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Corporate Accounting and Reporting Standards (PDF)

   

Added on  2021-05-31

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Running head: CORPORATE ACCOUNTING AND REPORTINGCorporate Accounting and ReportingName of the Student:Name of the University:Author’s Note:Course ID:
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1CORPORATE ACCOUNTING AND REPORTINGTable of ContentsAnswer to Part A:...............................................................................................................2Introduction:...................................................................................................................2Accounting for forfeiture and reissue of shares:............................................................2Conclusion:.....................................................................................................................8Answer to Part B:...............................................................................................................8References:......................................................................................................................12
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2CORPORATE ACCOUNTING AND REPORTINGAnswer to Part A:Introduction:There are certain advantages of issuing shares in the form of instalments. One ofthem is that it is possible for the investors to purchase many shares by not paying thelump sum amount at once like certain number of instalments made for purchasingassets. However, the organisations are deemed to have legally binding commitmentsfor making payment of the calls made (Jena, Mishra and Rajib 2016). In case, ashareholder fails to pay allotted money or a part or call by the stipulated fixed amountfor payment, the board of directors of the organisation progress in forfeiting the shareson which allotted money or call has been in-arrear. Accounting for forfeiture and reissue of shares:There are certain procedures related to accounting for forfeiture and reissue ofshares. In such instances, a notice needs to be provided to the defaulter by asking theperson to clear the unsettled amount along with the accrued interest at a certain point oftime. There is another significant aspect that needs to be mentioned in the notice aswell. It needs to inform the defaulter that if the payment is not made within thestipulated time before the due date, the shares for which the notice is served would beforfeited (Beams, Brozovsky and Shoulders 2017). During the time of share forfeiture,the name of the shareholder would be removed from the member register and theamount incurred by the individual on shares is forfeited to the organisation. This couldbe treated in the form of capital gain and the amount would be credited to the “Forfeited
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3CORPORATE ACCOUNTING AND REPORTINGShares Account”. There is possibility of reissuing the forfeited shares at a loss.However, the loss incurred on reissuance could not exceed the profit made on forfeitureof the reissued shares. Moreover, it is necessary to consider certain provisionsassociated with the forfeiture and reissue of shares and they are briefly discussed asfollows:Firstly, if any shareholder could not pay any call or instalment related on orbefore the stipulated date, the board of the organisation has the right to provide a noticeto the individual asking for payment (Carnegie and O’Connell 2014). In addition, theindividual is needed to make the interest payment as well, which is accrued on or beforethe stipulated timeframe. Secondly, the notice to be sent to the defaulter wouldcomprise of certain components within the same. An additional date after the due datewould be provided on which the shareholders needs to make the overall outstandingpayment, as per the notice. In case, if the shareholder misses the due date again orevent of non-payment takes place, the shares in relation to which the call has beenmade would be liable to be forfeited. If the defaulter does not meet any of therequirements mentioned in the notice, the board would forfeit the shares of the defaulterand the decision would come into effect (Collier 2015). Once the decision of forfeiture is taken, the shares could be sold or disposed oncertain terms and conditions, as deemed appropriate by the board of the organisation.However, it needs to be mentioned that before selling or disposing the shares, theboard has the full right of cancelling the forfeiture on certain terms as deemed fit. Itmight sometimes happen that when a shareholder realises about the inability of payingthe calls made, the individual has an option of surrendering the shares voluntarily to the
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