Issue of Shares With Entries

Issue of shares involves the following steps:

• Issue of prospectus including people to take up shares
• Receiving applications along with application money.
• Allotment of shares
• Making calls on shares as decided by the Board of Directors.
• Issue and dispatch of share certificate.

 Journal Entries for issue of Shares

1) On receipt of application money:

Bank A/c Dr.

To Share Application A/c [No. of shares applied ‘×’ Rate]

2) On allotment of shares:

Share Application A/c [No. of shares applied ‘×’ Rate] Dr.

To Share capital A/c

3) For rejection of some applications:

Share Application A/c Dr.

To Share Capital A/c [No. of shares rejected ‘×’ Rate]

Note: Shares can be issued at premium which may be receivable either at the time of application or allotment; the Journal Entries then will be:

• When Premium is receivable along with application:
  • Bank A/c [Total receipt including premium] Dr.
    To Share Application
  • Share Application A/c [No. of shares issued '×’ Rate] Dr.
    To Share Capital [No. of shares issued '×’ Rate towards face value]
    To Share Premium [premium / share ‘×’ No. of shares issued]
• When premium is receivable at the time of allotment.
  • Share Allotment A/c Dr.
    To Share Capital
    To Share Premium.
  • Bank A/c Dr.
    To Share Allotment

4) Making and Receipt of Calls: The Balance due towards face value of shares after receiving application and allotment money can be recovered by making as many calls as the directors decide. The entries should be :

• For Call Money due:
  Share Call A/c [No. of shares Issued '[No. of shares issued ‘×’ Rate]’ Rate.] Dr.
  To Share Capital.
• For Call money received
  Bank A/c Dr.
  To Share Call A/c

5) Treatment of calls-in-arrear: The term denotes failure on part of some shareholders to make payment of any call due on the shares taken up by him. The following entry should be passed in every case of such default.

Call-in-arrear A/c [No. of defaulted shares ‘×’ Rate] Dr.

To (Respective) Call A/c.