Under which major head will the following be shown: (i) Share Capital; and (ii) Money Received Against Share Warrants?
CBSE Class 12 Accountancy - Financial Statements of a Company
2
Question
Under which major head will the following be shown:
- Share Capital; and
- Money Received Against Share Warrants?
Answer
Note:
Share Warrants give the holder right to get Equity Shares on a specified date and at a specified value. Thus, Share Warrants will be converted into Equity Shares at a later date at a predetermined price. Since these are to be converted into Equity Shares, these are classified or shown as Shareholder's Funds.
Key Points to Remember
- Both Share Capital and Money Received Against Share Warrants are classified under Shareholder's Funds
- Share Warrants are convertible instruments that will become Equity Shares in the future
- The classification of these items follows Schedule III of the Companies Act, 2013
- These items are shown on the Equity and Liabilities side of the Balance Sheet
Related Concepts
Understanding the classification of Share Capital and Share Warrants is essential for correct presentation in financial statements. Here are some related concepts:
Types of Share Capital
Share capital can include equity shares, preference shares, and other forms of ownership interests in a company.
Share Warrants vs. Share Options
While both are financial instruments, share warrants are typically issued by the company itself, whereas options are usually traded on secondary markets.
Disclosure Requirements
Companies must disclose details about share warrants including the number of shares, exercise price, and expiry dates in the notes to accounts.