Till now, we have studied that the shares had been issued at either par / premium, the amount

was called in either

lumpsum or instalments and each and every time, the shares were either under-subscribed or fully-subscribed.
What will a company do if the offer for issue of shares get over-subscribed?
Over-subscribed means the situation when a company receives application for number of shares more than the
number of shares it can allot/provide. This usually happens in case of well-managed and financially strong
companies.
Before we go further, we should make ourselves understand the technical points. For this, we have to keep in
mind the following steps:
 A company offers number of shares to public for subscription at a particular price called as Issue Price.
 If this Issue Price = Face Value (Actual value) of a share, it is said to be issued at par.
 If this Issue Price > Face Value (Actual value) of a share, it is said to be issued at premium.
 A company may call this issue price in lumpsum or instalments.
 Now, it is up to public as they have to apply. So, an offer for issue of shares may get:
Under-subscribed = Number of shares applied < Number of shares offered / to be allotted
Fully- subscribed = Number of shares applied = Number of shares offered / to be allotted
Over- subscribed = Number of shares applied > Number of shares offered / to be allotted
This can be understood as:
A company may issue shares to

Public for Cash at Signatories to MoA

Vendors (Seller)

Par payable in Premium payable in

lumpsum instalments
and the issue gets and the issue gets
instalments and the issue gets
Over-subscribed
lumpsum and the issue gets
Fully-subscribed

Fully-subscribed Under-subscribed Over-subscribed

Fully-subscribed

Under-subscribed Over-Subscribed
Under-subscribed Over-subscribed

Fully-subscribed Fully-subscribed
Thus, we have 12 cases in total. These are as follows:
S. No. ISSUED AT PAYABLE IN AND THE ISSUE GETS
 1. Par Lumpsum Under-subscribed
 2. Par Lumpsum Fully-subscribed
3. Par Lumpsum Over-subscribed
 4. Par Instalments Under-subscribed
 5. Par Instalments Fully-subscribed
6. Par Instalments Over-subscribed
S. No. ISSUED AT PAYABLE IN AND THE ISSUE GETS
 7. Premium Lumpsum Under-subscribed
 8. Premium Lumpsum Fully-subscribed
9. Premium Lumpsum Over-subscribed
 10. Premium Instalments Under-subscribed
 11. Premium Instalments Fully-subscribed
12. Premium Instalments Over-subscribed

From the above table, it is clear that there are 12 cases in total out of which the cases with tick mark have
been done earlier in Document 2. It means that cases of under-subscription and full-subscription have been done.
What would be the company’s treatment if the issue gets oversubscribed?
In this document, we will see the treatment if the issue gets oversubscribed, irrespective of its issue price.
FOR CONVENIENCE, ENTRIES ARE BEING SHOWN FOR EACH OF ABOVE CASES NO. 3,6,9 AND 12.
In case of over-subscription, a company’s directors have the following options and may opt any of these:
FIRST ALTERNATIVE
When the directors decide to fully accept some applications and totally reject the others; the application money
received on rejected applications is fully refunded.
SECOND ALTERNATIVE
When the directors opt to make a proportionate allotment to all the applicants, the excess application money
received is normally adjusted towards the amount due on allotment. This is called as ‘Pro-rata Allotment’.
THIRD ALTERNATIVE
When the applications for some shares are rejected out-rightly; and proportionate allotment is made to the
remaining applicants, the money on rejected applications is refunded and the excess application money received
from applicants to whom pro-rata allotment has been made is adjusted towards the amount due on the allotment
of shares.
In short, it can be said that it is a mixture of first alternative and second alternative.
For Case No. 3, where shares issued at par, amount was payable in lumpsum and issue gets over-subscribed.
In this case, the excess application money will be refunded due to non-allotment of shares.
ACCOUNTING TREATMENT FOR ISSUE OF SHARES AT PAR TO PUBLIC FOR CASH
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
20XX
[Shares applied x Rate Bank A/c Dr. XXX
of Application] To Equity Share Application A/c XXX
(Being application money received for …….. equity
shares @ Rs………….. per share)
Equity Share Application A/c Dr. XXX
[Shares allotted x Rate To Equity Share Capital A/c XXX
of Application] To Bank A/c XXX
[Shares rejected x (Being application money on ………. equity shares
Rate of Application] transferred to Share Capital and on ………. Equity
shares refunded due to rejection of applications)
SOME SOLVED ILLUSTRATIONS
Q 1. Rakul Ltd. offered 100 equity shares of Rs.10 each at par for public subscription. Applications were
received for 120 shares. The full amount was payable in lumpsum. The directors decided to reject the
applications for 20 shares and to allot shares to the remaining applicants. Pass the necessary journal entries.
Sol. Here, we can see that a company had offered 100 equity shares for subscription whereas applications
were received for 120 equity shares which is more than the number of equity shares offered. So, such a
case is called as case of ‘OVER-SUBSCRIPTION’.
Moreover, since issue price of Rs.100 has not been called in instalments therefore, the issue price has
been called in lumpsum (discussed earlier).
ACCOUNTING TREATMENT WILL BE AS FOLLOWS:
in the books of Rakul Ltd.
JOURNAL [FIRST ALTERNATIVE]
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
20XX
[120 x 10] Bank A/c Dr. 1,200
To Equity Share Application A/c 1,200
(Being application money received for 120 equity shares @
Rs.10 per share)
[120 x 10] Equity Share Application A/c Dr. 1,200
[100 x 10] To Equity Share Capital A/c 1,000
[20 x 10] To Bank A/c 200
(Being application money on 100 equity shares transferred to
Share Capital excess application money on 20 equity shares
refunded)
The above question was of the case where shares were issued at par, amount was payable in lumpsum and issue got
over-subscribed and directors of the company opted for first alternative.
DO IT YOURSELF
Q 2. Moxy Ltd. offered 400 equity shares of Rs.20 each at par for public subscription. Applications were
received for 450 equity shares. The whole amount was payable on application.
Pass necessary journal entries for the above.
Q 3. Boss Ltd. offered 1,000 equity shares of Rs.100 each at par for public subscription. Public had applied for:
1,100 equity shares. The full amount was payable on application.
Pass necessary journal entries for the above.
Now, we will discuss the case where shares will be issued at par, company calls the issue price of shares
in instalments and public applies for the number of shares more than the number of shares it has i.e.,
OVER-SUBSCRIPTION.
For Case No. 6, where shares were issued at par, amount was payable in instalments and issue got
over-subscribed.
In this case, the excess application money will be (a) refunded due to non-allotment of shares
(b) pro-rata allotment and (c) combination of both (a) and (b).
ACCOUNTING TREATMENT FOR ISSUE OF SHARES AT PAR TO PUBLIC FOR CASH
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
20XX
[Shares applied x Rate Bank A/c Dr. XXX
of Application] To Equity Share Application A/c XXX
(Being application money received for …….. equity
shares @ Rs………….. per share)
Equity Share Application A/c Dr. XXX
[Shares allotted x Rate To Equity Share Capital A/c XXX
of Application] To Bank A/c XXX
[Shares rejected x To Equity Share Allotment A/c (balancing fig.) XXX
Rate of Application]
(Being application money on ………. equity shares
transferred to Share Capital and on ………. equity
shares refunded due to rejection of applications and
excess thereafter adjusted towards allotment)
[Shares allotted x Rate Equity Share Allotment A/c Dr. XXX
of Allotment] To Equity Share Capital A/c XXX
(Being allotment money due on ………. equity shares
@ Rs….. per share)
[Shares paid x Rate of Bank A/c Dr. XXX
Allotment] Calls-in-Arrears A/c Dr. XXX
[Shares unpaid x Rate To Equity Share Allotment A/c XXX
of Allotment]
(Being allotment money received on …. equity shares
@ Rs… per share with the exception of …... shares)
 [Shares allotted x Rate Equity Share First Call A/c Dr. XXX
of First Call] To Equity Share Capital A/c XXX
(Being first call money due on ………. equity shares @
Rs….. per share)
[Shares paid x Rate of Bank A/c Dr. XXX
First Call]
Calls-in-Arrears A/c Dr. XXX
[Shares unpaid x Rate To Equity Share First Call A/c XXX
of First Call]
(Being first call money received on …….. equity shares
@ Rs…. per share with the exception of …….. shares )

[Shares allotted x Rate Equity Share Second and Final Call A/c Dr. XXX
of Second and Final To Equity Share Capital A/c
Call]
(Being second and final call money due on ……….
equity shares @ Rs….. per share)
[Shares paid x Rate of Bank A/c Dr. XXX
Second and Final Calls-in-Arrears A/c Dr. XXX
Call]
To Equity Share Second and Final Call A/c XXX
[Shares unpaid x Rate
of Second and Final (Being second and final call money received on ……..
Call] equity shares @ Rs…. per share with the exception of
…….. shares )

POINTS TO BE NOTED:
Shares paid refer to those number of shares on which that particular instalment has been paid by the
shareholder / received by the company.
Shares unpaid refer to those number of shares on which that particular instalment has not been paid by
the shareholder / received by the company.
Q 4. Ajay Ltd. offered 100 equity shares of Rs.100 each at par payable as Rs.25 on application, Rs.25 on
allotment and balance in two equal instalments of Rs.25 each for public subscription. Applications were
received for 120 equity shares. The directors of the company decided to reject the applications for 20
shares which were in excess of the number of shares offered and refunded their application money in
full. Pass necessary journal entries for the above.
Sol. Here, Rate of Application = Rs.25 and Rate of Allotment = Rs.25. The total of these two instalments is equal
to Rs.50 only which is less than the amount of issue price (Rs.100). So, there are two possibilities regarding
the remaining amount.
Either company has kept Rs.50 as Reserve Capital OR balance can be called in further instalments.
Here, the question has also clarified that the balance will be called in two equal instalments so, it means that
the two next instalments will be ‘First Call’ and ‘Second Call’.
Since, directors have decided to reject the excess applications therefore, it is the case of
FIRST ALTERNATIVE to deal with oversubscription.
ACCOUNTING TREATMENT WILL BE AS FOLLOWS:
in the books of Ajay Ltd.
JOURNAL
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
20XX
[120 x 25] Bank A/c Dr. 3,000
To Equity Share Application A/c 3,000
(Being application money received for 120 equity shares @ Rs.25
per share)
[120 x 25] Equity Share Application A/c Dr. 3,000
[100 x 25] To Equity Share Capital A/c 2,500
[20 x 25] To Bank A/c 500
(Being application money on 100 equity shares transferred to Share
Capital and excess money on 20 shares refunded)
[100 x 25] Equity Share Allotment A/c Dr. 2,500
To Equity Share Capital A/c 2,500
(Being allotment money due on 100 equity shares @ Rs.25 per
share)
[100 x 25] Bank A/c Dr. 2,500
To Equity Share Allotment A/c 2,500
(Being allotment money duly received on 100 equity shares)
[100 x 25] Equity Share First Call A/c Dr. 2,500
To Equity Share Capital A/c 2,500
(Being first call money due on 100 equity shares @ Rs.25 per share)
[100 x 25] Bank A/c Dr. 2,500
To Equity Share First Call A/c 2,500
(Being first call money duly received on 100 equity shares)
[100 x 25] Equity Share Second and Final Call A/c Dr. 2,500
To Equity Share Capital A/c 2,500
(Being second and final call money due on 100 equity shares @
Rs.25 per share)
[100 x 25] Bank A/c Dr. 2,500
To Equity Share Second and Final Call A/c 2,500
(Being second and final call money duly received)
DO IT YOURSELF
Q 5. Cosco Ltd. offered 1,000 equity shares of Rs.100 each at par payable as Rs.25 on application, Rs.50 on
allotment and the balance on call. Applications were received for 1,500 shares. The excess applications
for shares exceeding the number of shares offered are to be rejected and the money received
thereon is to be refunded. Pass necessary journal entries for the above.
Q 6. Ajax Ltd. offered 100 equity shares of Rs.100 each at par payable as Rs.20 on application, Rs.30 on
allotment, Rs.20 on first call and Rs.30 on second and final call. Applications were received for 200 equity
shares. All the applicants were allotted shares on pro-rata basis. Journalise for the above.
Sol. In this case, we can observe that the company has called issue price (Rs.100) in instalments and the issue got
oversubscribed. (SECOND ALTERNATIVE HAS BEEN USED TO DEAL OVER-SUBSCRIPTION).
Moreover, ‘All the applicants were allotted shares on pro-rata basis’ means that there was no rejection
of applications. Hence, the excess application money received on 100 shares (difference between applied
shares and allotted shares) will be adjusted towards the amount due on allotment.
Therefore, the entry for making allotment due will be passed with the full value i.e., (Shares Allotted x
Rate of Allotment) but at the time of receipt of allotment money, the excess application money will
be deducted (adjusted) from the allotment money due.
‘Pro-rata’ means proportionate allotment. We can understand it by the following:
100 shares are allotted to those who had applied for = 200 shares
1 share will be allotted to those who had applied for = 200 shares = 2 shares.
100 shares
It means that ratio of applied shares : allotted shares = 2:1. For every 2 applied shares, 1 share is allotted.
For e.g., It means that the person who had applied for 30 shares, would have got 15 shares and so on.
ACCOUNTING TREATMENT WILL BE AS FOLLOWS:
in the books of Ajax Ltd.
JOURNAL
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
20XX
[200 x 20] Bank A/c Dr. 4,000
To Equity Share Application A/c 4,000
(Being application money received for 200 equity shares @ Rs.20
per share)
[200 x 20] Equity Share Application A/c Dr. 4,000
[100 x 20] To Equity Share Capital A/c 2,000
To Equity Share Allotment A/c (balancing figure) 2,000
(Being application money on 100 equity shares transferred to Share
Capital and excess money adjusted on allotment)
[100 x 30] Equity Share Allotment A/c Dr. 3,000
To Equity Share Capital A/c 3,000
(Being allotment money due on 100 equity shares @ Rs.30 per
share)
Bank A/c Dr. 1,000
To Equity Share Allotment A/c [(100 x 30) – 2,000] 1,000
(Being balance allotment money received)
 [100 x 20] Equity Share First Call A/c Dr. 2,000 2,000
To Equity Share Capital A/c
(Being first call money due on 100 equity shares @ Rs.20 per share)
[100 x 20] Bank A/c Dr. 2,000
To Equity Share First Call A/c 2,000
(Being first call money received on 100 equity shares @ Rs.20 per
share)

[100 x 30] Equity Share Second and Final Call A/c Dr. 3,000
To Equity Share Capital A/c 3,000
(Being second and final call money due on 100 equity shares @
Rs.30 per share)
[100 x 30] Bank A/c Dr. 3,000
To Equity Share Second and Final Call A/c 3,000
(Being second and final call money received on 100 equity shares @
Rs.30 per share)

NOTE: Excess of application money can be adjusted towards the amount due on allotment and Over-Payment on
application exceeding the amount due on allotment will be refunded, if the question is silent.
DO IT YOURSELF
Q 7. Mastana Ltd. offered 100 equity shares of Rs.100 each at par payable as Rs.25 on application, Rs.35 on
allotment, Rs.25 on first call and Rs.15 on second and final call. Applications were received for 150 equity
shares. All the applicants were allotted shares on pro-rata basis. Journalise for the above.
Q 8. Martina Ltd. offered 500 equity shares of Rs.100 each at par payable as Rs.30 on application, Rs.30 on
allotment, Rs.30 on first call and balance as and when required. Applications were received for 600 equity
shares. All the applicants were allotted shares on pro-rata basis. Journalise for the above.
HINT: SINCE AS AND WHEN REQUIRED IS GIVEN FOR THE REMAINING AMOUNT, SO. NO ENTRY
WILL BE PASSED FOR THAT. REASON, ALREADY DISSCUSED.
Q 9. Navratna Ltd. offered 200 equity shares of Rs.10 each at par payable as Rs.5 on application, Rs.3 on
allotment, and Rs.2 on call. Applications were received for 300 equity shares. All the applicants were
allotted shares on pro-rata basis. Journalise for the above.
Q 10. Rajaji Ltd. offered 100 equity shares of Rs.100 each at par payable as Rs.20 on application, Rs.30 on
allotment, Rs.20 on first call and Rs.30 on second and final call. Applications were received for 200 equity
shares. Applicants for 50 shares were sent letters of regret and remaining applicants were allotted
shares on pro-rata basis. Journalise for the above.
Sol. Since rejection of applications and pro-rata allotment have come together, therefore, it is the case of
third alternative to deal with oversubscription.
Here, Rate of Application = Rs.20, Rate of Allotment = Rs.30, Rate of First Call = Rs.20 and
Rate of Final Call = Rs.30.
Now, Shares Applied = 200 out of which applications for 50 shares were rejected.
 Therefore, Net Applied Shares = Total Shares Applied – Shares Rejected
= 200 – 50
So, Net Applied Shares = 150, means that to the applicants of 150 shares, 100 shares have been allotted.
Hence, the excess application money received on 50 shares (difference between net applied shares and
allotted shares) will be towards the amount due on allotment.
AND, THE APPLICANTS TO WHOM NO SHARES WERE ALLOTTED, THEIR MONEY WILL BE
REFUNDED.
Therefore, the entry for making allotment due will be passed with the full value i.e., (Shares Allotted X
Rate of Allotment) but at the time of receipt of allotment money, the excess application money will
be deducted (adjusted) from the allotment money due.
‘Pro-rata’ means proportionate allotment. We can understand it by the following:
100 shares are allotted to those who had applied for = 150 shares
1 share will be allotted to those who had applied for = 150 shares = 1.5 shares.
100 shares
It means that ratio of applied shares : allotted shares = 1.5:1. For every 1.5 applied shares, 1 share is
allotted.
For e.g., It means that the person who had applied for 30 shares, would have got 20 shares and so on.
ACCOUNTING TREATMENT WILL BE AS FOLLOWS:
in the books of Rajaji Ltd.
JOURNAL
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
20XX
[200 x 20] Bank A/c Dr. 4,000
To Equity Share Application A/c 4,000
(Being application money received for 200 equity shares @ Rs.20
per share)
[200 x 20] Equity Share Application A/c Dr. 4,000
[100 x 20] To Equity Share Capital A/c 2,000
To Equity Share Allotment A/c (balancing figure) 1,000
[50 x 20] To Bank A/c 1,000
(Being application money on 100 equity shares transferred to Share
Capital, on 50 shares refunded and excess money adjusted on
allotment)
[100 x 30] Equity Share Allotment A/c Dr. 3,000
To Equity Share Capital A/c 3,000
(Being allotment money due on 100 equity shares @ Rs.30 per
share)
Bank A/c Dr. 2,000
To Equity Share Allotment A/c [(100 x 30) – 1,000] 2,000
(Being balance allotment money received)
 [100 x 20] Equity Share First Call A/c Dr. 2,000
To Equity Share Capital A/c 2,000
(Being first call money due on 100 equity shares @ Rs.20 per share)
[100 x 20] Bank A/c Dr. 2,000
To Equity Share First Call A/c 2,000
(Being first call money received on 100 equity shares @ Rs.20 per
share)

[100 x 30] Equity Share Second and Final Call A/c Dr. 3,000
To Equity Share Capital A/c 3,000
(Being second and final call money due on 100 equity shares @
Rs.30 per share)
[100 x 30] Bank A/c Dr. 3,000
To Equity Share Second and Final Call A/c 3,000
(Being second and final call money received on 100 equity shares @
Rs.30 per share)

NOTE: Excess of application money can be adjusted towards the amount due on allotment and Over-Payment on
application exceeding the amount due on allotment will be refunded, if the question is silent.
DO IT YOURSELF
Q 11. Veer Ltd. offered 200 equity shares of Rs.100 each at par payable as Rs.25 on application, Rs.35 on
allotment, Rs.25 on first call and Rs.15 on second and final call. Applications were received for 280 equity
shares. Applicants for 30 shares were sent letters of regret and remaining shareholders were allotted shares
on pro-rata basis. Journalise for the above.
Q 12. Sooryavanshi Ltd. offered 500 equity shares of Rs.100 each at par payable as Rs.30 on application, Rs.30
on allotment, Rs.30 on first call and balance as and when required. Applications were received for 600
equity shares. Applicants for 50 shares were sent letters of regret and remaining shareholders were allotted
shares on pro-rata basis.. Journalise for the above.
HINT: SINCE AS AND WHEN REQUIRED IS GIVEN FOR THE REMAINING AMOUNT, SO. NO ENTRY
WILL BE PASSED FOR THAT. REASON, ALREADY DISSCUSED.
Q 13. Zokovik Ltd. offered 2,000 equity shares of Rs.10 each at par payable as Rs.5 on application, Rs.3 on
allotment, and Rs.2 on call. Applications were received for 3,000 equity shares. Applicants for 2,400 shares
were allotted 2,000 shares and the remaining shares applicants were sent letters of regret.
Journalise for the above.

TILL NOW, WE HAVE DONE QUESTIONS WHERE SHARES HAD BEEN ISSUED AT PAR.
FROM HERE, WILL START WITH QUESTIONS WHERE SHARES HAD BEEN ISSUED AT PREMIUM.
For Case No. 9, where shares issued at premium, amount was payable in lumpsum and issue gets
over-subscribed.
In this case, as per first alternative, the excess application money will be refunded due to non-allotment of shares.
 ACCOUNTING TREATMENT FOR ISSUE OF SHARES AT PREMIUM TO PUBLIC FOR CASH
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
20XX
[Shares applied x Rate Bank A/c Dr. XXX
of Application] To Equity Share Application A/c XXX
(Being application money received for …….. equity
shares @ Rs………….. per share)
Equity Share Application A/c Dr. XXX
[Shares allotted x Rate To Equity Share Capital A/c XXX
of Application (face To Securities Premium Reserve A/c XXX
value)]
To Bank A/c XXX
[Shares allotted x Rate
of Application (Being application money on ………. equity shares
(premium)] transferred to Share Capital and Securities Premium
Reserve A/c and on ………. Equity shares refunded due
[Shares rejected x to rejection of applications)
Rate of Application]
SOME SOLVED ILLUSTRATIONS
Q 14. Kakul Ltd. offered 100 equity shares of Rs.10 each at a premium of Rs.2 per share for public subscription.
Applications were received for 120 shares. The full amount was payable in lumpsum. Pass the necessary
journal entries.
Sol. Here, we can see that a company had offered 100 equity shares for subscription whereas applications
were received for 120 equity shares which is more than the number of equity shares offered. So, such a
case is called as case of ‘OVER-SUBSCRIPTION’.
Moreover, since issue price of Rs.100 has been called in lumpsum therefore, the full issue price is
payable on the very first instalment only, called as Application.
ACCOUNTING TREATMENT WILL BE AS FOLLOWS:
in the books of Kakul Ltd.
JOURNAL
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
20XX
[120 x 12] Bank A/c Dr. 1,440
To Equity Share Application A/c 1,440
(Being application money received for 120 equity shares @
Rs.12 per share)
[120 x 12] Equity Share Application A/c Dr. 1,440
[100 x 10] To Equity Share Capital A/c 1,000
[100 x 2] To Securities Premium Reserve A/c 200
[20 x 12] To Bank A/c 240
(Being application money on 100 equity shares transferred to
Share Capital Account and Securities Premium Reserve
Account and excess application money on 20 equity shares
refunded)
 The above question was of the case where shares were issued at premium, amount was payable in lumpsum
and the issue gets over-subscribed.
DO IT YOURSELF
Q 15. Madan Ltd. offered 400 equity shares of Rs.20 each at a premium of Rs.2 per share for public
subscription. Applications were received for 450 equity shares. The whole amount was payable on
application.
Pass necessary journal entries for the above.
Q 16. Bosch Ltd. offered 1,000 equity shares of Rs.100 each at premium of Rs.5 per share for public
subscription. Public had applied for 1,100 equity shares. The full amount was payable on application.
Pass necessary journal entries for the above.
Now, we will discuss the case where shares will be issued at premium, company calls the issue price of shares
in instalments and public applies for the number of shares more than the number of shares it has i.e.,
OVER-SUBSCRIPTION.
For Case No. 12, where shares were issued at premium, amount was payable in instalments and issue gets
over-subscribed.
In this case, the excess application money will be (a) refunded due to non-allotment of shares
(b) pro-rata allotment and (c) combination of both (a) and (b).
In questions related to premium, where the issue price is called in instalments, we have to keep in mind that the
entries of receipt (entries in which Bank Account is debited), the treatment of Securities Premium Reserve will
not be made.
Securities Premium Reserve will be given an effect in the entries of transfer or in the entries of making amount of
any instalment due.
Amount of Securities Premium can be called by company at any of the instalments or a fraction of total premium
can be called at every instalment of the issue price. In absence of information, it will be adjusted on allotment.
ACCOUNTING TREATMENT FOR ISSUE OF SHARES AT PREMIUM TO PUBLIC FOR CASH
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
20XX
[Shares applied x Rate Bank A/c Dr. XXX
of Application] To Equity Share Application A/c XXX
(Being application money received for …….. equity
shares @ Rs………….. per share)
Equity Share Application A/c Dr. XXX
[Shares allotted x Rate To Equity Share Capital A/c XXX
of Application (face To Securities Premium Reserve A/c XXX
value)]
To Bank A/c XXX
[Shares allotted x Rate
of Application To Equity Share Allotment A/c (balancing fig.) XXX
(premium)] (Being application money on ………. equity shares
[Shares rejected x transferred to Share Capital and Securities Premium
Rate of Application] Reserve Account, on ………. equity shares refunded
 due to rejection of applications and excess thereafter
adjusted towards allotment)
[Shares allotted x Rate Equity Share Allotment A/c Dr. XXX
of Allotment] To Equity Share Capital A/c XXX
[Shares allotted x Rate To Securities Premium Reserve A/c XXX
of Allotment (face
value)] (Being allotment money including premium due on
………. equity shares @ Rs….. per share)
[Shares allotted x Rate
of Allotment
(premium)]
[Shares paid x Rate of Bank A/c Dr. XXX
Allotment] Calls-in-Arrears A/c Dr. XXX
[Shares unpaid x Rate To Equity Share Allotment A/c XXX
of Allotment]
(Being allotment money received on ……. equity
shares @ Rs… per share with the exception of ……..
shares)
[Shares allotted x Rate Equity Share First Call A/c Dr. XXX
of First Call] To Equity Share Capital A/c XXX
[Shares allotted x Rate To Securities Premium Reserve A/c
of First Call (face
value)] (Being first call money including premium due on
[Shares allotted x Rate ………. equity shares @ Rs….. per share)
of First Call
(premium)]
[Shares paid x Rate of Bank A/c Dr. XXX
First Call] Calls-in-Arrears A/c Dr. XXX
[Shares unpaid x Rate To Equity Share First Call A/c XXX
of First Call]
(Being first call money received on …….. equity shares
@ Rs…. per share with the exception of …….. shares )

[Shares allotted x Rate Equity Share Second and Final Call A/c Dr. XXX
of First Call] To Equity Share Capital A/c XXX
[Shares allotted x Rate To Securities Premium Reserve A/c XXX
of First Call (face
value)] (Being second and final call money including premium
[Shares allotted x Rate due on ………. equity shares @ Rs….. per share)
of First Call
(premium)]
[Shares paid x Rate of Bank A/c Dr. XXX
First Call] Calls-in-Arrears A/c Dr. XXX
[Shares unpaid x Rate To Equity Share Second and Final Call A/c XXX
of First Call]
(Being second and final call call money received on
…….. equity shares @ Rs…. per share with the
exception of …….. shares )
POINTS TO BE NOTED:
Shares paid refer to those number of shares on which that particular instalment has been paid by the
shareholder / received by the company.
Shares unpaid refer to those number of shares on which that particular instalment has not been paid by
the shareholder / received by the company.
Q 17 Bharat Ltd. offered 100 equity shares of Rs.100 each at a premium of Rs.20 per share payable as Rs.25 on
application, Rs.45 on allotment and balance in two equal instalments of Rs.25 each for public subscription.
Applications were received for 120 equity shares. Pass necessary journal entries for the above.
Sol. Here, Rate of Application = Rs.25 and Rate of Allotment = Rs.45. The two instalments for the remaining
amount will be ‘First Call’ and ‘Second and Final Call’.
Moreover, there is no information in the question regarding the calling of premium i.e., at which of the
instalment(s), the amount of premium is payable.
As discussed earlier, in such a case, the amount of premium is payable at the time of allotment.
Whenever question is of premium, make a division of issue price in the following manner:
FACE VALUE + PREMIUM = ISSUE PRICE
100 + 20 = 120
25 C + 0 Application (25)
25 C + 20 Allotment (45)
25 C + 0 First Call (25)
25 C + 0 Second and Final Call (25)
 Always remember that the price of face value only will be credited to Share Capital Account.

ACCOUNTING TREATMENT WILL BE AS FOLLOWS:

in the books of Bharat Ltd.
JOURNAL
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
20XX
[120 x 25] Bank A/c Dr. 3,000
To Equity Share Application A/c 3,000
(Being application money received for 120 equity shares @ Rs.25
per share)
[120 x 25] Equity Share Application A/c Dr. 3,000
[100 x 25] To Equity Share Capital A/c 2,500
[20 x 25] To Bank A/c 500
(Being application money on 100 equity shares transferred to Share
Capital and excess money on 20 shares refunded)
[100 x 45] Equity Share Allotment A/c Dr. 4,500
[100 x 25] To Equity Share Capital A/c 2,500
 [100 x 20] To Securities Premium Reserve A/c 2,000
(Being allotment money including premium due on 100 equity shares
@ Rs.45 per share)
[100 x 45] Bank A/c Dr. 4,500
To Equity Share Allotment A/c 4,500
(Being allotment money received on 100 equity shares @ Rs.45 per
share)
[100 x 25] Equity Share First Call A/c Dr. 2,500
To Equity Share Capital A/c 2,500
(Being first call money due on 100 equity shares @ Rs.25 per share)
[100 x 25] Bank A/c Dr. 2,500
To Equity Share First Call A/c 2,500
(Being first call money received on 100 equity shares @ Rs.25 per
share)
[100 x 25] Equity Share Second and Final Call A/c Dr. 2,500
To Equity Share Capital A/c 2,500
(Being second and final call money due on 100 equity shares @
Rs.25 per share)
[100 x 25] Bank A/c Dr. 2,500
To Equity Share Second and Final Call A/c 2,500
(Being second and final call money received on 100 equity shares @
Rs.25 per share)

DO IT YOURSELF
Q 18. Chris Ltd. offered 1,000 equity shares of Rs.100 each at premium of Rs.20 per share payable as Rs.25 on
application, Rs.65 on allotment and the balance on call. Applications were received for 1,500 shares. The
excess applications for shares exceeding the number of shares offered are to be rejected and the
money received thereon is to be refunded.
Pass necessary journal entries for the above.
Q 19. Ninja Ltd. offered 100 equity shares of Rs.100 each at a premium of Rs.25 per share payable as Rs.20 on
application, Rs.55 (including premium) on allotment, Rs.20 on first call and Rs.30 on second and final call.
Applications were received for 200 equity shares. All the applicants were allotted shares on pro-rata
basis. Journalise for the above.
Sol. Here, the company has called issue price (Rs.100) in instalments and the issue got oversubscribed.
Moreover, ‘All the applicants were allotted shares on pro-rata basis’ means that there was no rejection
of applications. Hence, the excess application money received on 100 shares (difference between applied
shares and allotted shares) will be adjusted towards the amount due on allotment.
Therefore, the entry for making allotment due will be passed with the full value i.e., (Shares Allotted x
Rate of Allotment) but at the time of receipt of allotment money, the excess application money will
 be deducted (adjusted) from the allotment money due.
‘Pro-rata’ means proportionate allotment. We can understand it by the following:
100 shares are allotted to those who had applied for = 200 shares
1 share will be allotted to those who had applied for = 200 shares = 2 shares.
100 shares
It means that ratio of applied shares : allotted shares = 2:1. For every 2 applied shares, 1 share is allotted.
For e.g., It means that the person who had applied for 42 shares, would have got 21 shares and so on.
Whenever question is of premium, make a division of issue price in the following manner:
FACE VALUE + PREMIUM = ISSUE PRICE
100 + 25 = 125
20 C + 0 Application (20)
30 C + 25 P Allotment (55)
20 C + 0 First Call (20)
30 C + 0 Second and Final Call (30)
 Always remember that the price of face value only will be credited to Share Capital Account.
ACCOUNTING TREATMENT WILL BE AS FOLLOWS:
in the books of Ninja Ltd.
JOURNAL
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
20XX
[200 x 20] Bank A/c Dr. 4,000
To Equity Share Application A/c 4,000
(Being application money received for 200 equity shares @ Rs.20
per share)
[200 x 20] Equity Share Application A/c Dr. 4,000
[100 x 20] To Equity Share Capital A/c 2,000
To Equity Share Allotment A/c (balancing figure) 2,000
(Being application money on 100 equity shares transferred to Share
Capital and excess money adjusted on allotment)
[100 x 55] Equity Share Allotment A/c Dr. 5,500
[100 x 30] To Equity Share Capital A/c 3,000
[100 x 25] To Securities Premium Reserve A/c 2,500
(Being allotment money, including premium @ 25 per share, due on
100 equity shares @ Rs.55 per share)
Bank A/c Dr. 3,500
To Equity Share Allotment A/c [(100 x 55) – 2,000] 3,500
(Being balance allotment money received)
 [100 x 20] Equity Share First Call A/c Dr. 2,000
To Equity Share Capital A/c 2,000
(Being first call money due on 100 equity shares @ Rs.20 per share)
[100 x 20] Bank A/c Dr. 2,000
To Equity Share First Call A/c 2,000
(Being first call money received on 100 equity shares @ Rs.20 per
share)

[100 x 30] Equity Share Second and Final Call A/c Dr. 3,000
To Equity Share Capital A/c 3,000
(Being second and final call money due on 100 equity shares @
Rs.30 per share)
[100 x 30] Bank A/c Dr. 3,000
To Equity Share Second and Final Call A/c 3,000
(Being second and final call money received on 100 equity shares @
Rs.30 per share)

NOTE: Excess of application money can be adjusted towards the amount due on allotment and Over-Payment on
application exceeding the amount due on allotment will be refunded, if the question is silent.

DO IT YOURSELF
Q 20. Moksha Ltd. offered 100 equity shares of Rs.100 each at a premium of Rs.30 per share payable as
Rs.25 on application, Rs.65 on allotment, Rs.25 on first call and Rs.15 on second and final call. Applications
were received for 150 equity shares. All the applicants were allotted shares on pro-rata basis.
Journalise for the above.
Q 21. Riwaaz Ltd. offered 500 equity shares of Rs.100 each at 20% premium payable as Rs.30 on application,
Rs.40 on allotment, Rs.30 on first call and balance as and when required. Applications were received for
600 equity shares. All the applicants were allotted shares on pro-rata basis. Journalise for the above.
HINT: SINCE AS AND WHEN REQUIRED IS GIVEN FOR THE REMAINING AMOUNT, SO. NO ENTRY
WILL BE PASSED FOR THAT. REASON, ALREADY DISSCUSED.
Q 22. Nakshatra Ltd. offered 200 equity shares of Rs.10 each at a premium of Rs.4 per share payable as follows:
Rs.5 (including Rs.1 premium) on application,
Rs.4 (including Rs.1 premium) on allotment,
Rs.3 (including Rs.1 premium) on first call, and
Rs.2 (including Rs.1 premium) on second and final call.
Applications were received for 300 equity shares.
All the applicants were allotted shares on pro-rata basis. Journalise for the above.
Q 23. Raksha Ltd. offered 100 equity shares of Rs.100 each at a premium of Rs.40 per share payable as follows:
Rs.30 (including Rs.10 premium) on application,
Rs.40 (including Rs.10 premium) on allotment,
Rs.30 (including Rs.10 premium) on first call, and
Rs.40 (including Rs.10 premium) on second and final
call. Applications were received for 200 equity shares. Applicants for 50 shares were sent letters of regret
and remaining applicants were allotted shares on pro-rata basis. Pass necessary journal entries.
Sol. Here, Shares Applied = 200 out of which applications for 50 shares were rejected.
Therefore, Net Applied Shares = Total Shares Applied – Shares Rejected
= 200 – 50
So, Net Applied Shares = 150.
It means that to the applicants of 150 shares, 100 shares have been allotted.
Hence, the excess application money received on 50 shares (difference between net applied shares and
allotted shares) will be adjusted towards the amount due on allotment.
AND, THE APPLICANTS TO WHOM NO SHARES WERE ALLOTTED, THEIR MONEY WILL BE
REFUNDED.
Therefore, the entry for making allotment due will be passed with the full value i.e., (Shares Allotted X
Rate of Allotment) but at the time of receipt of allotment money, the excess application money will
be deducted (adjusted) from the allotment money due.
‘Pro-rata’ means proportionate allotment. We can understand it by the following:
100 shares are allotted to those who had applied for = 150 shares
1 share will be allotted to those who had applied for = 150 shares = 1.5 shares.
100 shares
It means that ratio of applied shares : allotted shares = 1.5:1. For every 1.5 applied shares, 1 share is
allotted.
Whenever question is of premium, make a division of issue price in the following manner:
FACE VALUE + PREMIUM = ISSUE PRICE
100 + 40 = 140
20 C + 10 P Application (30)
30 C + 10 P Allotment (40)
20 C + 10 P First Call (30)
30 C + 10 P Second and Final Call (40)
 Always remember that the price of face value only will be credited to Share Capital Account.

ACCOUNTING TREATMENT WILL BE AS FOLLOWS:

 in the books of Raksha Ltd.
JOURNAL
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
20XX
[200 x 30] Bank A/c Dr. 6,000
To Equity Share Application A/c 6,000
(Being application money received for 200 equity shares @ Rs.30
per share)
[200 x 30] Equity Share Application A/c Dr. 6,000
[100 x 20] To Equity Share Capital A/c 2,000
[100 x 10] To Securities Premium Reserve A/c 1,000
To Equity Share Allotment A/c (balancing figure) 1,500
[50 x 30] To Bank A/c 1,500
(Being application money on 100 equity shares transferred to Share
Capital and Securities Premium Reserve Account, on 50 shares
refunded and excess money adjusted on allotment)
[100 x 40] Equity Share Allotment A/c Dr. 4,000
[100 x 30] To Equity Share Capital A/c 3,000
[100 x 10] To Securities Premium Reserve A/c 1,000
(Being allotment money including premium due on 100 equity shares
@ Rs.40 per share)
Bank A/c Dr. 2,500
To Equity Share Allotment A/c [(100 x 40) – 1,500] 2,500
(Being balance allotment money received)
[100 x 30] Equity Share First Call A/c Dr. 3,000
[100 x 20] To Equity Share Capital A/c 2,000
[100 x 10]
To Securities Premium Reserve A/c 1,000
(Being first call including premium money due on 100 equity shares
@ Rs.30 per share)
[100 x 30] Bank A/c Dr. 3,000
To Equity Share First Call A/c 3,000
(Being first call money duly received on 100 equity shares)
[100 x 40] Equity Share Second and Final Call A/c Dr. 4,000
[100 x 30] To Equity Share Capital A/c 3,000
[100 x 10]
To Securities Premium Reserve A/c 1,000
(Being second and final call including premium money due on 100
equity shares @ Rs.40 per share)
[100 x 40] Bank A/c Dr. 4,000
To Equity Share First Call A/c 4,000
(Being first call money duly received on 100 equity shares)
NOTE: Excess of application money can be adjusted towards the amount due on allotment and Over-Payment on
application exceeding the amount due on allotment will be refunded, if the question is silent.
DO IT YOURSELF
Q 24. Vikrant Ltd. offered 200 equity shares of Rs.100 each at a premium of Rs.20 per share payable as
Rs.25 on application, Rs.55 on allotment, Rs.25 on first call and Rs.15 on second and final call.
Applications were received for 280 equity shares. Applicants for 30 shares were sent letters of regret and
remaining shareholders were allotted shares on pro-rata basis. Journalise for the above.
Q 25. Mankirt Ltd. offered 500 equity shares of Rs.100 each at 30% premium payable as follows:
Rs.30 (including Rs.10 premium) on application, Rs.50 (including Rs.20 premium) on allotment,
Rs.30 on first call and balance as and when required. Applications were received for 600 equity shares.
Applicants for 50 shares were sent letters of regret and remaining shareholders were allotted
shares on pro-rata basis. Journalise for the above.
HINT: SINCE AS AND WHEN REQUIRED IS GIVEN FOR THE REMAINING AMOUNT, SO. NO ENTRY
WILL BE PASSED FOR THAT. REASON, ALREADY DISSCUSED.
Q 26. Zoloto Ltd. offered 2,000 equity shares of Rs.10 each at 40% premium payable as follows:
Rs.6 (including Rs.1 premium) on application, Rs.5 (including Rs.2 premium) on allotment, and
Rs.3 (including Rs.1 premium) on call. Applications were received for 3,000 equity shares.
Applicants for 2,400 shares were allotted 2,000 shares and the remaining shares applicants were sent letters
of regret. Pass necessary journal entries.

SOME OTHER CONCEPTUAL QUESTIONS

Q 27. Damini Ltd. having an authorised capital of Rs.10,00,000 divided into shares of Rs.10 each, offered
50,000 shares at a premium of Rs.3 per share payable as follows:
Rs.3 on application, Rs.5 (including premium) on allotment, Rs.3 on first call and the balance as and when
required. Applications were received for 60,000 shares and the directors decided to allot shares as follows:
(a) Applicants for 40,000 shares were allotted in full.
(b) Applicants for 15,000 shares were allotted 8,000 shares.
(c) Applicants for 5,000 shares were allotted 2,000 shares.
Excess money received on application to be returned. All the amounts were duly received with the
exception of call on 100 shares.
A. Pass journal entries and prepare Cash Book.
B. Pass journal entries.
Sol. Here, Authorised Capital = Rs.10,00,000 = Total Face Value of all the shares
Face Value of a share = Rs.10
Therefore, No. of Shares the company has = Authorised Capital (Total Face Value of all the shares)
Face Value of a share
= 10,00,000
10
So, the company has total 1,00,000 shares.
 Out of total of 1,00,000 shares, shares offered / shares issued = 50,000
whereas, Number of shares applied for = 60,000
Premium is payable on allotment and for the balance as and when required, No entry will be passed.
The way directors have decided to allot shares makes it a category / group based allotment.
These categories / groups are the examples of pro-rata allotment.
For category (b), Ratio of Applied Shares : Allotted Shares = 15:8
For category (c), Ratio of Applied Shares : Allotted Shares = 5:2
Applicants for 40,000 shares were allotted in full means that this group / category was allotted the same
number of shares (40,000 shares), they had applied for.
Excess money received on application to be returned means the excess that is left with company after
adjusting on allotment.
For category (a), No adjustment can be made as the group got the same no. of shares they had applied for.
For category (b),
 Excess Application Money received = (Shares Applied – Shares Allotted) x Rate of Application
= Rs. [(15,000 – 8,000) x 3] = Rs.21,000.
 Allotment Money due from this category = Shares Allotted x Rate of Allotment
= Rs. (8,000 x 5) = Rs. 40,000
Less: Excess Application Money received = Rs.(21,000)
Amount still to be received from this category = Rs. 19,000
For category (c),
 Excess Application Money received = (Shares Applied – Shares Allotted) x Rate of Application
= Rs. [(5,000 – 2,000) x 3] = Rs.9,000.
 Allotment Money due from this category = Shares Allotted x Rate of Allotment
= Rs. (2,000 x 5) = Rs. 10,000
Less: Excess Application Money received = Rs. (9,000)
Amount still to be received from this category = Rs. 1,000
Since for both the categories, after adjustment of excess application money on allotment, the company does not have
any excess amount therefore, no money will be refunded.
A. WHEN JOURNAL ENTRIES ARE TO BE PASSED AND CASH BOOK IS TO BE PREPARED
In such a case, as already studied, entries for receipt of amount will directly be a part of Cash Book and
will not be shown in Journal.
in the books of Damini Ltd.
JOURNAL
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
20XX
[60,000 x 3] Equity Share Application A/c Dr. 1,80,000
[50,000 x 3] To Equity Share Capital A/c 1,50,000
To Equity Share Allotment A/c (balancing figure) 30,000
(Being application money on 50,000 equity shares transferred to
Share Capital, and excess money adjusted on allotment)
[50,000 x 5] Equity Share Allotment A/c Dr. 2,50,000
To Equity Share Capital A/c 2,50,000
(Being allotment money including premium due on 50,000 equity
shares @ Rs.5 per share)
[50,000 x 3] Equity Share First Call A/c Dr. 1,50,000
To Equity Share Capital A/c 1,50,000
(Being first call money due on 50,000 equity shares @ Rs.3 per
share)
[100 x 3] Calls-in-Arrear A/c Dr. 300
To Equity Share First Call A/c 300
(Being first call money received except on 100 equity shares)
Dr. CASH BOOK (BANK COLUMN ONLY) Cr.
Date Particulars L.F Amount Date Particulars L. Amount
(Rs.) F (Rs.)
To Equity Share Application A/c 1,80,000 By balance c/d 5,49,700
To Equity Share Allotment A/c 2,20,000
To Equity Share First Call A/c 1,49,700

5,49,700 5,49,700

B. WHEN JOURNAL ENTRIES ARE TO BE PASSED

in the books of Damini Ltd.
JOURNAL
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
20XX
[60,000 x 3] Bank A/c Dr. 1,80,000
To Equity Share Application A/c 1,80,000
(Being application money received for 60,000 equity shares @
Rs.3 per share)
[60,000 x 3] Equity Share Application A/c Dr. 1,80,000
[50,000 x 3] To Equity Share Capital A/c 1,50,000
To Equity Share Allotment A/c (balancing figure) 30,000
(Being application money on 50,000 equity shares transferred to
Share Capital, and excess money adjusted on allotment)
[50,000 x 5] Equity Share Allotment A/c Dr. 2,50,000
To Equity Share Capital A/c 2,50,000
(Being allotment money including premium due on 50,000 equity
shares @ Rs.5 per share)
Bank A/c Dr. 2,20,000
To Equity Share Allotment A/c [(50,000 x 5) – 30,000] 2,20,000
 (Being balance allotment money received)
[50,000 x 3] Equity Share First Call A/c Dr. 1,50,000
To Equity Share Capital A/c 1,50,000
(Being first call money due on 50,000 equity shares @ Rs.3 per
share)
Bank A/c [(50,000 x 3) – (100 x 3)] Dr. 1,49,700
[100 x 3] Calls-in-Arrear A/c Dr. 300
To Equity Share First Call A/c 1,50,000
(Being first call money received except on 100 equity shares)
NOTE: Excess of application money can be adjusted towards the amount due on allotment and Over-Payment on
application exceeding the amount due on allotment is refunded.
DO IT YOURSELF
Q 28. Sujoy Ltd. having an authorised capital of Rs.20,00,000 divided into shares of Rs.10 each, offered
1,00,000 shares at a premium of Rs.3 per share payable as follows:
Rs.3 on application, Rs.5 (including premium) on allotment, Rs.3 on first call and the balance as and when
required. Applications were received for 1,20,000 shares and the directors decided to allot shares as
follows:
(a) Applicants for 80,000 shares were allotted in full;
(b) Applicants for 30,000 shares were allotted 16,000 shares.
(c) Applicants for 10,000 shares were allotted 4,000 shares.
Excess money received on application to be returned. All the amounts were duly received with the
exception of call on 200 shares.
A. Pass journal entries.
B. Pass journal entries and prepare Cash Book.
Q 29. Ujjawal Ltd. issued / offered 50,000 shares of Rs.10 each payable as Rs.3 on application, Rs.4 on allotment,
and balance on first call. Applications were received for 1,00,000 shares and allotment was made as follows:
(a) Applicants for 60,000 shares were allotted 30,000 shares
(b) Applicants for 40,000 shares were allotted 20,000 shares
Alok to whom 1,000 shares were allotted in category (a), failed to pay the allotment money.
Calculate amount received on allotment and pass required journal entries.
Sol. Here, Shares offered / shares issued = 50,000
whereas, Number of shares applied for = 1,00,000
The way directors have decided to allot shares makes it a category / group based allotment.
These categories / groups are the examples of pro-rata allotment.
For category (a), Ratio of Applied Shares : Allotted Shares = 6:3 = 2:1
It means that for every 2 applied shares, 1 share was allotted.
For category (b), Ratio of Applied Shares : Allotted Shares = 4:2 = 2:1
It means that for every 2 applied shares, 1 share was allotted.
 For category (a),
 Excess Application Money received = (Shares Applied – Shares Allotted) x Rate of Application
= Rs. [(60,000 – 30,000) x 3] = Rs.90,000.
 Allotment Money due from this category = Shares Allotted x Rate of Allotment
= Rs. (30,000 x 4) = Rs. 1,20,000
Less: Excess Application Money received = Rs. (90,000)
Amount still to be received from this category = Rs. 30,000
For category (b),
 Excess Application Money received = (Shares Applied – Shares Allotted) x Rate of Application
= Rs. [(40,000 – 20,000) x 3] = Rs.60,000.
 Allotment Money due from this category = Shares Allotted x Rate of Allotment
= Rs. (20,000 x 4) = Rs. 80,000
Less: Excess Application Money received = Rs.(60,000)
Amount still to be received from this category = Rs. 20,000
After observing the above calculation, it is clear that total of excess from category (a) Rs.90,000 and
from category (b) Rs.60,000 = Rs.1,50,000 will be adjusted towards the amount due on allotment.
In such a question, where it has been given that a shareholder has not paid allotment money but there is no
information whether that shareholder has paid further instalments, It is assumed that the shareholder failed
to pay the next instalments also, unless otherwise stated.
in the books of Ujjawal Ltd.
JOURNAL
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
20XX
[1,00,000 x 3] Bank A/c Dr. 3,00,000
To Equity Share Application A/c 3,00,000
(Being application money received for 1,00,000 equity shares @
Rs.3 per share)
[1,00,000 x 3] Equity Share Application A/c Dr. 3,00,000
[50,000 x 3] To Equity Share Capital A/c 1,50,000
To Equity Share Allotment A/c (balancing figure) 1,50,000
(Being application money on 50,000 equity shares transferred to
Share Capital, and excess money adjusted on allotment)
[50,000 x 4] Equity Share Allotment A/c Dr. 2,00,000
To Equity Share Capital A/c 2,00,000
(Being allotment money due on 50,000 equity shares @ Rs.4 per
share)
Bank A/c Dr. 49,000
To Equity Share Allotment A/c (working note) 49,000
(Being balance allotment money received)
[50,000 x 3] Equity Share First Call A/c Dr. 1,50,000
To Equity Share Capital A/c 1,50,000
(Being first call money due on 50,000 equity shares @ Rs.3 per
share)
Bank A/c [(50,000 x 3) – (1000 x 3)] Dr. 1,47,000
[1,000 x 3] Calls-in-Arrear A/c Dr. 3,000
To Equity Share First Call A/c 1,50,000
(Being first call money received except on 100 equity shares)

Now, Calculation of amount of allotment unpaid by Alok and Net Amount received on Allotment.
Step 1. Calculation of number of shares applied by Alok
= Total Applied Shares in concerned category (group) X Shares allotted to Alok
Total Allotted Shares in concerned category
= 60,000 X 1,000
30,000
= 2,000 shares (Alok had applied for)
Step 2. (m) Excess application money received from Alok
= (Shares applied by Alok – Shares allotted to Alok) x Rate of Application
= Rs. [(2,000 – 1,000) x 3]
= Rs.3,000
(n) Allotment money due from Alok = Shares Allotted to Alok x Rate of Allotment
= Rs. (1,000 x 4) = Rs. 4,000
Less: Excess application money received from Alok = Rs. (3,000)
Amount to be paid by Alok on Allotment AND to be received by company from Alok= Rs. 1,000
But since, the question states that Alok failed to pay allotment money, it means that he failed to
pay Rs.1,000 on allotment.
Therefore, Net Allotment Money received
= Total Allotment Money due (Entry No.3) – Excess Application Money adjusted on Allotment
– Unpaid Allotment Money (if any) by a defaulter.
= Rs. [ 2,00,000 – 1,50,000 – 1,000 ]
= Rs.49,000 (Entry No.4)
DO IT YOURSELF
Q 30. Utkarsh Ltd. issued / offered 1,00,000 shares of Rs.20 each payable as Rs.6 on application, Rs.8 on
allotment, and balance on first call. Applications were received for 2,00,000 shares and allotment was made
as follows:
(a) Applicants for 1,20,000 shares were allotted 60,000 shares
(b) Applicants for 80,000 shares were allotted 40,000 shares
Amrit to whom 3,200 shares were allotted in category (a), failed to pay the allotment money.
Calculate amount received on allotment and pass required journal entries.
Q 31. Raunak Ltd. issued 60,000 shares of Rs.10 each at a premium of Rs.2 per share payable as Rs.3 per share on
application, Rs.5 (including premium) on allotment and the balance on first and final call. Applications were
received for 92,000 shares. The directors decided to allot shares as follows:
(a) Applicants for 40,000 shares were allotted 30,000 shares
(a) Applicants for 50,000 shares were allotted 30,000 shares
(a) Applicants for 2,000 shares were allotted Nil.
Saif, who had applied for 800 shares in category (a) and Nitin, who was allotted 600 shares in
category (b) failed to pay the allotment money. Calculate amount received on allotment.
Sol. Here, Shares offered / shares issued = 60,000
whereas, Number of shares applied for = 92,000
The way directors have decided to allot shares makes it a category / group based allotment.
These categories / groups are the examples of pro-rata allotment.
For category (a), Ratio of Applied Shares : Allotted Shares = 4:3
It means that for every 4 applied shares, 3 shares were allotted.
For category (b), Ratio of Applied Shares : Allotted Shares = 5:3
It means that for every 5 applied shares, 3 shares were allotted.
For category (a),
 Excess Application Money received = (Shares Applied – Shares Allotted) x Rate of Application
= Rs. [(40,000 – 30,000) x 3] = Rs.30,000.
 Allotment Money due from this category = Shares Allotted x Rate of Allotment
= Rs. (30,000 x 5) = Rs. 1,50,000
Less: Excess Application Money received = Rs. (30,000)
Amount still to be received from this category = Rs. 1,20,000
For category (b),
 Excess Application Money received = (Shares Applied – Shares Allotted) x Rate of Application
= Rs. [(50,000 – 30,000) x 3] = Rs.60,000.
 Allotment Money due from this category = Shares Allotted x Rate of Allotment
= Rs. (30,000 x 5) = Rs.1,50,000
Less: Excess Application Money received = Rs. (60,000)
Amount still to be received from this category = Rs. 90,000
After observing the above calculation, it is clear that total of excess from category (a) Rs.30,000 and
from category (b) Rs.60,000 = Rs.90,000 will be adjusted towards the amount due on allotment.
Now, Calculation of amount of allotment unpaid by Saif and Nitin and Net Amount received on Allotment.
Step 1. Calculation of number of shares allotted to Saif
= Total Allotted Shares in concerned category (group) X Shares applied by Saif
Total Applied Shares in concerned category
= 30,000 X 800
40,000
= 600 shares (Saif was allotted)
 Step 2. (m) Excess application money received from Saif
= (Shares applied by Saif – Shares allotted to Saif) x Rate of Application
= Rs. [(800 – 600) x 3] = Rs.600
(n) Allotment money due from Saif = Shares Allotted to Saif x Rate of Allotment
= Rs. (600 x 5) = Rs. 3,000
Less: Excess application money received from Saif = Rs. (600)
Amount to be paid by Saif on Allotment AND to be received by company from Saif = Rs.2,400
But since, the question states that Saif failed to pay allotment money, it means that he failed to
pay Rs.2,400 on allotment.
Step 3. Calculation of number of shares applied by Nitin
= Total Applied Shares in concerned category (group) X Shares allotted to Nitin
Total Allotted Shares in concerned category
= 50,000 X 600
30,000 = 1,000 shares (Nitin had applied for)
Step 2. (m) Excess application money received from Nitin
= (Shares applied by Nitin – Shares allotted to Nitin) x Rate of Application
= Rs. [(1,000 – 600) x 3] = Rs.1,200
(n) Allotment money due from Nitin = Shares Allotted to Nitin x Rate of Allotment
= Rs. (600 x 5) = Rs. 3,000
Less: Excess application money received from Nitin = Rs.(1,200)
Amount to be paid by Nitin on Allotment AND to be received by company from Nitin = Rs.1,800
But since, the question states that Nitin failed to pay allotment money, it means that he failed to
pay Rs.1,800 on allotment.
Therefore, Net Allotment Money received
= Total Allotment Money due (Entry No.3) – Excess Application Money adjusted on Allotment
– Unpaid Allotment Money by Saif and Nitin.
= Rs. [ (60,000 x 5) – 90,000 – (2,400 +1,800) ]
= Rs. [3,00,000 – 90,000 – 4,200]
= Rs.2,05,800 (Entry No.4)
DO IT YOURSELF
Q 32. Sheetal Ltd. issued 1,20,000 shares of Rs.20 each at a premium of Rs.4 per share payable as Rs.6 per share
on application, Rs.10 (including premium) on allotment and the balance on first and final call.
Applications were received for 1,84,000 shares. The directors decided to allot shares as follows:
(a) Applicants for 80,000 shares were allotted 60,000 shares
(b) Applicants for 1,00,000 shares were allotted 60,000 shares
(c) Applicants for 4,000 shares were allotted Nil.
Sagar, who had applied for 1,600 shares in category (a) and Naman, who was allotted 1,200 shares in
category (b) failed to pay the allotment money.
Calculate amount received on allotment and pass journal entries.
Q 33. Shikara Ltd. offered Rs.10,00,000 shares of Rs.100 each for subscription at a premium of Rs.20 per share
payable as:
Rs.10 per share on application, Rs.40 per share and Rs.10 premium per share on allotment,
Rs.50 per share and Rs.10 premium per share on first call,
Over-payments on applications were to be applied towards the amount due on allotment and over-payments
on applications exceeding the amount due on allotment was to be returned. The offer got over-subscribed
to the extent of 13,000 shares.
Applicants for 12,000 shares were allotted 1,000 shares.
Applicants for 2,000 shares were sent letters of regret.
All the money due on allotment and call was duly received.
Pass necessary journal entries in books of the company. Also, prepare balance sheet of the company as per
Schedule III, Part A of the Indian Companies Act, 2013.
Sol. Since, the question states ‘Shikara Ltd. offered Rs.10,00,000 shares of Rs.100 each’, therefore,
Rs.10,00,000 is the total face value of total shares offered by the company.
Now, total face value of total shares offered by the company = Rs.10,00,000
Face value of a share of the company = Rs.100
Therefore, Number of shares offered by the company = total face value of shares offered by the company
Face value of a share of the company
= 10,00,000
100
So, Number of shares offered by the company = 10,000
Now, if a company receives application for 1 share more than the number of shares offered / issued, it
will be called as Over–Subscription.
In this question, the offer got over-subscribed to the extent of 13,000 shares.
So, it means that number of shares applied = (10,000 + 13,000) = 23,000
Moreover, on looking at the categories given in the question, we observed the following:
1 2 3 4 5 6
Shares Shares Excess Application money Allotment Excess Application Refund
received @ Rs.10 per share money due @ money adjusted on
Applied Allotted
Rs.50 per share allotment
12,000 1,000 [ (12,000 – 1,000) x 10 ] 1,000 x 50
= 1,10,000 = 50,000 = 50,000 60,000
2,000 NIL [ (2,000 – 0) x 10 ] NIL, as no NIL, as no allotment 50,000
= 20,000 allotment was was made in this
made in this category.
category.
9,000 9,000 [ (9,000 – 9,000) x 10 ] 9,000 x 50 NIL, as no excess NIL
= 0 = 45,000 application money is
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left.
23,000 10,000 1,30,000 95,000 50,000 1,10,000
In column no. 3, Excess Application money received is calculated as follows:
= [Shares Applied in Category – Shares Allotted in Category] x Rate of Application
In column no. 4, Allotment money due is calculated as follows:
= [Shares Allotted in Category – Shares Allotted in Category] x Rate of Allotment
In column no. 5, Excess Application money adjusted on allotment is possible to the extent of allotment money due
and the availability of excess application money.
for FIRST category
Excess application money = Rs.1,10,000 whereas Allotment money due = Rs.50,000 > Rs.1,10,000
Therefore, out of available excess application money Rs.1,10,000; Rs.50,000 only will be adjusted on
allotment.
Since, the question states ‘over-payments on applications exceeding the amount due on allotment was to be
returned' therefore, for this category
Excess Application Money After Adjusting On Allotment Rs.60,000 (= Rs.1,10,000 – Rs.50,000) will be
refunded.
for SECOND category
Excess application money = Rs.20,000 whereas Allotment money due = NIL, as no allotment was made
in this category.
Therefore, due to non-allotment of shares, Rs.20,000 will be refunded.
for THIRD category
Excess application money = Rs.0 / NIL (due to full allotment of shares)
Therefore, Rs.0 / NIL will be adjusted on allotment.
So, total amount to be refunded = Rs.60,000 (from first category) + Rs.20,000 (from second category)
= Rs.80,000
Net Allotment money received = Total Allotment money due (Entry No.3) – Excess Application money (Entry No.2)
- Unpaid Allotment Money (if any)
in the books of Shikara Ltd.
JOURNAL
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
20XX
[23,000 x 10] Bank A/c Dr. 2,30,000
To Equity Share Application A/c 2,30,000
(Being application money received for 23,000 equity shares @
Rs.10 per share)
[23,000 x 10] Equity Share Application A/c Dr. 2,30,000
[10,000 x 10] To Equity Share Capital A/c 1,00,000
To Bank A/c (working note) 80,000
To Equity Share Allotment A/c (working note) 50,000
(Being application money on 10,000 shares transferred to Share
Capital, Rs.50,000 adjusted on allotment and balance refunded)
[10,000 x 50] Equity Share Allotment A/c Dr. 5,00,000
[10,000 x 40] To Equity Share Capital A/c 4,00,000
[10,000 x 10] To Securities Premium Reserve A/c 1,00,000
(Being allotment money including premium due on 10,000 equity
shares @ Rs.50 per share)
Bank A/c Dr. 4,50,000
To Equity Share Allotment A/c 4,50,000
(Being balance allotment money received)
[10,000 x 60] Equity Share First Call A/c Dr. 6,00,000
[10,000 x 50] To Equity Share Capital A/c 5,00,000
[10,000 x 10] To Securities Premium Reserve A/c 1,00,000
(Being first call money including premium due on 10,000 equity
shares @ Rs.60 per share)

Bank A/c Dr. 6,00,000

To Equity Share First and Final Call A/c 6,00,000
(Being first call money duly received)
DISCLOSURE OF SHARE CAPITAL IN BALANCE SHEET OF THE COMPANY
Balance Sheet of Shikara Ltd. as at …………. (As per Schedule III of the Companies Act, 2013)
Particulars Note No. Current Year’s Fig. (Rs.) Previous Year’s Fig. (Rs.)
I. EQUITY AND LIABILITIES
Shareholders’ Funds
Share Capital 1 10,00,000 ……..
Reserves and Surplus 2 2,00,000 ……..
TOTAL 12,00,000 ……..
II. ASSETS
Current Assets
Cash and Cash Equivalents 3 12,00,000 ……..
TOTAL 12,00,000 ……..

Notes to Accounts:
Note No. Particulars Current Year’s Fig. (Rs.) Previous Year’s Fig. (Rs.)
1. Share Capital
Authorised Capital / Nominal Capital …….
……… equity shares of Rs. 100 each
Issued Capital
10,000 equity shares of Rs.100 each
issued to public 10,00,000
Subscribed Capital:
Subscribed and fully paid capital
10,000 equity shares of Rs. 100 each 10,00,000
P TOTAL to be shown in Balance Sheet 10,00,000
2. Reserves and Surplus
Securities Premium Reserve 2,00,000
Q TOTAL to be shown in Balance Sheet 2,00,000
3. Cash and Cash Equivalents
Cash at Bank (P + Q) 12,00,000 =
 DO IT YOURSELF
Q 34. Bakul Ltd. invited applications for issuing 60,000 shares of Rs.10 each at par. The amount was payable as
Rs.2 per share on application, Rs.3 per share on allotment and balance on first and final call.
Applications were received for 92,000 shares. Allotment was made on the following basis:
(a) To applicants for 40,000 shares Full
(b) To applicants for 50,000 shares 40%
(c) To applicants for 2,000 Shares Nil
Rs.1,08,000 was realised on account of allotment money (excluding the amount carried from application
money) and Rs.250,000 on account of call.
Pass journal entries in books of the company assuming that the company has opened calls-in-arrears and
calls-in-advance accounts.
Also, Calculate the number of shares on which allotment and first call money were not received.