Revision: Issue of Shares SP HSC Commerce (English Medium) 12th Standard Board Exam Maharashtra State Board

A. When the Issue Price is Payable in Lump Sum:

1. On Receiving Application Money:

Bank A/c                             ...Dr.

   To Shares Application A/c /  Shares Application and Allotment A/c 

(Being the application money received in a lump sum)

Or if a joint account is used:

Bank A/c           ...Dr.

         To Shares Application and Allotment A/c

(Being the application and allotment money received in a lump sum)

2. On Allotment of Shares (Transfer of Application Money):

Shares Application A/c / Shares Application and Allotment A/c    ...Dr.

       To Share Capital A/c

(Being the transfer of application money to share capital on allotment)

Or (if joint account used):

Shares Application and Allotment A/c         ...Dr.

       To Share Capital A/c

(Being the application and allotment money transferred to share capital)

B. When Issue Price is Payable in Instalments:

1. On Receipt of Application Money:

Bank A/c                              ...Dr.

      To Shares Application A/c

(Being the application money received)

2. On Allotment of Shares (Transfer of Application Money):

Shares Application A/c                  ...Dr.

      To Share Capital A/c

(Being application money transferred to share capital on allotment)

3. On Amount Due on Allotment:

Shares Allotment A/c                 ...Dr.

       To Share Capital A/c

(Being allotment money due)

4. On Receipt of Allotment Money:

Bank A/c           ...Dr.

      To Shares Allotment A/c 

(Being the allotment money received)

5. On Amount Due on First Call:

Shares First Call A/c                  ...Dr.

        To Share Capital A/c

(Being the amount due on the first call)

6. On Receipt of First Call Money:

Bank A/c                    ...Dr.

      To Shares First Call A/c

(Being the amount received on the first call)

7. (Optional) On Amount Due on Second Call:

Shares Second Call A/c      ...Dr.

      To Shares Capital A/c

(Being the amount due on the second call)

8. Bank A/c           ...Dr.

       To Shares Second Call A/c

(Being the amount received on the second call)

C. Other Related Entries:

1. For Money Refunded on Rejected Application:

Share Application A/c         ...Dr.

      To Bank A/c

(Being refund of application money on rejected shares)

2. For Adjustment of Excess Application Money towards Allotment:

Share Application A/c         ...Dr.

     To Share Allotment A/c

(Being excess application money adjusted towards allotment)

3. Combined Entry (Refund + Adjustment):

Share Application A/c       ...Dr.

      To Share Allotment A/c

      To Bank A/c

(Being excess application money adjusted and balance refunded)

• Share Capital is the total money raised by issuing shares, representing ownership in the company.
• Authorised Capital is the maximum amount a company can issue, as stated in its Memorandum of Association.
• Issued Capital is the part of the authorised capital offered to the public for subscription.
• Subscribed Capital is the portion of issued capital that investors agree to take.
• Called-up Capital is the amount demanded by the company, and Paid-up Capital is what shareholders actually pay; the difference is called Calls-in-Arrears.
• Reserve Capital is the part of subscribed capital to be called only during winding up.
• A Prospectus invites the public to buy shares, and the company must receive at least 90% subscription before allotting shares.

                 Calculation of Amount Received on Allotment

• Oversubscription means more shares are applied for than offered.
• It can be handled by rejecting extra applications, pro rata allotment, or both.
• In rejection, extra applications are refused, and money is refunded.
• In pro rata, shares are allotted in a fixed ratio and excess money is adjusted or refunded.
• In the combined method, some applications are fully accepted, some partially, and some rejected.

A. Over-Subscription of Shares:

1. When application money is refunded for rejected shares:

Share Application A/c        ...Dr.

          To Bank A/c

(Being refund of application money for rejected applications)

2. When excess application money is adjusted towards allotment:

Share Application A/c      ...Dr.

          To Share Allotment A/c

(Being excess application money adjusted against allotment)

3. When excess application money is adjusted towards allotment and calls:

Share Application A/c      ...Dr.

          To Share Allotment A/c

          To Calls-in-Advance A/c

(Being excess application money adjusted towards allotment and calls)

B. Joint Application and Allotment Account

1. On receipt of application money:

Bank A/c         ...Dr. 

        To Share Application and Allotment A/c

(Being application money received)

2. On transfer of application money and allotment due:

Share Application and Allotment A/c     ...Dr.

        To Share Capital A/c

(Being the transfer of application and allotment money to the share capital)

3. On refund of money for rejected applications:

Share Application and Allotment A/c     ...Dr.

         To Bank A/c

(Being refund of application money on rejected shares)

4. On receipt of the balance allotment money:

Bank A/c        ...Dr.

        To Share Application and Allotment A/c

(Being receipt of balance allotment money)

A. Forfeiture of Shares (Issued at Par):

Share Capital A/c           ...Dr. [With called-up amount till the stage of forfeiture]

       To Forfeited Shares A/c  [With the amount received on forfeited shares]

       To Calls-in-Arrears A/c  [With the amount not received on forfeited shares]

(Being forfeiture of shares for non-payment of call money)

Note to Accounts