JOURNAL ENTRY ISSUE OF SHARE CAPITAL IN CAPIAL ACCOUNTS

JOURNAL ENTRY ISSUE OF SHARE CAPITAL IN CAPIAL ACCOUNTS

As we lean earlier if company takes money it takes in parts.

Example like Share value Rs  10 in 3 parts  3+5+2 is to be received from the public it will be divided as given below

Division of share

Rs 10

3

Application money

2

Allotment money

5

Calls (first call)

Total shares 10

 

Example of issue of share in parts to public

If a company issued 100000 shares in market with share value Rs 10 each.

First of all, money ask for application money.

Division of share

Rs 10

3 *100000 = 300000

Application money

2 *100000 = 200000

Allotment money

5 *100000 = 500000

Calls (first call)

Total shares 100000*10 = Rs. 10,00000

 

 

 

When application is received.

Journal entry of Application money

 

Bank A/c Dr.  Dr.

300000

   To application Share A/c

     300000

Being Application money received form public

Note : It means company received Application for share in the beginning. This entry is made to show how money comes in business. We cannot make journal entry of due of application because we don’t know who to due.

As the money is invested by public now they become owner of the company therefore it will be transfer to Share capital accounts . As we know that capital is the money invested by its owners therefore the money of the pubic in company is known by the name share capital.

Now this Application money is transfer to company share capital .

               

Application Share A/c Dr

200000

   To share capital a/c

     200000

Being Application money received form public

 

Automatically share capital accounts is adjusted in the journal entry by crediting in the first entry and debiting in the second entry.

Journal entry of Allotment money

 

Now company ask for Allotment .

First of all need to make journal entry of share allotment due entry in books of accounts.

Share allotment A/c

500000

   To share capital a/c

     500000

Being share allotment due.

Next we have to make  share allotment received entry.

 

Bank A/c Dr

300000

   To share Allotment A/c

     300000

Being share allotment adjustment

 

 

Journal entry of Final call money

When first and final call is due .

Here we have a make entry of due in the beginning and then the other entry of received.

Share First and final call  A/c  Dr

500000

   To  Share Capital A/c

     500000

Being first call due

 

When first and final call is received.

 

 

Bank A/c Dr.

500000

    To Share First and final call  A/c  Dr

     500000

Being first call received in bank

 

 

JOURNAL ENTRY OF SHARE ISSUE EXPENSES

Share issue expense is expense by nature therefore its journal entry will be :

Share issue expenses a/c Dr

XXXXX

    To Bank   A/c  Dr

          XXXXX

Being share issue expenses paid

 

 

JOURNAL ENTRY OF SHARE ARE ISSUED TO PROMOTERS

When share is issued to promoters .Promoters are those who form the company.

Incorporation A/c Dr

XXXXX

To share capital A/c

         XXXXX

Being received from promoters.

 

 

JOURNAL ENTRY OF COMMISSION TO UNDERWRITES.

If share is issued to underwriters for his commission .

Underwriters : are those people who gives assurance to company to sell his share to public in lieu of commission .

Under writers Commission A./c Dr

XXXXX

     To Underwriters.

          XXXXX

Being underwriters commission due

 

 When under writer commissions is paid .

    Underwriters. A/c Dr

XXXXX

           To shar capital a/c

      XXXXX

Being underwriters’ commissions received

 

 

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