
Call A/C
8. Premium
Included in Installment:
Dr. Allotment or Call
A/C with the premium included in the
Cr.
Share Premium A/C installment
9. Unpaid calls:
Dr.
Call in arrears A/C with calls due
but not received
Cr.
Call A/C
10.Call
Received in Advance:
Dr.
Call A/C with
calls received but not due
Cr.
Call in Advance A/C
11. Shares
Forfeited:
Dr.
Share Capital A/C with called up
value of shares forfeited
Cr.
Forfeited Share A/C
12.Transfer
of unpaid calls on the forfeited shares to the forfeited shares A/C:
Dr.
Forfeited share A/C with the unpaid
calls on the shares
Cr.
Calls in arrears A/C forfeited
13.
Re-issue of forfeited shares:
Dr.
Forfeited Re-issued A/C with the called
–up value of shares
Cr.
Share Capital A/C re-issued.
14.Transfer
of nominal value already paid-up by previous shareholder of the re-issue shares
to the forfeited shares re-issued A/C:
Dr.
Forfeited shares A/C with
the credit balance on the
Cr.
Forfeited Share Re-issued A/C
forfeited shares A/C relating to
The
re-issue shares.
15.
Monies received on re-issue:
Dr.
Bank A/C with
the sum received on re-issue
Cr.
Forfeited Share Re-issue A/C
16.
Premium on Re-Issue:
Dr.
Forfeited share re-issue A/C with
credit balance on the forfeited
Cr.
Share Premiums A/C re-issue
A/C
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