Financial Accounting, share issues, share applications, excess on applications, forfeiture of shares, reissue of shares

1. Journal Entries for
Issuing Shares
&
Forfeiture of Shares

2. Share Issues follow a logical Process
1. There is an application for shares
2. There is an allotment of shares
3. The allotment money becomes due
4. The allotment money arrives
5. The first call becomes due
6. The first call money arrives ….etc for any other calls

3. The Share Issue needs to be recognised
Dr Application
Dr Allotment
Dr Uncalled Shares
Cr Share Capital

4. 1. Application for Shares
• receipt the money received
Dr Bank
Cr. Application Acct.
2. Allot the Shares
Dr Bank
Cr Allotment Acct

5. 3. First Call becomes due
Dr First Call
Cr. Uncalled Share Capital
4. First Call money arrives
Dr. Bank
Cr. First Call

6. For any subsequent calls
- journal the call as it become due
Dr. XXX Call
Cr Uncalled Share Capital
- journal the money when it arrives
for the call
Dr Bank
Cr XXX Call

7. Remember:
The very first Journal Entry will
record
- the Application
- the Allotment
- All the calls
- To the Share Capital

8. What to do with an
over-subscription of
applications for shares

9. Excess money on application is
adjusted towards the sums due on
allotment
Dr Application Acct
Cr Share Allotment
Unless the excess applications are
rejected
Dr Application Acct
Cr Bank

10. What to do with
Forfeiture of Shares

11. Forfeiture of Shares – the Steps
1. Make adjustment to Call
2. Make an adjustment to the Share
Capital
3. Shut Call in arrears

12. 1. Adjustment to Call
Dr. Call in Arrears
Cr Call
2. Adjust Share Capital
Dr Share Capital
Cr Forfeiture Reserve Capital
3. Shut Call in arrears
Dr. Forfeiture Reserve Capital
Cr Calls in Arrears

13. You Still have to reissue the shares
1. Make an entry for reissue of share
capital
2. Move the money from the forfeiture
reserve account to reissue
3. Reissue the shares
4. Refund any funds

14. 1. Reissue the Shares
Dr. Reissue
Cr Share Capital
2. Close the Forfeiture Reserve Acct
Dr Forfeiture Reserve Acct
Cr Reissue
3. Reissue shares at new price
Dr Bank
Cr Reissue
4. Refund any money left over
Dr Reissue
Cr Bank

15. The End
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