ISSUE OF SHARES FOR CASH :
Issue of Shares at par
Shares are said to be issued at par when the issue price is equal to the face value or nominal value of the shares i.e. issue price is Rs.10 and face value is also Rs.10. When the shares are issued, the company may ask the payment of the shares either in one lump sum or in installments.
(a) When shares are issued at par and are payable in full in a lump sum:
Note:
(i) When the capital of the company consists of shares of different classes, a separate share application account will be opened for each class of shares, i.e. equity share application account/preference share application account etc.
(ii) Unless shares are allotted by the company, the receipt of application is simply an offer and cannot be credited to Share Capital Account.
(iii) If the company fails to raise the minimum subscription, then no shares can be allotted and the application money has to be returned to the applicants. For this, the entry will be as follows:
(iv) In actual practice, the cash transactions are not journalised but the same have to be entered in the cash book. The entry in the Cash Book will be as follows:
Cash Book (Bank Columns)
(b) When shares are issued at par and the amount is payable in installments:
When shares are not payable in a lump sum, the amount can be called in a number of installments. After allotment, whenever the need arises, the directors may demand further money from the shareholders towards payment of the value of shares taken up by them. Such demands are termed as calls. The different calls are distinguished from each other by their serial numbers, i.e. first call, second call, third call and so on. The last installment is also termed the final call along with the number of the last call.
–First installment is called ‘application money’
–Second installment is called ‘allotment money’
–Third installment is called ‘first call money’ and
–The last installment is called ‘final call money’.
