AIOU Solved Assignment 1 Code 444 Spring 2017

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AIOU Solved Assignment 1 Code 444 Spring 2017 B.COM

Q 1:  What is the difference between shares and debentures? Also, explain in detail the various types of shares and debentures, which may be issued by a Joint Stock Company.

Answer.    Definition:Justice Farewellas defined share in the following word,

“A share is the interest of the shareholder in the company; it is measured by the sum of money for the purpose of liability in the first place and of interest (dividend) in this condolencea company’s capital is divided into a number of equal parts called as a share”.

Nature of Share:

  1. The share of a company shall be movable property. It is transferable in the manner provided by the article of the company.
  2. The share capital no n refund able except in the case of winding up and reduction of capital.
  3. c. Each share in a company shall have distinctive numb

Class of Share:

Beforepassingofthecompanyordinance1948, accompany use to issue three types of shares.

  1. Ordinary Share.
  2. Preference Share.
  3. Deferred Share.

AIOU Solved Assignment 1 Code 444 Spring 2017 B A

The company’s ordinance no wallows the company to issue only one type of shares normally ordinary shares.

  • Ordinary Share: Are also called Equity Sh The holders of ordinary or Equity Shares are the real owners of the company .The ordinary shareholders have voting rights in the meetings of the company, they are entitled and receive dividend and are declared by the board of directors.The Equity Share capital cannot be redeemed during the life of the company.
  1. Preference Share: As the name suggest have certain preference on other types of shares. The preferences are as under.
  2. The first preference is for payment of dividend first paid to preference shareholder.
  3. In case of winding up the company, the preference shareholders have prior right in regard to repayment of capital.
  4. c. A fix rate of dividend is paid on preference share capital.
  5. Deferred Share: Is also called Founder’s Share we refuse to be issued to the promoters of the claims of all other shareholders had been not the deferred shareholders.

Definition:The Company’s Ordinance explains debentures in the following words; “Debentures includes Debenture Stock, bonds, terms, Finance Certificate(T.F.C)and any other security other then the share of a company with constituting a charge on the assets on the company or not.

A company may raise part of its capital by obtaining loans in the form of debentures. Debenture means too we a debt, “debenture is a security issues or allotted to the interest under the seal of the company who become creditors of the company”. A debenture may therefore be defined as a document issued by the company as an evidence of its debts .It contains a contract of the repayment of the principle sum of the interest at a specified date to the debenture holder.

Kinds of Debentures:

The debentures can be classified   of their issue by the company.

  1. Ordinary or Naked Debentures: The debentures, which are issued without any security for re payment, are known as Ordinary or Naked Debentures.
  2. Mortgage Debentures: Mortgage Debenture is one, which is secured by a mortgage

On the real property of thecompany.

  1. Redeemable Debentures: The debentures, which are re payable at the state time ,arecalled Redeemable Debentures.
  2. Irredeemable Debenture: A debenture, which is not payable during the life time of the issuing company, is called Irredeemable Debenture.
  3. Registered Debentures: A Registered Debenture id issued in the name of owner of

The debenture.

  1. Bearer Debentures: The Bearer Debentures, which does not show the name of owner the Bond.
  2. Equipment Trust Debenture: The debentures, which are issued of raise funds for

The purchase of new equipment of a business is called Equipment trust Debenture.

  1. Convertible Debentures: In certain cases, the company allows the debentures holders to count their debentures for the share of the company.


Share Debenture
1.  Share Capital:     The company’s ordinance defines shares as   a share incapital of the company. A debenture is a certificate in datedness

Issued under the scale of the company.

2. Rights: The shareholder receives dividends when the   company earns theprofit.  They   suffer   financially when itsuffers losses. The right of debenture is to receive money at a fixed rate of interest. They can earn whit the profit or loss of company.
3. Voting: A shareholder is entitled to vote at the company’s general meeting. The debenture holder has no rights of voting at any meeting of the company.
4. Owner of the Company: The share holders except the Preference Shareholders are the owner of the company. The debentures are the creditors of the company and as   such they have no   claim on   the ownership of the company.
5. Return of the Capital: The shareholders are allowed to sale the share a will to other person but they are not paid back capital. The company gives an undertaking to pay back the capital along with the interest a stated time to the debenture.
6.  Management:     The shareholder manages the offers of the company through the created representatives called Board of Directors. The   debenture holders are   not entitled tointerfere in the management and the administration of the company as they are not the owner of the company.
7. Payment at the Winding up: In case the company is wind up the shareholder has a secondary claim of the return of money on the purchased shares. On winding up   of   the company, the   first propriety is to pay back the money to the debentureholder.
8. Islamic Sprits: The dividend paid to the shareholders depends upon the profit of the company. There are no fix errata of return on the shares of the company. Asmuch theyare Islamic in character. The company has to pay fix errata of interest to the bondholders whether the company makesany, which is basically against the Islam.

Redemption of Debentures means to discharge the liability on account of debenture. Debentures may be redeemed out of profit, out of capital or out of provision made for redemption. A company can redeemed its debenture by any of the following method.


Answer (a): Debenture-Definition:

Debenture is a type of debt instrument that is not secured by physical assets or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer. Both corporations and governments frequently issue this type of bond in order to secure capital. Like other types of bonds, debentures are documented in an indenture.

ABOUT AIOU Solved Assignment 1 Code 444 Spring 2017 FINE MORE


debentures shares
The holder of shares is known as shareholder the holder of debentures is known as debenture holder
Debenture is the debt of the company Share is the capital of the company
, debentures represent indebtedness of the company The shares represent ownership of the shareholders in the company
the income earned on debentures is interest. The income earned on shares is dividend
debentures are convertible Shares cannot be converted
Conversely, security charge is created for the payment of debentures. There is no security charge created for payment of shares
security charge is created for the payment of debentures Trust deed is not executed in case of shares
Debentures can be issued at discount without any legal compliance. Shares are issued at discount subject to some legal compliance


Types of shares

A company may have many different of shares that come with different conditions and rights.

AIOU Solved Assignment 1 Code 444 Spring 2017 Types of Shares

There are four main types of shares

  • Ordinary shares are standard shares with no special rights or restrictions. They have the potential to give the highest financial gains, but also have the highest risk. Ordinary shareholders are the last to be paid if the company is wound up.
  • Preference shares typically carry a right that gives the holder preferential treatment when annual dividends are distributed to shareholders. Shares in this category receive a fixed dividend, which means that a shareholder would not benefit from an increase in the business’ profits. However, usually they have rights to their dividend ahead of ordinary shareholders if the business is in trouble. Also, where a business is wound up, they are likely to be repaid the par or nominal value of shares ahead of ordinary shareholders.
  • Cumulative preference shares give holders the right that, if a dividend cannot be paid one year, it will be carried forward to successive years. Dividends on cumulative preference shares must be paid, despite the earning levels of the business, provided the company has distributable profits.
  • Redeemable shares come with an agreement that the company can buy them back at a future date – this can be at a fixed date or at the choice of the business. A company cannot issue only redeemable shares.
  • Types Of Debentures
  • The major types of debentures are as follows:Types Of Debentures On The Basis Of Record Point Of Viewa. Registered Debentures
    These are the debentures that are registered with the company. The amount of such debentures is payable only to those debenture holders whose name appears in the register of the company.b. Bearer Debentures
    These are the debentures which are not recorded in a register of the company. Such debentures are transferable merely by delivery. Holder of bearer debentures is entitled to get the interest.

    2. Types Of Debentures On The Basis Of Security

    a. Secured Or Mortgage Debentures
    These are the debentures that are secured by a charge on the assets of the company. These are also called mortgage debentures. The holders of secured debentures have the right to recover their principal amount with the unpaid amount of interest on such debentures out of the assets mortgaged by the company.

    b. Unsecured Debentures
    Debentures which do not carry any security with regard to the principal amount or unpaid interest are unsecured debentures. These are also called simple debentures.


    AIOU Solved Assignment 1 Code 444 Spring 2017 Debentures Type

  • 3. Types Of Debentures On The Basis Of Redemption

    a. Redeemable Debentures
    These are the debentures which are issued for a fixed period. The principal amount of such debentures is paid off to the holders on the expiry of such period. These debentures can be redeemed by annual drawings or by purchasing from the open market.

    b. Non-redeemable Debentures
    These are the debentures which are not redeemed in the life time of the company. Such debentures are paid back only when the company goes to liquidation.


  • 4. Types Of Debentures On The Basis Of Convertibility

    a. Convertible Debentures
    These are the debentures that can be converted into shares of the company on the expiry of pre-decided period. The terms and conditions of conversion are generally announced at the time of issue of debentures.

    b. Non-convertible Debentures
    The holders of such debentures can not convert their debentures into the shares of the company.

    5. Types Of Debentures On The Basis Of Priority

    a. First Debentures
    These debentures are redeemed before other debentures.

    b. Second Debentures
    These debentures are redeemed after the redemption of first debentures.

AIOU Solved Assignment 1 Code 444 Spring 2017 continue

Q #2 Ayala Corporation opens a branch at Multan on IST January, 2016Book of ayala corporation Multan branch a/c for the year ended 31st 2016


Particular Amount Particular Amount
Goods sent to Multan branch (invoice price) 30937 Cash sales


Closing balance




Less: goods returned Stocks 57750
By the branch (invoice prince) 10500 298875 Petty cash 625 58375
Cash sent to branch for exp 41250 Debtors 27500


Stock reverse (57750 *1/5) Goods sent to branch
General profit and less account 2975 298875*1/5 59775
354650 354650

Branch debtors Account

Particular Amount Particular Amount
Balance b/d              – cash 105875
Sale (credit) 134750 Discount 1375
Balance c/d 27500
134750 134750


Q#3 tanvir and zaheer entered into a joint venture to construct a building for a contract price of rs. 4000000. They agreed to share profits………….


Joint venture account

Joint book account Rs Rs

Miscellaneous exp



Zaheer (taken over of various items) 16800
Wages 25400 Joint bank account 4000000
Supervisors 19800 Contact price
Building pass fit 8700
Tanvir 1398040

Zaheer 599160

4168000 4168000

AIOU Solved Assignment 1 Code 444 Spring 2017 Join Bank Account

Joint bank account

Rs Rs
Tanvir (contribution)

Zaheer (contribution)



Joint ventures

(payment of cost)

Joint venture 131400 Tanvir on (ventures completion) 1498240
Joint venture

(recipt of contact

4000000 Zaheer (on venture completion) 702360
Building passed fit 8700
4371400 4371400

Zaheer account


Particular Rs Particular Rs
Joint venture


16800 Cash (contribution) 120000
Joint venture

(on venture completion)

702360 Joint venture( profit ) 599160
719160 719160


Tanvir account

Particular Rs Particular Rs
Supervisor (paid) 19800 Cash (contribution) 120000
Joint venture

(on venture completion)

1498140 Joint venture( profit ) 1398040


1518040 1518040

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