On April 01, 2019, a limited company was incorporated with an authorised capital of ₹40,000 divided into shares of ₹10 each. It offered to the public for subscription of 3,000 shares payable as follows:
| Instalment | Amount (₹) |
|---|---|
| On Application | 3.00 per share |
| On Allotment | 2.00 per share |
| On First Call (one month after allotment) | 2.50 per share |
| On Second and Final Call | 2.50 per share |
The shares were fully subscribed for by the public and application money duly received on April 15, 2019. The directors made the allotment on May 1, 2019. How will you record the share capital transactions in the books of the company if the amounts due have been duly received, and the company maintains a combined account for application and allotment?
Concept understanding — Share Subscription Accounting
Share Subscription Accounting – A First Look
Think of a company raising money by selling pieces of itself. When you buy a share, you're not buying a product off a shelf — you're promising to pay for a part of the business. That promise, and the money that follows, is what share subscription accounting tracks.
The Everyday Intuition
Imagine you and three friends decide to start a small café. You each agree to contribute ₹10,000. But you don't all have the cash right now. One friend says, "I'll pay ₹5,000 now and the rest next month." Another says, "I'll pay the full amount after two months."
How do you keep track of who has paid what, and who still owes? You'd need a simple record: "Amount Promised" and "Amount Received." That's exactly what share subscription accounting does — but for a company with hundreds or thousands of investors.
The Precise Meaning
Share subscription is the process by which investors (subscribers) apply for shares of a company and agree to pay for them. The company records:
- The amount called up by the board (the portion of face value demanded from shareholders)
- The amount received from shareholders
- The amount unpaid (calls in arrears)
The key accounts involved are:
| Account | Nature | When Used |
|---|---|---|
| Share Capital Account | Liability (credit) | When shares are issued |
| Share Allotment Account | Personal (temporary) | When allotment money is due |
| Share Calls Account | Personal (temporary) | When call money is due |
| Calls in Arrears Account | Personal (debit) | When shareholders fail to pay |
| Bank Account | Real (asset) | When money is actually received |
Why It Matters
Without proper subscription accounting, a company cannot:
- Know how much capital it has actually collected
- Track defaulting shareholders
- Comply with the Companies Act, 2013
- Prepare accurate financial statements
The law requires that share capital be shown separately as "Subscribed but not fully paid" and "Subscribed and fully paid" in the balance sheet.
The Accounting Treatment – Step by Step
Stage 1: Application Money Received
When investors apply for shares, they send application money (usually a part of the face value).
Journal Entry:
Bank A/c Dr. [Amount received]
To Share Application A/c [Amount received]
Stage 2: Allotment of Shares
When the company allots shares, the application money is transferred to Share Capital. The remaining allotment money becomes due.
Journal Entry (for allotment due):
Share Allotment A/c Dr. [Amount due]
To Share Capital A/c [Amount due]
Stage 3: Receiving Allotment Money
Journal Entry:
Bank A/c Dr. [Amount received]
To Share Allotment A/c [Amount received]
Stage 4: Calls Made and Received
If the company makes a first call, second call, etc.:
When call is made:
Share First Call A/c Dr. [Amount due]
To Share Capital A/c [Amount due]
When call is received:
Bank A/c Dr. [Amount received]
To Share First Call A/c [Amount received]
Stage 5: Calls in Arrears
If a shareholder fails to pay a call:
Journal Entry:
Calls in Arrears A/c Dr. [Amount unpaid]
To Share Allotment/Call A/c [Amount unpaid]
The Balance Sheet Presentation (Proforma)
As per NCERT Class 12 Accountancy, the Share Capital section in the Balance Sheet appears as:
| Particulars | Note No. | Amount (₹) |
|---|---|---|
| EQUITY AND LIABILITIES | ||
| 1. Shareholders' Funds | ||
| (a) Share Capital | 1 | XXX |
| 2. Non-Current Liabilities | ||
| 3. Current Liabilities |
Note 1: Share Capital
| Particulars | Amount (₹) |
|---|---|
| Authorised Capital | |
| ... shares of ₹ ... each | XXX |
| Issued Capital | |
| ... shares of ₹ ... each | XXX |
| Subscribed Capital | |
| Subscribed but not fully paid: | |
| ... shares of ₹ ... each, ₹ ... called up | XXX |
| Less: Calls in Arrears | (XXX) |
| Subscribed and fully paid: | |
| ... shares of ₹ ... each | XXX |
| Total Share Capital | XXX |
The key distinction: Subscribed but not fully paid shows shares where the company has called up only part of the face value. Subscribed and fully paid shows shares where the entire face value has been called and received.
A Simple Example (No Invented Data)
Suppose a company issues 10,000 shares of ₹10 each, payable as: ₹3 on application, ₹3 on allotment, ₹4 on first and final call.
All applications are received and allotment is made. All money is received except one shareholder holding 100 shares fails to pay the first and final call.
Journal Entries:
-
Bank A/c Dr. ₹30,000
To Share Application A/c ₹30,000
-
Share Application A/c Dr. ₹30,000
To Share Capital A/c ₹30,000
-
Share Allotment A/c Dr. ₹30,000
To Share Capital A/c ₹30,000
-
Bank A/c Dr. ₹30,000
To Share Allotment A/c ₹30,000
-
Share First & Final Call A/c Dr. ₹40,000
To Share Capital A/c ₹40,000
-
Bank A/c Dr. ₹39,600
Calls in Arrears A/c Dr. ₹400
To Share First & Final Call A/c ₹40,000
Balance Sheet Extract:
| Subscribed but not fully paid: | |
| 10,000 shares of ₹10 each, ₹10 called up | ₹1,00,000 |
| Less: Calls in Arrears | (₹400) |
| | ₹99,600 |
A common mistake: Students often debit Share Capital when recording calls in arrears. Remember — Share Capital is credited when the call is made. Calls in Arrears is a separate debit account that reduces the net amount shown under Subscribed Capital.
The Core Idea
Share subscription accounting is simply tracking the journey of money from an investor's promise to the company's bank account — and recording any broken promises along the way. The Share Capital account always shows the total amount called up, while Calls in Arrears shows what's still missing.
With a combined Share Application and Allotment Account, the application (₹3) and allotment (₹2) stages are handled through one account; the two calls (₹2.50 each) go through their own call accounts. Total called and received = 3,000 × ₹10 = ₹30,000.
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
| Bank A/c Dr. | 9,000 | |||
| To Share Application and Allotment A/c | 9,000 | |||
| Share Application and Allotment A/c Dr. | 15,000 | |||
| To Share Capital A/c | 15,000 | |||
| Bank A/c Dr. | 6,000 | |||
| To Share Application and Allotment A/c | 6,000 |
Application & allotment (₹5 per share) is routed through the combined account (₹15,000 to Share Capital); each call of ₹2.50 (₹7,500) is then made and received, bringing the shares to fully paid — total Share Capital ₹30,000.
The combined account receives application money (₹9,000), then the ₹15,000 application-plus-allotment due is transferred to Share Capital and the ₹6,000 allotment balance received; the two ₹2.50 calls (₹7,500 each) complete the ₹30,000 capital.
Concept
A combined Share Application and Allotment Account merges the first two stages, because allotment cannot happen without application. Application money is first received into it, the total application-and-allotment amount due is transferred to Share Capital, and the remaining allotment cash is then received.
Solution — Journal
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
| 2019 Apr 15 | Bank A/c Dr. | 9,000 | ||
| To Share Application and Allotment A/c | 9,000 | |||
| (Application money on 3,000 shares @ ₹3 received) | ||||
| 2019 May 1 | Share Application and Allotment A/c Dr. | 15,000 | ||
| To Share Capital A/c | 15,000 | |||
| (Application and allotment due on 3,000 shares @ ₹5) | ||||
| Bank A/c Dr. | 6,000 | |||
| To Share Application and Allotment A/c | 6,000 | |||
| (Allotment money received @ ₹2 on 3,000 shares) | ||||
| Share First Call A/c Dr. | 7,500 | |||
| To Share Capital A/c | 7,500 | |||
| (First call due on 3,000 shares @ ₹2.50) | ||||
| Bank A/c Dr. | 7,500 | |||
| To Share First Call A/c | 7,500 | |||
| (First call money received) | ||||
| Share Second and Final Call A/c Dr. | 7,500 | |||
| To Share Capital A/c | 7,500 | |||
| (Second & final call due on 3,000 shares @ ₹2.50) | ||||
| Bank A/c Dr. | 7,500 | |||
| To Share Second and Final Call A/c | 7,500 | |||
| (Second & final call money received) |
Share Capital builds up as ₹15,000 (application + allotment) + ₹7,500 (first call) + ₹7,500 (second & final call) = ₹30,000, all fully received.
Showing the 12 most recent of 31 on this concept.
- CBSE 2026Set ANNUAL1 markQ.If applicants for 15000 equity shares were alloted 13500 shares on pro-rata basis, the types of subscription will be __________.
›Reveal solutionSolution
Allotting fewer shares (13,500) than applied for (15,000) on a pro-rata basis indicates over-subscription.
Pro-rata allotment is used only when a company receives applications for MORE shares than it offers. Here applicants for 15,000 shares were given 13,500 shares proportionately, so the issue attracted more applications than shares available - this is a case of over-subscription (applications exceed shares offered).
✓Final answerIt is a case of over-subscription.
- CBSE 2026Set ANNUAL1 markMCQQ.Share Application A/c is(a) Personal A/c(b) Real A/c(c) Nominal A/c(d) None of these
›Reveal solutionSolution
The Share Application A/c is a Personal Account - option (a).
The Share Application Account records the money received from and due to the applicants for shares; since it represents a group of persons (the applicants/shareholders), it is classified as a personal account under the traditional classification. (Cash/Bank is a real account; nominal accounts deal with expenses, losses, incomes and gains.)
✓Final answer(a) Personal A/c.
- CBSE 2026Set ANNUAL1 markQ.A company sent letter of regret for 200 shares and allotment letters for 25,000 shares to its applicants. Application money was ₹ 20 per share. Calculate the amount of Application money which company is refunding?
›Reveal solutionSolution
Amount of Application money refunded = ₹ 4,000.
The company sent a letter of regret (full rejection) for 200 shares and allotment letters for 25,000 shares. This means the company received applications for a total of 200 + 25,000 = 25,200 shares, but only 25,000 of these applications are being allotted shares; the remaining 200 shares' worth of applications are being entirely rejected.
Since application money was ₹20 per share, the refund due on the fully-rejected applications is:
Refund = 200 shares × ₹20 = ₹4,000
(The application money on the 25,000 allotted shares, i.e. 25,000 × ₹20 = ₹5,00,000, is retained by the company and adjusted/transferred towards share capital — it is not refunded.)
✓Final answerApplication money refunded = 200 shares × ₹20 = ₹ 4,000.
- CBSE 2025Set 67/6/11 markMCQQ.(a) A portion of the uncalled capital reserved by a company to be called only in the event of winding up of the company, is called : (A) Subscribed but not fully paid up capital (B) Unissued capital (C) Reserve capital (D) Subscribed capital(OR)(b) When applications for more shares of a company are received than the number of shares offered to the public for subscription, it is known as : (A) Over subscription (B) Full subscription (C) Subscription at premium (D) Under subscription
›Reveal solutionSolution
Part (a): (C) Reserve Capital — uncalled capital callable only on winding up. Part (b): (A) Over subscription — applications exceed shares offered.
Part (a)
A company's authorised capital splits into issued and unissued portions; issued capital may be partly called, leaving an uncalled portion. Under Section 65 of the Companies Act, 2013, a company may, by special resolution, resolve that a part of this uncalled capital shall not be called except in the event of winding up. This ring-fenced portion is Reserve Capital — a permanent security for creditors.
Option Meaning (A) Subscribed but not fully paid-up Issued capital with some amount still callable at any time (B) Unissued capital Authorised capital never offered to the public (C) Reserve capital Uncalled capital reserved to be called only on winding up (D) Subscribed capital Face value of shares actually subscribed Watch outReserve Capital ≠ Capital Reserve. Reserve Capital is uncalled share capital reserved for winding up; Capital Reserve is a reserve out of capital profits.
✓Final answerPart (a): (C) Reserve capital.
Part (b)
When a company invites the public to subscribe, three outcomes are possible:
- Under subscription — applications < shares offered.
- Full subscription — applications = shares offered.
- Over subscription — applications exceed shares offered; the company then allots pro-rata, rejects some applications, or a combination.
Subscription at premium refers to the price (above face value), not the volume of applications, so it is irrelevant here.
✓Final answerPart (b): (A) Over subscription — applications received exceed the shares offered to the public.
- CBSE 2025Set ANNUAL1 markMCQQ.A company issued 10,000 shares of Rs. 10 each at a premium of 10%. The amount of premium will be (A) Rs. 10,000 (B) Rs. 20,000 (C) Rs. 8,000 (D) Rs. 5,000
›Reveal solutionSolution
A 10 percent premium on 10,000 shares of Rs 10 each gives a total premium of Rs 10,000, so the answer is (A).
This is a straightforward BSEB Inter / Bihar Class-12 Accountancy premium calculation.
Particulars Working Amount Face value per share given Rs 10 Premium rate given 10% Premium per share 10 x 10% Re 1 Number of shares given 10,000 Total premium 10,000 x Re 1 Rs 10,000 So the total securities premium = 10,000 x Re 1 = Rs 10,000, which matches option (A). The other figures (Rs 20,000, Rs 8,000, Rs 5,000) do not fit this computation.
✓Final answer(A) Rs 10,000
- CBSE 2025Set ANNUAL1 markMCQQ.Which account is to be debited on receive of calls in advance? (A) Calls in Arrear A/c (B) Bank A/c (C) Shareholder A/c (D) Calls in Advance A/c
›Reveal solutionSolution
On receiving calls in advance, Bank A/c is debited (and Calls-in-Advance A/c is credited).
When a company receives call money before it is actually due, it records the receipt as Bank A/c Dr. To Calls-in-Advance A/c. The bank balance (an asset) increases, so Bank A/c is debited; Calls-in-Advance is a liability of the company until the call falls due, so it is credited. (Calls-in-Arrears, by contrast, is debited when a call is not received.) Hence on receipt of calls in advance the account debited is the Bank Account. This is a standard RBSE Rajasthan Class-12 Accountancy share-capital entry, consistent with the NCERT/CBSE commerce syllabus.
✓Final answer(B) Bank A/c
- CBSE 2025Set ANNUAL1 markQ.On 1st April, 2024 P Ltd. received in advance the final call of Rs. 3 per share on 10,000 equity shares. The final call was due on 15-5-2024. Journalise the above transaction.
›Reveal solutionSolution
Money received on 1st April for a call that becomes due only on 15th May is recorded as Calls-in-Advance, a liability, and is adjusted against the Final Call A/c only when the call actually falls due.
The final call of Rs. 3 per share on 10,000 equity shares = 10,000 × Rs. 3 = Rs. 30,000. Since this amount is received on 1st April, 2024 — before the call is actually made/due (15-5-2024) — it cannot be credited to the Share Final Call Account; it must be recorded as Calls-in-Advance, which is a liability of the company (an amount owed back to the shareholders in the form of shares until the call becomes due).
Journal Entries:
Date Particulars Dr. (Rs.) Cr. (Rs.) 1-4-2024 Bank A/c Dr. 30,000 To Calls-in-Advance A/c 30,000 (Being final call of Rs. 3 per share on 10,000 shares received in advance) 15-5-2024 Equity Share Final Call A/c Dr. 30,000 To Equity Share Capital A/c 30,000 (Being final call of Rs. 3 per share made due on 10,000 shares) 15-5-2024 Calls-in-Advance A/c Dr. 30,000 To Equity Share Final Call A/c 30,000 (Being calls-in-advance adjusted against the final call now due) ✓Final answerOn 1-4-2024: Bank A/c Dr. Rs. 30,000; To Calls-in-Advance A/c Rs. 30,000. On 15-5-2024, this Rs. 30,000 Calls-in-Advance is adjusted against the Final Call A/c when it falls due.
- CBSE 2025Set ANNUAL1 markMCQQ.Arihant Ltd. invited applications for 20,000 Preference Shares @ Rs. 250 each. Applications were received for 25,000 Preference Shares. This situation is known as .........................(a) Oversubscription(b) Undersubscription(c) Full subscription(d) Partial subscription
›Reveal solutionSolution
When the number of shares applied for is MORE than the number of shares offered by the company, the issue is said to be oversubscribed.
Explanation
Arihant Ltd. offered (invited applications for) 20,000 Preference Shares, but received applications for 25,000 shares — 5,000 shares more than were on offer.
Term Meaning Oversubscription Applications received > Shares offered Undersubscription Applications received < Shares offered Full subscription Applications received = Shares offered Since 25,000 > 20,000, this is a clear case of oversubscription. In practice the company would allot only 20,000 shares (using pro-rata allotment, rejection of some applications, or a combination) and refund or adjust the excess application money of the remaining 5,000 shares' worth.
✓Final answerThis is Oversubscription, since applications (25,000 shares) exceeded the 20,000 shares actually offered by the company.
- CBSE 2024Set ANNUAL1 markMCQQ.Application money cannot be less than ............................. of the nominal value of shares.(a) 5%.(b) 10%.(c) 15%.(d) 20%.
›Reveal solutionSolution
Application money cannot be less than 5% of the nominal value of shares — option (a).
Under Section 39 of the Companies Act, 2013, the amount payable on application for every share shall not be less than 5% of the nominal (face) value of the share (or such other percentage as SEBI may specify for listed issues). This ensures a minimum commitment from applicants.
- 10%, 15% and 20% are not the statutory minimum prescribed by the Act.
Hence the correct minimum is 5%. This is a standard WBCHSE HS Accountancy company-accounts one-mark question, in line with the NCERT/CBSE share-capital curriculum.
✓Final answer(a) 5%.
- CBSE 2024Set ANNUAL1 markMCQQ.X Ltd. issued 10,000 ordinary shares of ₹ 10 each at a premium of 20%. All moneys were received on shares. The amount of Share Capital is(a) ₹ 1,00,000.(b) ₹ 1,20,000.(c) Both(a) and (b).(d) ₹ 80,000.
›Reveal solutionSolution
The amount of Share Capital is ₹1,00,000 — option (a).
Shares of ₹10 each issued at a 20% premium means an issue price of ₹12 (₹10 face + ₹2 premium). But Share Capital is always recorded at face value only:
Item Working Amount (₹) Share Capital 10,000 × 10 1,00,000 Securities Premium (shown separately) 10,000 × 2 20,000 Total money received 10,000 × 12 1,20,000 The premium of ₹20,000 is credited to Securities Premium A/c, not Share Capital. Hence Share Capital = ₹1,00,000.
✓Final answer(a) ₹1,00,000.
- CBSE 2024Set ANNUAL1 markMCQQ.Pro-rata allotment applies in the case of:- A) Over-subscription B) Minimum-subscription C) Under-subscription D) Equal-subscription
›Reveal solutionSolution
Pro-rata allotment is made to deal with over-subscription, allotting shares proportionately to applicants. Correct option: (A).
When the number of shares applied for exceeds the number offered (over-subscription), the company cannot allot to everyone in full. One method is pro-rata allotment, where every applicant is allotted shares in proportion to the number applied for, and excess application money is adjusted on allotment or refunded. Under-subscription or exact subscription needs no such proportionate scaling.
✓Final answer(A) Over-subscription
- CBSE 2024Set ANNUAL1 markQ.Preeti limited had invited application for ₹10,000 equity share of ₹10 each at a premium of ₹1 each. Total application money received at ₹4 per share of ₹45,600. State the numbers of application that are received.
›Reveal solutionSolution
Applications received = Total application money ÷ application money per share = 45,600 ÷ 4 = 11,400 shares.
The company invited applications for 10,000 shares; the application money was ₹4 per share and the total received was ₹45,600.
Step Working Amount Total application money — ₹45,600 Application money per share — ₹4 Number of shares applied for 45,600 ÷ 4 11,400 shares Since applications (11,400) exceed shares offered (10,000), the issue is over-subscribed.
✓Final answerNumber of applications (shares applied for) = 11,400 shares.
🎓Unlock everything free for 14 days
- ✓Full step-by-step solutions
- ✓Concept-first explanations
- ✓Methods, shortcuts & mistakes
- ✓PYQ mapping + timed mock tests
Full access for 14 days. No credit card required.