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7296 Points
Joined March 2019
The first entry is recording cash from applicants. There can be 100 applicants which you cannot show in the financial statement of changes in equity. All numbers should be consolidated amounts.
FOR THE PURPOSE OF THE ABOVE: a transfer entry is created. That is the entry in your question. So all applicants who are share holders, their shareholding interests in the form of monetary value is transferred to share capital.
To be precise with your query:
1 Who is receiving money here? Company is receiving money here in the form of application money.
2 share capital or share application? Share application is bringing in the cash and this share application details are transferred to share capital account. All of it.
In other words,
applicant paid money into your bank and you transferred their accounts to total shareholders capital account.
Eg. if five partners bought in capital 1000₹, you will transfer all of their cash into bank- assets and credit their accounts in equity. This is because, you have a system called as Dual aspect- for every debit, there is a corresponding credit. The Dual aspect concept will balance the balance sheet equation.
Assets= Equity+ Liabilities
Here, Share application money is transferred to bank- assets increase by 1000₹.
Then you should balance liabilities by giving credit to capital account- liabilities increase by 1000₹.