Issue and Forfeiture of Shares

Lesson

Part 1 — issuing shares for cash, at par and at a premium, the journal proper and cash book, over- and under-subscription, and shares for consideration other than cash. Every company, person and figure in this chapter is imagined.

In this lesson you will

Pass journal entries for an issue of shares at par and at a premium, in the journal proper and the cash book
Prepare share capital and related ledger accounts
Record under-subscription, over-subscription and pro-rata allotment
Record shares issued to promoters, underwriters and vendors

Part 1 at a glance

Concept

How a company issues shares

Each share has a face value; money is usually collected in instalments: application, allotment and one or more calls.
Every instalment has its own account, which is first made due and then received.

How a company issues shares for cash

Concept

Entries for an issue at par

Table of entries for an issue at par: application money received is debited to bank; on allotment the application account is transferred to share capital; allotment and each call are first made due to share capital and then received into the bank
Event	Entry
Application money received	Bank A/c Dr. To Equity Share Application A/c
Shares allotted	Equity Share Application A/c Dr. To Equity Share Capital A/c (and To Bank A/c for any refund)
Allotment money due	Equity Share Allotment A/c Dr. To Equity Share Capital A/c
Allotment money received	Bank A/c Dr. To Equity Share Allotment A/c
Call made	Equity Share First Call A/c Dr. To Equity Share Capital A/c
Call money received	Bank A/c Dr. To Equity Share First Call A/c

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