Journal Entries For Isuue of Share In Company Account

1)    When a company allows public to give the full value of share at a time of application.

First, the company will receive full value with application money:

Bank a/c         debit

     To share application and allotment a/c   credit

(Being application and allotment money received)

If there is an over subscription, then company would refund the excess money immediately:

Share application and allotment a/c      debit

      To Bank a/c    credit

(Being excess application money refunded)

Now transfer of application and allotment money to share capital:

Share application and allotment a/c       debit

            To share capital a/c    credit

(Being transfer of application and allotment money to share capital)

2)    When company allows public to give value of share in installment:

    

When application money received:    

Bank a/c      debit

  To share application a/c

(Being application money received)

Share application a/c   Debit

     To Bank a/c

(Being excess application money refunded)

Share application a/c     Debit

      To share capital a/c

(Being the application money transferred to share capital)

For allotment, the company will pass the due entry first and then money received entry:

                                                                                      

Share allotment a/c     Debit                                                                                                   

   To share capital a/c                                                                                       

(Being allotment money due to be received)                                                                          

                                                                                                                 

Bank a/c                Debit                                                                                

    To share allotment a/c                                                                              

(Being amount received from allotment)                                                          

For first call, company again will pass due entry first:

Share 1^st call a/c            Debit

       To share capital a/c

(Being money due for share 1^st call)

Bank a/c       Debit

  To share 1^st call a/c

(Being amount received for 1^st call)

Similar transaction will be there for final call.

Now suppose, If shares are issued at premium:

In the due entry we will add one more item “security premium a/c”

Share allotment a/c                 debit

      To share capital a/c

       To security premium a/c

(Being the amount due to be received with premium)

If shares are issued at discount:

 Share allotment a/c              debit

  Share discount a/c              debit

       To share capital a/c

(Being the amount due to be received and discount allowed)

If any shareholder fails to pay allotment money:

Bank a/c                debit

Calls in arrear a/c   debit

      To share allotment a/c

(Being the amount received on allotment except shareholder holding

___shares failed to pay allotment money)

Similar treatment will be there for shareholders fail to pay call money)

When calls received in advance at the time of allotment:

Bank a/c          debit

     To share allotment a/c

       To calls in advance a/c

(Being allotment money received with some shareholder

Paying calls money in advance)

When calls are made:

Calls in advance a/c    debit

 To (relevant) calls a/c

(Being the amount adjusted with calls money received)

And for the money on calls in advance the company have to pay 6 % interest and the entry will be:

Interest on calls in advance a/c   debit

  To bank a/c

(Being money paid for interest on calls in advance)

If interest on calls in advance not paid in cash:

Interest on calls in advance a/c   debit

  To sundry shareholders a/c

(Being the amount due to be paid)

At the end interest on calls in advance transferred to p/l account:

Profit and loss a/c   debit

 To interest on calls in advance a/c

(Being interest on calls in advance transferred to p/l)

Sometimes, company issues shares to the vendor for the purchase of assets. Company doesn’t give cash but instead it gives its shares to that vendor. The journal entry for these types of transaction is:

Asset a/c     debit

    To share capital a/c

(Being share issued for purchase of asset)

When company issues share to promoter for the service rendered by them by the way of engineering service, drawing and designing etc without payment, the entry will be:

Goodwill a/c   debit

  To share capital a/c

(Being share issued to promoter)

This was how I explained about part of  issue of shares. I f you have any question regarding this concept feel free to write in the comment box below.