Initially there were 10 shareholders then further allotment for 750 new shareholders, then a right issue was made to 760 Shs then a further allotment to 730 Shs now the company has received an amount of 7.3 lacs and company want to allot this capital to these 730 shareholders only so can we do this if yes, what we can call /an appropriate term we can use for this allotment.
Kindly suggest
Thanks
Once an application is received, the money is deposited into bank and the application account is transferred to share capital account.
It is similar in the case of Allotment as well. Allotment is done on pro rate basis and who ever did not get the shares confirmed, the company will return back the money. Once allotments money is received, it is transferred to share capital account. Once again, first and final call follows the same procedure.
So if you want to allot 5,000 shares to 7,000 share holders, you will use a pro rate calculation in allotting shares. I am attaching a link here and this website has many such journal entries which are useful: https://www.yourarticlelibrary.com/accounting/share/issue-of-share-at-par-journal-entries/46980
When the company decides to allot the shares at pro-rata basis, then it has to allot 10000 shares to the applicants of 20000 shares. Thus, the ratio will be 20000:10000 i.e. 2:1. Hence, an applicant for 2 shares will receive 1 share. This is Pro-rata allotment.
In the above, rights issue was made to the existing shareholders who are fully subscribed and paid up for already. So, find out, how many new shares are issued, how many applications have been received and how many share have been allotted.
From the above, one can understand, the money received from application and Allotment is debited to bank directly and credited to share capital account. You will only give the money back to the subscribers when they are not allotted any shares.
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