Q.Read the following case study and answer the questions
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🔒 Start your 14-day free trial to unlock the full solution →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 |
Applications exceeded the 80,000 shares offered by 50%, i.e. total applications = 1,20,000; pro-rata was applied to 1,00,000 of these applications in the ratio 80,000:1,00,000 (4:5), from which Alex's and Lenin's figures can be derived.
…
(i) 1,20,000 applications received. (ii) Pro-rata ratio = 4 : 5. (iii) Alex applied for 20,000 shares. (iv) Lenin was allotted 41,600 shares.
(i) Total applications received: Shares offered = 80,000. Applications were received in excess of 50% of the shares offered, i.e. total application = 80,000 + 50% of 80,000 = 80,000 + 40,000 = 1,20,000 shares.
(ii) Pro-rata ratio: Pro-rata allotment was made against applications of 1,00,000 shares (the remaining 20,000 shares' applications having been fully rejected/sent letters of regret), for the 80,000 shares offered:
Pro-rata ratio = Shares allotted : Shares applied (in this category) = 80,000 : 1,00,000 = 4 : 5
(i.e., for every 5 shares applied for, 4 shares were allotted.)
(iii) Alex's application: Alex was allotted 16,000 shares under the pro-rata ratio of 4:5.
…
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 th …
- 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 classific …
- 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
…
- 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 - 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 - 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 cal …
- 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 - 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 … - 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.
…
- 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 - 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 …
- 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
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