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Aadil
AadilCurious
In: 1. Financial Accounting > Shares & Debentures

Is ‘Reserve Capital’ a Part of ‘Unsubscribed Capital’ or ‘Uncalled Capital’?

CapitalReserve CapitalReservesUncalled CapitalUnsubscribed Capital
  • 1 Answer
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Answer
  1. Ayushi Curious Pursuing CA
    Added an answer on November 15, 2021 at 7:27 pm
    This answer was edited.

    Reserve capital is part of ‘Uncalled capital’. ‘Uncalled capital’ means the outstanding amount on shares on which the call money is not yet called. A company may issue its shares and receive the money either in full or in instalments. The instalments are named: Application money – Received by a compRead more

    Reserve capital is part of ‘Uncalled capital’. ‘Uncalled capital’ means the outstanding amount on shares on which the call money is not yet called.

    A company may issue its shares and receive the money either in full or in instalments. The instalments are named:

    • Application money – Received by a company from the people who apply for allotment of the shares.
    • Allotment money – Called by the company from the people to whom the shares are allotted at the time of allotment.
    • Call money – The outstanding amount is called by way of call money in one or more instalments.

     For example, X Ltd issues 1000 shares at a price of Rs. 100 per share which is payable Rs. 25 at application, Rs. 30 at the allotment, Rs. 25 at the first call and Rs. 20 at the second and final call.

    The shares at fully subscribed and X Ltd has called and received money till the first call. The second call is not made yet.

     This amount of Rs 20,000 (1000 x Rs.20) will be uncalled capital.

    Now, It is up to the management when to make the second and final call.

    If the management shows no intention of calling the outstanding money on such shares, then the uncalled capital will be called reserve capital.

    Such shares which are not fully called are known as party paid shares.

    It is ultimately payable to the company by the shareholders of partly paid shares at the time of dissolution.

    Reserve capital is not shown either in the balance sheet or in the notes to accounts to the balance sheet. But one can ascertain it just by examining the notes to accounts to the balance. If the shares are partly paid and the management seems to have no intention of calling the outstanding money then such uncalled share capital is reserve capital.

    Reserve capital is neither a liability nor an asset for the company.

    But at the time of winding up of the company, it becomes a liability for the shareholders to pay the balance amount of their shares.

    By now, you must have understood why reserve capital is not part of unsubscribed capital. It is because reserve capital is related to shares that are issued and subscribed.

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A_Team
A_Team
In: 1. Financial Accounting > Accounting Terms & Basics

Capital account is which type of account?

I mean to ask is it real, nominal, or personal and why?

CapitalType of Account
  • 2 Answers
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Answer
  1. AbhishekBatabyal Helpful Pursuing CA, BCOM (HONS)
    Added an answer on November 7, 2021 at 4:06 pm

    The correct option is option A. Journal is the book of original entry. It is from the journal, the postings in the ledgers are made. As it is the journal first to record the transactions, it is called the book of original entry. It is from the journal, the postings in the ledgers are made. Ledgers aRead more

    The correct option is option A.

    Journal is the book of original entry. It is from the journal, the postings in the ledgers are made. As it is the journal first to record the transactions, it is called the book of original entry.

    It is from the journal, the postings in the ledgers are made. Ledgers are called the books of principal book of entry.

    Option B Duplicate is wrong as there is no such thing as the book of duplicate entry in financial accounting. Journal entries are the first-hand record of business transactions. Hence, it cannot be the book of duplicate entries.

    Option C Personal is wrong. This classification of ‘personal’ is a type of account as per traditional rules of accounting, not books of accounts

    Option D Nominal is wrong. It is also a type of account as per the traditional rules of accounting.

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Astha
AsthaLeader
In: 1. Financial Accounting > Accounting Terms & Basics

What is capital work-in-progress?

Capital
  • 1 Answer
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Answer
  1. Simerpreet Helpful CMA Inter qualified
    Added an answer on May 30, 2021 at 3:01 pm
    This answer was edited.

    As per Wiki, it is also called construction in progress. Capital work in progress is a non-current asset of an entity. It is also known as CWIP in short. CWIP is the work which is not yet completed but the amount for which has already been paid. Suppose, at the time of preparing a balance sheet, ifRead more

    As per Wiki, it is also called construction in progress. Capital work in progress is a non-current asset of an entity. It is also known as CWIP in short.

    CWIP is the work which is not yet completed but the amount for which has already been paid.

    Suppose, at the time of preparing a balance sheet, if an asset is not completed, all the costs incurred on that asset up to the balance sheet date are to be transferred to an account called capital work in progress.

    Example 1: A machinery under installation.

    There are several expenses incurred while installing machinery, expenses such as labor charges, Initial delivery and handling costs, Assembly and installation cost, etc are included in CWIP and when the asset is completed and is ready to use, all the costs are transferred to the relevant accounts.

    To make it simpler, let me show journal entries relating to this example.

    When an expense is incurred/paid:

    Journal entry for capital work in progress when an expense is incurred

    When an asset is complete and put to use:

    Journal entry for capital work in progress when asset is complete and put to use

    Example 2: A Contractor is constructing a building. The following expenditures are being incurred to date:

    i) Raw materials – 5,00,000

    ii) Payment to Architect – 3,50,000

    iii) Advance for Equipments – 1,50,000

    Following accounting entries will be passed to record the expenditure on CWIP assets:

    capital work in progress journal entries example

    The following accounting entry will be passed once assets are ready to use:

    entry to show cwip when asset is complete

    Disclosure in the Balance sheet

    CWIP account is shown separately in the balance sheet below the fixed asset.

    we cannot depreciate capital work in progress. It can only be depreciated when the asset is put to use.

    Capital work in progress shown in balance sheet

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