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Difference between Capital Reserve and Reserve Capital
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Share Capital: Meaning, Kinds, and Presentation of Share Capital in Company's Balance Sheet

Last Updated : 21 Apr, 2025
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What are Shares?

When the total capital of the company is divided into units of small denominations, it is known as shares. For example, if the total capital of the company is ₹ 5,00,000, divided into 10,000 units of ₹50 each, each unit of ₹50 will be called a share (of ₹ 10 each). Thus, in the above case, the company has 1,00,000 shares of ₹10 each. In order to identify the shares, they must be numbered.

What is Share Capital?

The Capital raised by a company through the issue of shares is known as Share Capital. There is no separate Capital Account for each individual or institution even after they contribute varying sums to the company's capital. There is one Consolidated Capital Account called the Share Capital Account.

Kinds of Share Capital

The kinds of Share Capital are as follows:

1. Authorised, Registered, or Nominal Capital:

 The amount, which is stated in the Memorandum of Association is termed Authorised Capital. Authorised, Registered or Nominal Capital is the maximum capital for which a company is authorised to issue shares during its lifetime.

2. Issued Capital: 

That part of Authorised Capital, which is actually offered to the public for subscription is known as Issued Capital. The remaining part of the Authorised Capital, which can be issued later, is known as 'Unissued Capital'.

3. Subscribed Capital: 

That part of the capital that has been subscribed for by the public is known as Subscribed Capital. For example, 12,000 shares of Rs. 100 each are offered to the public, and the public applies for 10,000 shares, then the Subscribed Capital will be 10,000 x 100 = Rs. 10,00,000.

Subscribed Capital is shown in the Balance Sheet under two heads:

  1. Subscribed and fully paid up
  2. Subscribed but not fully paid up

(i) Subscribed and fully paid up:

When the entire or nominal (face) value of a share is called by the company, and also paid up by the shareholders, it is known as Subscribed and Fully paid-up Capital. 

(ii) Subscribed but not fully paid up:

When the company has called up the full nominal value of the share, but the shareholder has not paid some part of the nominal value of the share, and when the company has not called up the full nominal value of the share, the shares are said to be Subscribed and not fully paid-up.  

Illustration:
The Authorised Capital of Jordan Ltd. is Rs. 15,00,000 divided into 1,50,000  equity shares of Rs. 10 each. Out of these shares, the company issued 1,00,000 equity shares to the public. The public applied for 90,000 equity shares and all the money was duly received. How this will be shown in the 'Share Capital Account' in the Balance Sheet of the company. Also, prepare 'Notes to Accounts' for the same.

Notes to Accounts:

 

Terms like Called-up and Paid-up are also used in the case of 'Share Capital'.

Called-up Share Capital: The part of the face value of a share which is called by the directors from the shareholders is known as Called-up Share Capital. For example, if the directors call at the rate of ₹ 50 per share on 1,000 shares of ₹100 each, ₹50,000 will be the called up Capital. The remaining ₹ 50 per share will be uncalled share capital.

Paid-up Share Capital: That portion of called-up capital that has been actually received from the shareholders is known as Paid-up Share Capital. The only point of difference between called-up capital and paid-up capital is that some shareholders may not have paid the amount of calls. The unpaid amount is called Calls in Arrear. For example, ₹ 4 has been paid against the called-up amount of ₹10, then ₹4 is the paid-up amount.


Paid-up Amount = Capital - Amount of Calls in Arrear

4. Reserve Capital: 

That portion of the increased nominal capital or uncalled share capital of an organisation which shall not be called up, except in the event of winding up is known as Reserve Capital. It is not necessary to create Reserve Capital. Reserve Capital is not shown in the Balance Sheet of a Company. A firm can use Reserve Capital only at the time of winding up of the Company.

5. Capital Reserve: 

The reserves which are created out of the Capital Profits of a firm are known as Capital Reserves. Here, capital profits are the profits that are not earned during the normal course of the business. However, an organisation can not utilise the capital reserve for the distribution of dividends. The items that give rise to the Capital Profits and ultimately Capital Reserves of an organisation are as follows:

  • Profit on Sale of Fixed Assets.
  • Profit on Revaluation of Fixed Assets.
  • Profit on Redemption of Debentures. 
  • Profit earned by a company prior to its corporation.
  • Profit on forfeiture and re-issue of shares.
  • Premium on Issue of Shares and Debentures. 

Presentation of Share Capital in Company's Balance Sheet:

 

Notes to Accounts:

As per Schedule III of Companies Act, 2013, Share Capital is to be disclosed in a Company's Balance Sheet in the following way:

 

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Difference between Capital Reserve and Reserve Capital

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    Accounting Treatment of Goodwill in case of Dissolution of Firm
    Goodwill is nothing but a monetary value of a reputation of a business firm in the market, earned by the firm by serving its customers. In a Partnership firm, Goodwill is treated like an asset; every partner has a right over the firm's goodwill up to his/her share in the business.In case of the Diss
    2 min read
    Accounting Treatment of Joint Life Policy in case of Dissolution of a Firm
    What is Joint Life Policy?Joint Life Policy is a life policy that gives coverage against the death of the policyholder, under which the coverage is of a minimum of two persons and the pay-out is on a first-death basis. Since the Partnership firm is a business run by at least two people, the partners
    3 min read
    Accounting Treatment of Contingent Assets and Contingent Liabilities in case of Dissolution of a firm
    Contingent Assets: A Contingent Asset is an economic gain that may come into existence in near future as a result of some past action. The existence of such assets is completely uncertain and beyond the control of the entity. Example: Any property of a firm under some legal suit, and warranty receiv
    3 min read

    Part-B

    Chapter 1: Accounting for Share Capital

    Company and its Types
    A company is one of the most important and prominent forms of business organization. It can be described as a voluntary association of individuals, having a common purpose, who agree to pool their funds and unite to achieve the said goals. It can be called an artificial person created under the juri
    7 min read
    Shares : Meaning, Nature and Types
    What are Shares?When the total capital of the company is divided into units of small denominations, it is known as shares. For example, if the total capital of the company is ₹ 5,00,000, divided into 10,000 units of ₹50 each, each unit of ₹50 will be called a share (of ₹ 10 each). Thus, in the above
    5 min read
    Difference between Preference Shares and Equity Shares
    Life-blood of any business is finance. Sufficient finance for the company helps to grow and expand the company. The financial needs of any business are concerned with the acquisition and utilisation of funds. It is done through planning, acquiring, utilising, managing, and controlling funds in conne
    5 min read
    Share Capital: Meaning, Kinds, and Presentation of Share Capital in Company's Balance Sheet
    What are Shares?When the total capital of the company is divided into units of small denominations, it is known as shares. For example, if the total capital of the company is ₹ 5,00,000, divided into 10,000 units of ₹50 each, each unit of ₹50 will be called a share (of ₹ 10 each). Thus, in the above
    5 min read
    Difference between Capital Reserve and Reserve Capital
    Capital Reserve and Reserve Capital are most often confused same. However, the former is a reserve created out of the Capital Profits of a firm; whereas, the latter is a part of the increased nominal capital or uncalled share capital of an organisation which shall not be called up, except in the eve
    3 min read
    Accounting for Share Capital: Issues of Shares for Cash
    A unit of capital or an equal portion of the share capital of an organisation divided, whose ownership is evidenced by a share certificate is known as a Share. Simply put, shares are the denominations of the share capital of an organisation. For example, if the total capital of ABC Ltd. is ₹10,00,00
    9 min read
    Issue of Shares At Par: Accounting Entries
    A unit of capital or an equal portion of the share capital of an organisation divided, whose ownership is evidenced by a share certificate is known as a Share. Simply put, shares are the denominations of the share capital of an organisation. For example, if the total capital of ABC Ltd. is ₹10,00,00
    3 min read
    Issue of Shares at Premium: Accounting Entries
    A unit of capital or an equal portion of the share capital of an organisation divided, whose ownership is evidenced by a share certificate is known as a Share. Simply put, shares are the denominations of the share capital of an organisation. For example, if the total capital of ABC Ltd. is ₹10,00,00
    4 min read
    Issue of Share for Consideration other than Cash: Accounting for Share Capital
    A unit of capital or an equal portion of the share capital of an organisation divided, whose ownership is evidenced by a share certificate is known as a Share. Simply put, shares are the denominations of the share capital of an organisation. For example, if the total capital of ABC Ltd. is ₹10,00,00
    5 min read
    Issue of Shares: Accounting Entries on Full Subscription with Share Application
    A unit of capital or an equal portion of the share capital of an organisation divided, whose ownership is evidenced by a share certificate is known as a Share. Simply put, shares are the denominations of the share capital of an organisation. For example, if the total capital of ABC Ltd. is ₹10,00,00
    2 min read
    Calls in Arrear: Accounting Entries with Examples on Issue of Shares
    Calls in Arrear refer to the amount of money that a shareholder has not yet paid to a company on shares they have agreed to purchase. In the context of a company issuing shares, the payment for these shares is often requested in installments, known as "calls." If a shareholder does not pay an instal
    4 min read
    Calls in Advance: Accounting Entries with Examples on Issue of Shares
    Calls in Advance is the amount of future calls which is received by the company in advance. Calls in Advance is just opposite to Calls in Arrear. It is a situation when the shareholders of a company pay the amount not yet called upon their shares. Section 50 of the Companies Act, 2013 says that the
    4 min read
    Oversubscription of Shares: Accounting Treatment
    A unit of capital or an equal portion of the share capital of an organisation divided, whose ownership is evidenced by a share certificate is known as a Share. Simply put, shares are the denominations of the share capital of an organisation. For example, if the total capital of ABC Ltd. is ₹10,00,00
    4 min read
    Oversubscription of Shares: Pro-rata Allotment
    A unit of capital or an equal portion of the share capital of an organisation divided, whose ownership is evidenced by a share certificate is known as a Share. Simply put, shares are the denominations of the share capital of an organisation. For example, if the total capital of ABC Ltd. is ₹10,00,00
    4 min read
    Oversubscription of Shares: Pro-rata Allotment with Calls in Arrear
    A unit of capital or an equal portion of the share capital of an organisation divided, whose ownership is evidenced by a share certificate is known as a Share. Simply put, shares are the denominations of the share capital of an organisation. For example, if the total capital of ABC Ltd. is ₹10,00,00
    5 min read
    Forfeiture of Shares : Accounting Entries on Issue of Shares
    What is Forfeiture of Shares?Cancellation of shares of a shareholder who fails to pay the amount due on allotment or on any call within the specific time period is known as Forfeiture of Shares. A company or its directors can forfeit the shares only if its Articles of Association allow for the same.
    5 min read
    Accounting Entries on Re-issue of Forfeited Shares
    A unit of capital or an equal portion of the share capital of an organisation divided, whose ownership is evidenced by a share certificate is known as a Share. Simply put, shares are the denominations of the share capital of an organisation. For example, if the total capital of ABC Ltd. is ₹10,00,00
    7 min read
    Disclosure of Share Capital in the Balance Sheet: Accounting Entries on Issue of Shares
    A unit of capital or an equal portion of the share capital of an organisation divided, whose ownership is evidenced by a share certificate is known as a Share. Simply put, shares are the denominations of the share capital of an organisation. For example, if the total capital of ABC Ltd. is ₹10,00,00
    3 min read

    Chapter 2: Issue and Redemption of Debentures

    Issue of Debentures: Meaning, Characteristics, Purpose of Issuing Debentures and Example
    A debenture can be described as a debt instrument issued by a company to the public in order to raise funds for medium or long-term usage. It is just like a bank loan, with debt obligation and liability for interest payment, but instead of borrowing from a bank, these are issued and traded in the ca
    5 min read
    Types of Debentures
    What is Debenture?A debenture can be described as a debt instrument issued by a company to the public in order to raise funds for medium or long-term usage. It is just like a bank loan, with debt obligation and liability for interest payment, but instead of borrowing from a bank, these are issued an
    4 min read
    Difference between Shares and Debentures
    Issuing of Shares and Debentures are two of the most prominent source of finance for any business. By issuing shares and debentures, any public company can generate finance from the market. Finance required by the business to establish and run its operations is known as Business Finance. No business
    4 min read
    Issue of Debentures: Accounting Treatment of Issue of Debenture and Presentation of debentures in balance sheet (with format)
    What is a Debenture?A written instrument or document which is issued by the company acknowledging the borrowings is known as Debenture. In this document, the terms of repayment of principal and payment of interest at a specific rate are stated. According to Section 2(30) of the Companies Act, 2013,"
    2 min read
    Issue of Debenture at Par and Premium
    What is a Debenture?A written instrument or document which is issued by the company acknowledging the borrowings is known as Debenture. In this document, the terms of repayment of principal and payment of interest at a specific rate are stated. According to Section 2(30) of the Companies Act, 2013,"
    3 min read
    Issue of Debentures for Consideration other than Cash
    Issue of Debentures for consideration other than cash means that the company has not received amount (in cash or by cheque) against the debentures issued. Debentures may be issued for consideration other than cash in the following situations:To promoters of the company for rendering services for inc
    4 min read
    Issue of Debenture as Collateral Security
    What is Issue of Debentures as Collateral Security?A company may have to issue debentures as a subsidiary or secondary security in addition to the principal security when it takes a loan from a bank or from other party, this is known as Issue of Debentures as Collateral Security. Collateral security
    3 min read
    Interest on Debentures
    A debenture can be described as a debt instrument issued by a company to the public in order to raise funds for medium or long-term usage. It is just like a bank loan, with debt obligation and liability for interest payment, but instead of borrowing from a bank, these are issued and traded in the ca
    3 min read
    Redemption of Debentures
    What is Redemption of Debentures?Repayment of debentures to the debenture holders or discharge of the liability on account of debentures is known as the redemption of debentures. They are normally redeemed at the expiry of the period for which they were originally issued. The company may also redeem
    4 min read
    Redemption of Debentures: Meaning, Sources and Rules regarding Redemption
    What is Redemption of Debentures?Repayment of debentures to the debenture holders or discharge of the liability on account of debentures is known as the redemption of debentures. They are normally redeemed at the expiry of the period for which they were originally issued. The company may also redeem
    5 min read
    Redemption of Debentures in case of Lump-Sum
    What is Redemption of Debentures?Repayment of debentures to the debenture holders or discharge of the liability on account of debentures is known as the redemption of debentures. They are normally redeemed at the expiry of the period for which they were originally issued. The company may also redeem
    3 min read
    Redemption of Debentures in case of Installment
    What is Redemption of Debentures?Repayment of debentures to the debenture holders or discharge of the liability on account of debentures is known as the redemption of debentures. They are normally redeemed at the expiry of the period for which they were originally issued. The company may also redeem
    2 min read
    Redemption of Debentures in case of Purchase of Own Debentures
    What is Redemption of Debentures?Repayment of debentures to the debenture holders or discharge of the liability on account of debentures is known as the redemption of debentures. They are normally redeemed at the expiry of the period for which they were originally issued. The company may also redeem
    4 min read
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