Journal Entry-Issue of shares

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armchairca (Querist)
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19 April 2010 At the time of issue of shares at par:

Share Application A/C.............. DR.
Share Capital A/c.............CR

MY QUERY---- why has share application account been debited while share capital accounts has been credited.

Aditya Maheshwari

Aditya Maheshwari (Expert)
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19 April 2010 Share application has a credit balance when amount is received. So to make the account zero you have to debit the account and you want to transfer it to share capital should credit that account.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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19 April 2010 when you received application money you entered:---

Bank A/c Dr.
To Share application A/c.

Now at the time of allotment your share capital will increase, by transferring the share application balance to capital A/c, by entry mentioned above by you.

kartik_somu

kartik_somu (Expert)
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19 April 2010 getting application money is an invitation to offer. amount received is a liability.

when the share are allotted, the offer is made and a binding contract comes into existence. So share capital is credited after the shares are allotted.

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