Issue of Shares
Journal Entries In The Books of The Company:-
1. On being received application money
Bank A/C Dr.
To Share Application A/C
2. On being capitalised application money
Share Application A/C Dr.
To Share Capital A/C
3. On being due allotment money
Share Allotment A/C Dr.
To Share Capital A/C
4. On being received allotment money
Bank A/C Dr.
To Share Allotment A/C
5. On being due first call
Share First Call A/C Dr.
To Share Capital A/C
6. On being received first call money
Bank A/C Dr.
To Share First Call A/C
Notes:-
1. If interest rate on calls in advance is not given it is taken 12% per annum.
2. In case of over subscription an analysis table should be prepared.
3. If a shareholder fails to pay an amount called up by company, the company has a right to take
his shares back. This is known as forfeiture of shares
Journal Entry of Forfeiture
Share Capital Account dr.
Security Premium Reserve dr.
To Share Allot. (unpaid amount)
To Share Calls (unpaid amount)
To Share Forfeiture (balancing figure)
4. If forfeited shares are reissued at discount then share forfeiture account is debited with the
amount of discount.
But if shares are reissued at premium then Security Premium Reserve account is credited.
5. In case of over subscription if any shareholder fails to pay allotment money, it should be
checked for how many shares he had been applied for.
6. Balance of share forfeiture is transferred to capital reserve but if all the forfeited shares have
not been reissued then while transferring amount to capital reserve, proportionate amount is
excluded for the shares not issued so far.
7. At the time of forfeiture share capital account is debited with the called up value of shares.
And Security Premium Reserve is debited only when premium has not been received on
those shares.
