Accounting Treatment for Share

Subject: Principles of Accounting

Find Your Query

Lesson Info

  • Notes 4
  • Videos 0
  • Exercises 0
  • Practice Test 0
  • Skill Level Medium


Issue of shares and Issue of shares on installment basis. Calls in arrear and calls in advance. Share Forfeiture and Re-issue forfeited share


Issue of Shares

A company issues its shares to the general public through an invitation called prospectus. The prospectus states, besides others, the number of shares offered to the public and the face value of the shares. Share application is the money which a company receives during the time of accepting the request of purchase of the share of the company. Share application is the money which a company receives during the time of accepting the request of purchase of the share of the company. A company issues certain amount of shares in the market. In response investors and shareholders apply for the issuance of the share. When the application money is given the rights to the share, the share application money is transferred to the share capital money and is termed as first installment of the share. So a prospective subscriber intending to purchase the share pays first installment of the amount of share with an application form. The amount of first installment paid is called share application money. All the applicants deposit their application money in the bank. Share Allotment: When a company receives an application for the purchase of shares, it continues to assign the shares on predefined basis (decided on the prospectus of the company). Calls may be defined as the demand by the business made to its investors and shareholders to pay the remaining part or full part of the unpaid balance on each share value at any time in the run of a company. The shares of a company can be issued either at par or at discount or at premium. Learn More

Issue of Shares on Installment Basis

A share is issued at either a lump-sum basis or an installment basis. In lump-sum basis cash is fully paid at one during the time of application. If the shares are issued at par, the company collects the amount of shares in different installments equal to their face or nominal value. If the shares in different installments after deducting the amount discount from the face or nominal value of the shares.The issue of share at a price higher than its face value or nominal value is known as issue of share at premium. Learn More

Calls in Arrears and Calls in Advance

Calls in arrears is the situation when the shareholder fails to pay the called money in the allocated time by the company. A company calls for money when needed with a certain date. Some shareholders pay the money ahead of the allocated time with their first installments. So, this payment is known as calls in advance. Learn More

Share Forfeiture and Re-issue of Forfeited Shares

A joint stock company allots shares to the applicants applied for the shares. Upon allotment the applicants are liable to pay the allotment money and call money within the time specified. The conditions of forfeiture of shares are Forfeiture of shares issued at par, Forfeiture of shares issued at discount and Forfeiture of shares issued at premium. The board of directors of the company is empowered to reissue the forfeited shares if authorized by its articles. Such shares may be issued either at par or at premium or at discount. Learn More

© 2019-20 Kullabs. All Rights Reserved.