GeeksforGeeks App
Open App
Browser
Continue

Related Articles

• Write an Interview Experience
• Write an Admission Experience
• CBSE Class 12 Accountancy Notes

Issue of Shares At Par: Accounting Entries

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.”

Issue of Shares at Par:

Issue of Shares at Par means to issue the shares for an amount equal to the face value of shares. For example, if the face value of shares is ₹20 each and they are issued at ₹20 each, then it will be Issue of Shares at Par. One should also notice that the shares issued by the company may be fully subscribed by the public. Suppose, if a company issues 1,00,000 shares and gets applications for 1,00,000 shares then it will be a full subscription. Besides, there is no special treatment for the full subscription of shares.

Accounting Entries on Issue of Shares at Par:

1. Entries on Receiving Application Money:

The applicants who want to invest in a company deposit the application money directly in the bank. The bank then sends the application forms to the company’s office.

A. For entry is made by the company on receiving the application money:

B. For Application money is transferred to Share Capital A/c (When a share application is accepted, it is an allotment of shares):

2. Entries on Allotment:

The applicants who are allotted shares are sent a letter of allotment. The letter consists of information regarding the number of shares allotted and the amount due to allotment. Once the allotment letter is sent to the applicants, the allotment money becomes due on the allotment and becomes a part of the share capital.

A. For making allotment for money due:

B. For receipt of allotment money:

3. Entries on First Call:

A. For entry is passed for call money due:

B. For receipt of first call money:

4.  Entries of Second and Final Call:

A. For the second call money due as follows:

B. For receipt of Second Call Money:

Illustration 1:

Akanksha Ltd. was formed with an Authorised Share Capital of ₹1,00,000 divided into 10,000 shares of ₹10 each, payable ₹2 on Application, ₹3 on Allotment, ₹4 on First Call, and ₹1 on Second & Final Call. Expenses on the issue of shares amounted to ₹7,000. Pass the Journal Entries in the books of Akanksha Ltd.

Solution:

The amount payable will be as follows:

Illustration 2:

Nupur Ltd. was formed with an Authorised Share Capital of ₹7,00,000 divided into 70,000 shares of ₹10 each. The company issued a prospectus inviting application for 60,000 shares @ ₹10 each payable as ₹4 on Application, ₹1.5 on Allotment, ₹2 on First Call, and ₹2.5 on Second & Final Call. Applications were received for 50,000 shares. Allotments were made to all applicants and all dues were duly received. Pass Journal Entries in the books of Nupur Ltd.

Solution:

The amount payable will be as follows:

My Personal Notes arrow_drop_up
Related Tutorials