{"id":3782,"date":"2023-10-05T18:53:21","date_gmt":"2023-10-05T18:53:21","guid":{"rendered":"http:\/\/localhost\/ecole9ja\/?p=3782"},"modified":"2023-10-05T18:55:18","modified_gmt":"2023-10-05T18:55:18","slug":"week-9-and-10-ss3-first-term-financial-accounting-notes","status":"publish","type":"post","link":"https:\/\/ecolebooks.com\/nigeria\/posts\/week-9-and-10-ss3-first-term-financial-accounting-notes\/","title":{"rendered":"Week 9 and 10 &#8211; SS3 First Term Financial Accounting  Notes"},"content":{"rendered":"<p><strong>WEEK NINE AND TEN<\/strong><br \/>\n\t<strong>ISSUE OF SHARES<br \/>\n<\/strong><strong>CONTENT<br \/>\n<\/strong><\/p>\n<ul>\n<li>Definition of shares\n<\/li>\n<li>Classes of shares\n<\/li>\n<li>Issue of shares\n<\/li>\n<li>Explanation of issue of shares\n<\/li>\n<li>Shares payable in full on application at par\n<\/li>\n<li>Shares issued at a premium\n<\/li>\n<li>Shares issued at a discount\n<\/li>\n<\/ul>\n<p>\u00a0<strong>Definition of shares<br \/>\n<\/strong>Shares can be defined as units of capital of ownership of a limited company. It is an ownership right in a company. A company cannot commence business until it raises capital by selling shares to the public for subscription.<\/p>\n<p>\u00a0<strong>CLASSES OF SHARES<br \/>\n<\/strong>There are three classes of shares in a limited liability company, they are:<\/p>\n<ul>\n<li>Ordinary shares\n<\/li>\n<li>Preference shares\n<\/li>\n<li>Founder&#8217;s shares\n<\/li>\n<li><strong>ORDINARY SHARES<\/strong>: The shareholders of these are entitled to dividend after preference shareholders have settled. They are the owner&#8217;s of the company because they bear company risk and their dividend is not fixed. No wonder during the period of prosperity, they receive more dividends. They are often known as equities.\n<\/li>\n<li><strong>PREFERENCE SHARES<\/strong>: The shareholders of these shares are entitled to fixed dividend and they are treated preferentially. They received dividend before any other class of shares. A company can issue redeemable or irredeemable, participating or non-participating, cumulative or non- cumulative preference shares.\n<\/li>\n<li><strong>FOUNDER&#8217;S SHARE<\/strong>: These are also called deferred shares. These are shares issued to promoters of the company to compensate them for job well done. And they are entitled to dividend.\n<\/li>\n<\/ul>\n<p>\u00a0<strong>ISSUE OF SHARES<br \/>\n<\/strong>Shares can be issued in the following terms:<strong><br \/>\n\t\t<\/strong><\/p>\n<ul>\n<li>Shares issued at a discount\n<\/li>\n<li>Shares issued at a premium\n<\/li>\n<li>Shares issued at par\n<\/li>\n<\/ul>\n<p>\u00a0<strong>EXPLANATION OF ISSUE OF SHARES<br \/>\n<\/strong><\/p>\n<ul>\n<li><strong>Shares issued at a discount<\/strong>: Shares of limited liability companies are said to be issued at a discount, when the company share is issued at a price value less than the nominal value of the company share. For example if XYZ plc&#8217;s share nominal value is \u20a61 but the company share is issued for subscription at 50k per share, the share is said to be issued at discount. The discount is 50k\n<\/li>\n<li><strong>Shares issued at a premium<\/strong>: shares of limited liability companies are said to be issued at a premium, when the company share is issued at a price value above the nominal value of the company&#8217;s share. For example if XYZ  plc&#8217;s share nominal share value is \u20a61 but the company share is issued for subscription at \u20a62 per share, the share is said  to be issued at a premium. The premium is \u20a61.00\n<\/li>\n<li><strong>Shares issued at par<\/strong>: Shares of limited liability companies are said to be issued at par, when the company&#8217;s share is issued for subscription at the shares nominal value i.e issued at a price value equal to the nominal value. For example XYZ plc shares nominal nominal value is \u20a61, and the company issue the share for subscription at \u20a61 per share, the share is said to be issued at par.\n<\/li>\n<\/ul>\n<p>\u00a0<strong>EVALUATION<br \/>\n<\/strong><\/p>\n<ul>\n<li>Define the term shares.\n<\/li>\n<li>Explain the following: Cummulative and non cumulative preference share.\n<\/li>\n<\/ul>\n<p>\u00a0<strong>ISSUE OF SHARES<br \/>\n<\/strong><strong>NOTE<br \/>\n<\/strong>Shares issued at par, payable in full on application.<\/p>\n<p>\u00a0<strong>ACCOUNTING ENTRIES<\/strong>:<br \/>\nOn receipt of application of money<br \/>\n<strong>DEBIT<\/strong>: Bank Account<br \/>\n<strong>CREDIT<\/strong>: Application Account<br \/>\nOn allotment:<br \/>\nDebit Application Account<br \/>\nCredit Ordinary Share CapitalAccount<br \/>\n<strong>Example<\/strong>: On the 1<sup>st<\/sup> January 1980 XYZ plc made an issue of 13,000 ordinary shares of \u20a62 each at par Application together with total amount received for exactly 13,000 shares and the shares were allotted to the applicants. Show the journal entries and ledger accounts<\/p>\n<p>\u00a0<strong>Solution:<\/strong><br \/>\n\t<strong>Journal<br \/>\n<\/strong><\/p>\n<div>\n<table>\n<tbody>\n<tr>\n<td>Bank Account<br \/>\nApplication Account<\/p>\n<p>\u00a0Being money collected on application\n<\/td>\n<td>Dr<br \/>\n26,000<\/p>\n<p>\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a026,000<\/td>\n<td> Cr<\/p>\n<p>\u00a026,000<\/p>\n<p>\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a026,000<\/td>\n<\/tr>\n<tr>\n<td>Application Account<\/p>\n<p>\u00a0Share capital account<\/p>\n<p>\u00a0Allotment 13,000 ordinary shares at \u20a62 <\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><strong>Ledger accounts:<br \/>\n<\/strong><\/p>\n<div>\n<table>\n<tbody>\n<tr>\n<td>                                              \u20a6<br \/>\nApplication                    26,000<\/td>\n<td>\u00a0<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><strong>Bank account<br \/>\n<\/strong><br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<strong>Application Account<br \/>\n<\/strong><br \/>\n\u00a0<\/p>\n<div>\n<table>\n<tbody>\n<tr>\n<td>                                            \u20a6<br \/>\nShare capital                     26,000                       <\/td>\n<td>                                      \u20a6<br \/>\nBank                      26,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<table>\n<tbody>\n<tr>\n<td>\u00a0<\/td>\n<td>                                      \u20a6<br \/>\nApplication                  26,000 <\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>\u00a0<strong>Ordinary Share Capital Account<br \/>\n<\/strong><br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<strong>Shares issued at a premium payable in full on application<\/strong>: Share can be issued at apremium and paid in full application. This will necessitate the opening of share premium account. The value of the share premium is credited to the share premium account.<\/p>\n<p>\u00a0Accounting entries:<br \/>\nOn receipt of application money:<br \/>\nDebit Bank Account<br \/>\nCredit Application Account<br \/>\nOn allotment:<br \/>\nDebit Application Account<br \/>\nCredit Share Premium Account<br \/>\nCredit Ordinary Share Capital Account<\/p>\n<p>\u00a0<strong>Example 2<\/strong>: On 1<sup>st<\/sup> January 1980 XYZ plc made an issue of 13,000 ordinary shares of nominal value of \u20a62 at \u20a63. Application money were received for exactly 13,000 ordinary share.Show the journal entries and the ledger account.<br \/>\n<strong>Solution:<br \/>\n<\/strong><strong>Journal<\/p>\n<div>\n<table>\n<tbody>\n<tr>\n<td>\u00a0<\/td>\n<td>Dr<\/td>\n<td>Cr<\/td>\n<\/tr>\n<tr>\n<td>\n\u00a0Bank account<br \/>\nApplication account<br \/>\nBeing \u20a63 collected on 13,000 shares<\/p>\n<p>\u00a0Application account<br \/>\nShare premium account<br \/>\nOrdinary share capital account<br \/>\nAllotment of 13,000 ordinary shares at a premium                 <\/td>\n<td>\u20a6<br \/>\n39,000<\/p>\n<p>\u00a0<br \/>\n\u00a0<br \/>\n\u00a039,000<\/td>\n<td>\u20a6<\/p>\n<p>\u00a039,000<\/p>\n<p>\u00a0<br \/>\n\u00a0<br \/>\n\u00a013,000<br \/>\n26,000<\/p>\n<p>\u00a0<br \/>\n\u00a0<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><\/strong><br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<strong>Ledger Accounts:<br \/>\n<\/strong><\/p>\n<div>\n<table>\n<tbody>\n<tr>\n<td>                                                        \u20a6<br \/>\napplication                                 39,000<\/p>\n<p>\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<\/td>\n<td>\u00a0<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><strong>Bank  Account<br \/>\n\t\t\t\t<\/strong><br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<\/p>\n<div>\n<table>\n<tbody>\n<tr>\n<td>                                                   \u20a6<br \/>\nShare premium                         13,000<br \/>\nOrdinary share capital                26,000<br \/>\n                                               39,000<\/td>\n<td>                           \u20a6<br \/>\nBank                  39,000<br \/>\n<img decoding=\"async\" align=\"left\" src=\"https:\/\/ecolebooks.com\/nigeria\/wp-content\/uploads\/9jalessonsimages\/100523_1853_Week9and101.png\" alt=\"\"\/><br \/>\n\t\t\t\t\t\t\t\t                          39,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><strong>Application Account<br \/>\n<\/strong><br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<strong>SharePremium Account<br \/>\n<\/strong><\/p>\n<div>\n<table>\n<tbody>\n<tr>\n<td>\n\u00a0<br \/>\n\u00a0<\/td>\n<td>                                                    \u20a6<br \/>\nApplication and allotment a\/c      13,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><strong>Ordinary Share Capital Account<\/p>\n<div>\n<table>\n<tbody>\n<tr>\n<td>\u00a0<\/td>\n<td>                                                \u20a6<br \/>\nApplication                            26,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><\/strong><br \/>\n\u00a0<\/p>\n<ul>\n<li><strong>Share issued at a discount payable in full on application<\/strong>: Here, the share is issued at a discount. The difference is debited to discount account opened.\n<\/li>\n<\/ul>\n<p><strong>Accounting entries:<br \/>\n<\/strong>On receipt of application money:<br \/>\nDebit Bank Account<br \/>\nCredit Application Account<br \/>\n<strong>On allotment:<br \/>\n<\/strong>Debit Application Account<br \/>\nCredit Ordinary Share Capital Account<br \/>\n<strong>Example 3<\/strong>: On 1<sup>st<\/sup> January 1980 XYZ plc made an issue of 13,000 ordinary shares of nominal value of \u20a62 at \u20a61 each.  Application money was received in full,show the journal and ledger account entries.<\/p>\n<p>\u00a0<strong>Solution<\/strong>:<br \/>\n<strong>Journal<\/strong><\/p>\n<div>\n<table>\n<tbody>\n<tr>\n<td>\u00a0<\/td>\n<td>Dr<\/td>\n<td>Cr<\/td>\n<\/tr>\n<tr>\n<td>\n\u00a0Bank Account<br \/>\nApplication Account<br \/>\nBeing money collected on 13,000 shares<\/p>\n<p>\u00a0Application Account<br \/>\nShare discount account<br \/>\nOrdinary share capital account<br \/>\nAllotment of 13,000 shares at a discount<\/td>\n<td>\u20a6<br \/>\n13,000<\/p>\n<p>\u00a0<br \/>\n\u00a0<br \/>\n\u00a013,000<br \/>\n13,000<\/td>\n<td>\u20a6<\/p>\n<p>\u00a013,000<\/p>\n<p>\u00a0<br \/>\n\u00a0<br \/>\n\u00a0<br \/>\n\u00a026,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>\u00a0<strong>Ledger accounts:<br \/>\n<\/strong><strong>                                       Bank Account<br \/>\n<\/strong><\/p>\n<div>\n<table>\n<tbody>\n<tr>\n<td>                                                    \u20a6<br \/>\nApplication                                13,000<\/td>\n<td>\u00a0<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>\u00a0<br \/>\n\u00a0<strong>Application Account<br \/>\n<\/strong><\/p>\n<div>\n<table>\n<tbody>\n<tr>\n<td>Ordinary Share Capital        26,000<br \/>\n<img decoding=\"async\" align=\"left\" src=\"https:\/\/ecolebooks.com\/nigeria\/wp-content\/uploads\/9jalessonsimages\/100523_1853_Week9and102.png\" alt=\"\"\/><br \/>\n\t\t\t\t\t\t\t\t\t26,000<\/td>\n<td>Bank             13,000<br \/>\nShare discount  13,000<br \/>\n26,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>\u00a0<strong>Ordinary Share Capital Account<\/p>\n<div>\n<table>\n<tbody>\n<tr>\n<td>\u00a0<\/td>\n<td> \u20a6<br \/>\nApplication         13,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><\/strong><br \/>\n\u00a0<\/p>\n<ul>\n<li><strong>Under subscription<\/strong>: this is where fewer shares are applied for than available for sale e.g A company issued out 300 shares but only 250 shares were applied for.\n<\/li>\n<\/ul>\n<ul>\n<li><strong>Over subscription<\/strong>: This is when the number of shares applied for are more than that number actually offered for subscription.\n<\/li>\n<\/ul>\n<p>\u00a0<strong>Evaluation<br \/>\n<\/strong><\/p>\n<ul>\n<li>What is meant by over-subscription\n<\/li>\n<\/ul>\n<ul>\n<li>Explain the term under subscription\n<\/li>\n<\/ul>\n<p>\u00a0<strong>READING ASSIGNMENT<br \/>\n<\/strong>Essential Financial Accounting page 321-332<\/p>\n<p>\u00a0<strong>GENERAL EVALUATION<br \/>\n<\/strong><\/p>\n<ol>\n<li>\n<div>What is the effect of understatement of closing stock on : (a) cost of sales (b) gross\n<\/div>\n<p>profit (c) net profit\n<\/li>\n<li>\n<div>State five causes of a decline in the net profit of a business\n<\/div>\n<\/li>\n<li>\n<div>Differentiate between &#8221;Discount Allowed&#8221; and &#8221;Discount Received&#8221;\n<\/div>\n<\/li>\n<li>\n<div>State five characteristics of the imprest system of keeping petty cash records\n<\/div>\n<\/li>\n<li>\n<div>List four characteristics of each of the following (a) fixed assets (b) current assets\n<\/div>\n<p>(c) intangible assets\n<\/li>\n<\/ol>\n<p><strong>WEEKEND ASSIGNMENT<br \/>\n<\/strong><\/p>\n<ol>\n<li>When a company received application for shares fewer than available for sale, the share is said to be  a) oversubscribed b) under-subscribed  c)subscription at par (d) forfeited\n<\/li>\n<li>When a company received application for more than available shares for sales, the share is said to be (a) ever-subscribed  (b) under- subscribed (c) over- subscribed (d) cancelled\n<\/li>\n<li>On shares issued at par on application and fully paid, the accounting entries on  receipts of money are (a) debit bank and credit application  (b)debit application and credit bank (c) debit premium and credit bank (d) debit ordinary shares credit bank\n<\/li>\n<li>Based on question 3 above ,the accounting entries on allotment of shares are  (a) debit ordinary share capital account and credit application account  (b)debit application account and credit ordinary shares capital account (c) debit premium  and credit application account(d) debit ordinary shares credit bank\n<\/li>\n<li> A share issued below the nominal value is said to be issued at (a) discount (b) premium (c) at par (d) loss\n<\/li>\n<\/ol>\n<p>\u00a0<strong>THEORY<\/strong><br \/>\n\tOn 1<sup>st<\/sup> February 1989 ABC plc makes an issue of 15,000 ordinary shares of nominal value of \u20a62 at \u20a63. Application money were received for exactly 15,000 shares.<br \/>\nShow:<br \/>\na.\u00a0\u00a0\u00a0\u00a0Journal entries<br \/>\nb.\u00a0\u00a0\u00a0\u00a0Ledger accounts<\/p>\n","protected":false},"excerpt":{"rendered":"<p>WEEK NINE AND TEN ISSUE OF SHARES CONTENT Definition of shares Classes of shares Issue&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,293],"tags":[],"class_list":["post-3782","post","type-post","status-publish","format-standard","hentry","category-posts","category-first-term-ss3-financial-accounting"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/posts\/3782","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/comments?post=3782"}],"version-history":[{"count":2,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/posts\/3782\/revisions"}],"predecessor-version":[{"id":3784,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/posts\/3782\/revisions\/3784"}],"wp:attachment":[{"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/media?parent=3782"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/categories?post=3782"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/tags?post=3782"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}