Journal Entries for issue of Shares

  • Bank A/c Dr..
    • To Share Application A/c
    • (Being Share Application money received)
  • Share Application A/c Dr..
    • To Share Capital A/c
    • To Securities Premium Reserve A/c (if any)
    • (Being Share Application money transferred to Share Capital A/c)
  • Share Application A/c Dr..
    • To Bank A/c
    • (Being application money refunded)
  • Share Allotment A/c Dr..
    • To Share Capital A/c
    • To Securities Premium Reserve A/c (if any)
    • (Being Share Allotment money transferred to share capital A/c and premium transferred to Securities Premium Reserve A/c)
  • Bank A/c Dr..
    • To Share Allotment A/c
    • (Being allotment money received)
  • Share 1st Call A/c Dr..
    • To Share Capital A/c
    • To Securities Premium Reserve A/c (if any)
    • (Being Share 1st call money transferred to share capital A/c and premium transferred to Securities Premium Reserve A/c)
  • Bank A/c Dr..
    • To Share 1st Call A/c
    • (Being 1st Call money received)
  • Share 2nd Call A/c Dr..
    • To Share Capital A/c
    • To Securities Premium Reserve A/c (if any)
    • (Being Share 2nd call money transferred to share capital A/c and premium transferred to Securities Premium Reserve A/c)
  • Bank A/c Dr..
    • To Share 2nd Call A/c
    • (Being 2nd Call money received)
  • Share 3rd and Final Call A/c Dr..
    • To Share Capital A/c
    • To Securities Premium Reserve A/c (if any)
    • (Being Share 3rd and Final call money transferred to share capital A/c and premium transferred to Securities Premium Reserve A/c)
  • Bank A/c Dr..
    • To Share 3rd and Final Call A/c
    • (Being 3rd and Final Call money received)

If any calls are received in advance

  • Bank A/c Dr..
    • To Calls in Advance A/c
    • (Being calls received in advance)
  • Calls in Advance A/c Dr..
    • To Share Allotment/1st/2nd/3rd Call A/c (as applicable)
    • (Being Calls in advance adjusted against respective call)

Forfeiture of Shares

  • Share Capital A/c Dr.. (with the amount called up)
    • To Forfeited Shares A/c Dr.. (with the amount forfeited)
    • To Share Allotment/1st/2nd/3rd Call (As applicable)
    • To Calls in arrears A/c (In case calls in arrears account is used)
    • (Being Shares forfeited)
  • Bank A/c Dr..
  • Forfeited Shares A/c Dr.. (if shares reissued at discount)
    • To Share Capital A/c (with the amount considered as paid up on reissue)
    • To Securities Premium Reserve A/c (if shares reissued at premium)
    • (Being forfeited shares reissued)
  • Forfeited Shares A/c Dr..
    • To Capital Reserve A/c
    • (Being balance in forfeited shares A/c transferred to capital reserve A/c)

Calls in Arrears

If calls in arrears account is used then the arrear amount is kept in a separate account and the Share allotment or share call account are credited with the full amount. Journal entries will change as below :

  • Bank A/c Dr..
  • Calls in Arrears A/c Dr..
    • To Share Allotment/1st/2nd/3rd Call A/c (if applicable)

In case the whole amount is payable on application

  • Bank A/c Dr..
    • To Share Application and Allotment A/c
    • (Being share application money received)
  • Share Application and Allotment A/c Dr..
    • To Share Capital A/c
    • (Being application money transferred to share capital A/c)

Share issued for consideration other than cash

  • Sundry Assets A/c Dr..
    • To Vendor A/c
    • (Being assets purchased from vendor)
  • Vendor A/c Dr..
    • To Share Capital A/c
    • To Securities Premium Reserve A/c (if any)
    • To Cash/Bank A/c (if any part of consideration is paid in cash/bank)
    • (Being purchase consideration paid through issue of shares)

Issue of Shares to Promoters

  • Preliminary Expenses/Incorporation Expenses A/c Dr..
    • To Promoter A/c
    • (Being amount payable to promoters for incorporation expenses)
  • Promoter A/c Dr..
    • To Share Capital A/c
    • To Securities Premium Reserve A/c (if any)
    • (Being shares issued to promoters for incorporation expenses)

The preliminary expenses are written off from the securities premium reserve A/c or from Statement of Profit and Loss A/c in the year entry is made in books of accounts for expenses incurred

Issue of shares to underwriters

  • Underwriting Expenses A/c Dr..
    • To Underwriter A/c
    • (Being amount payable to underwriters for underwriting commission)
  • Underwriter A/c Dr..
    • To Share Capital A/c
    • To Securities Premium Reserve A/c (if any)
    • (Being shares issued to underwriter for underwriting commission)

The Underwriting expenses are written off from the securities premium reserve A/c or from Statement of Profit and Loss A/c in the year it is incurred

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