In this article we will solve some practical problems with solutions Questions & Answers with Numerical Examples of Issue of Shares in Corporate Accounting.
Issue of Shares
Issue of Shares is the process in which companies allot new shares to shareholders. Shareholders can be either individuals or corporates. The company follows the rules prescribed by Companies Act 2013 while issuing the shares. Issue of Prospectus, Receiving Applications, Allotment of Shares are three basic steps of the procedure of issuing the shares. The process of creating new shares is known as Allocation or allotment.
Practical Problems & Solutions
Practical Problems & Solutions
Questions 1: Issue of Shares at Par – Journal
Shipping Limited issued 10,000 equity shares of $25 each, payable $5 on application, $10 on allotment, and $10 on first and final call.
All the shares are subscribed and the amount duly received. Pass the journal entries.
Solutions
Journal Entries
Questions & Answers with Numerical Examples
Practical problems with solutions Questions & Answers with Numerical Examples of Issue of Shares in Corporate Accounting.
Question 2: Issue of Shares at Par – Journal and Cash Book
M Limited issued 10,000 equity shares of $10 each payable as to:
- $2 per share on application
- $5 per share on allotment
- $3 per share on first and final call
All money was duly received. Show the necessary journal and cash book entries to record the above transactions.
Solution
Journal Entries
Cash Book
Note: In actual practice, cash transactions are not jounalized but are passed through a cash book (bank column).
Journal entries are passed only in respect of other transactions. It is also common practice to pass separate entries for equity shares and preference shares.
Question 3: Issue of Shares at Par – Journal, Cash Book, and Balance Sheet
Practical problems with solutions Questions & Answers with Numerical Examples of Issue of Shares in Corporate Accounting.
A limited company issued 25,000 ordinary shares of $25 each, payable $5 on application, $10 on allotment, and $5 each on subsequent calls.
20,000 shares were fully subscribed and money dully received.
You are required to prepare journal entries, a cash book, and a balance sheet for the company.
Solution
Journal Entries
Question 4: Issue of Two Classes of Shares at Par
Practical problems with solutions Questions & Answers with Numerical Examples of Issue of Shares in Corporate Accounting.
A company was registered with an authorized capital share of $2,500,000 divided into 10,000 preference shares of $100 each and 15,000 equity shares of $100 each.
Out of these, 4,000 preference shares and 8,500 equity shares were issued. These shares were payable as under:
Preference Shares | Equity Shares | |
On Application | 20 | 20 |
On Allotment | 30 | 40 |
On First Call | 50 | 40 |
All shares were paid in full. You are required to prepare the necessary journal entries, a cash book, and a balance sheet.
Solution
Journal Entries
Accounting Book – Download
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