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ISSUE SHARE ON INSTALLMENT |
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Usually issues share in full amount or installment. When shares are issued as installment, an APPLICATION and ALLOTMENT Account is created · Where shares are issued and money is received from applicants at PAR VALUE (a) Debit: Bank Account Credit: Application & Allotment A/c (b) Debit: Application & Allotment a/c Credit: Shares Capital A/c
· Where shares are issued at PREMIUM (a) Debit: Bank Account Credit: Application & Allotment Account
(b) Debit: Application & Allotment A/c Credit: Share Capital Account Credit: Share Premium Account
· Where shares are issued at DISCOUNT (b) Debit: Bank Account Credit: Application & Allotment Account
(b) Debit: Application & Allotment A/c Credit: Discount on Shares Account Credit: Share Capital Account
Salient point Note that when shares are issued at Par, Premium or Discount, the Application & Allotment Account is open and then close accordingly. |
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A COMPANY RAISE SHARE CAPITAL using 2 methods namely (a) Bonus Issue (b) Rights Issue
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BONUS ISSUE ON SHARES Bonus Issue is actually the company CAPITALIZATING it’s reserve. Therefore, there is NO cash received. Accounting Entry: Debit: Reserve Account Credit: Share Capital Account |
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RIGHTS ISSUE |
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In a Right Issue, cash will be received from shareholder upon issuance of shares
Accounting Entry:
Debit: Bank Account Credit: Share Capital Account
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