Over Subscription

When an issue of debentures receives applications for more debentures than the company offered, it is called over subscription. A company cannot allot more debentures than it invited for subscription. The excess money received can be handled in two ways:

• Adjusted against future calls (allotment or instalments) for applicants who receive a partial allotment.
• Refunded to applicants who are rejected entirely.

The accounting treatment must record the full application money received, then transfer the correct amount to the Debentures account, adjust excess against allotment, and refund the balance.

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Key Points to Remember

• The Debenture Application A/c is a temporary account. It is fully closed after transferring the correct amount to Debentures A/c, adjusting excess against allotment, and refunding the balance.
• The Debenture Allotment A/c is credited with the excess application money adjusted. This reduces the actual cash to be collected on allotment.
• Rejected applicants get their money back immediately. The company cannot keep any money from rejected applications. …