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Issue of Shares: Accounting Entries on Full Subscription with Share Application

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A unit of capital or an equal portion of the share capital of an organisation divided, whose ownership is evidenced by a share certificate is known as a Share. Simply put, shares are the denominations of the share capital of an organisation. For example, if the total capital of ABC Ltd. is ₹10,00,000 and is divided into 10,000 units of ₹100 each. Each unit of ₹100 will be called a share. To easily identify the shares, it is essential to give them numbers. The share of a company is moveable in nature and can be moved through the process stated by the Articles of Association of the Company. 

According to Indian Companies Act, 2013, “Shares means shares in share capital of the company and includes stock except where the distinction between stock and share is expressed or implied.”

Full Subscription:

Full Subscription of Shares is a situation when the number of shares offered to the public and the number of share applications received from the public is the same. The Journal Entries passed in the books of the company are as follows:

1. When shares are issued at Par (If the Face Value of Shares is ₹10 each):

 

Or

A single entry can be passed:

 

2. When shares are issued at Premium (If the Face Value of Shares is ₹10 each at 10% Premium; i.e., 10 + 1 = ₹11):

 

Or

A single entry can be passed:

 

Illustration 1:

Vishal Ltd. issued 20,000 shares of ₹10 each and received applications in full; i.e., for 20,000 shares. Pass the Journal Entries for the same when:

a) Shares are issued at Par

b) Shares are issued at 25% Premium

Solution:

a) Shares are issued at Par:

 

Or

A single entry can be passed.

 

b) Shares are issued at 25% Premium:

 

Or

A single entry can be passed.

 

Illustration 2:

Ankit Ltd. invited applications for 10,000 equity shares of ₹20 each at a premium of ₹3 per share and received applications in full. The whole amount was payable on application. Pass necessary Journal Entries in the books of Ankit Ltd., and prepare a Balance Sheet for the same as on 31st March 2022.

Solution:

 

Or

A single entry can be passed:

 

 

Notes to Accounts:

 



Last Updated : 05 Apr, 2023
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