Limited Companies:Over-subscription Of Shares Issued

September 20th, 2008 Comments off
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This article deals with a limited company which has a scenario of over-subscription of shares issued. The accounting entries are shown and an illustration being given for clearer understanding.

When a limited company issue shares where the more shares are applied for than those available for issue, it results in the over-subscription of shares.

Accounting entries as follows:

Step 1:

Debit: Bank Account

Credit: Application and Allotment Account

[ Total apply shares amounts on application date]

Step 2:

Debit :Application & Allotment Account

Credit: Bank Account

[ Being unsuccessful shares being refunded on allotment date]

Step 3:

Debit: Application & Allotment Account

Credit: Ordinary Share Capital

[ Successful shares being taken up as share capital based on nominal or par value]

Illustration:

Company XYZ Ltd issued 100,000 Ordinary shares of $1 each to the public. On application, 120,000 shares have been applied and received in full amount. During allotment date, the monies receive from the unsuccessful applications were duly refunded

Bank Account

Debit($)

Credit($)

Application & Allotment

120,000

Application & Allotment

20,000

Balance c/d

100,000

120,000

120,000

Application & Allotment Account

Debit($)

Credit($)

Bank

20,000

Bank

120,000

Ordinary Share Capital

100,000

120,000

120,000

Ordinary Share Capital Account

Debit($)

Credit($)

Balance c/d

100,000

Application & Allotment

100,000

100,000

100,000

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Financial Accounting

 
 

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