Journal Entries forIssuing Shares

&Forfeiture of

Shares

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

The Share Issue needs to be recognised

Dr ApplicationDr AllotmentDr Uncalled Shares

Cr Share Capital

1. Application for Shares• receipt the money received

Dr BankCr. Application Acct.

2. Allot the Shares

Dr Bank Cr Allotment Acct

3. First Call becomes due

Dr First CallCr. Uncalled Share Capital

4. First Call money arrives

Dr. BankCr. First Call

For any subsequent calls- journal the call as it

become dueDr. XXX Call

Cr Uncalled Share Capital

- journal the money when it arrives for the call

Dr BankCr XXX Call

Remember:

The very first Journal Entry will record - the Application - the Allotment- All the calls

- To the Share Capital

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

Excess money on application is adjusted towards the sums due on allotment

Dr Application AcctCr Share Allotment

Unless the excess applications are rejected Dr Application Acct

Cr Bank

What to do with Forfeiture of Shares

Forfeiture of Shares – the Steps

1. Make adjustment to Call

2. Make an adjustment to the Share Capital

3. Shut Call in arrears

1. Adjustment to CallDr. Call in Arrears

Cr Call

2. Adjust Share CapitalDr Share Capital

Cr Forfeiture Reserve Capital

3. Shut Call in arrearsDr. Forfeiture Reserve Capital

Cr Calls in Arrears

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 shares4. Refund any funds

1. Reissue the SharesDr. Reissue

Cr Share Capital

2. Close the Forfeiture Reserve AcctDr Forfeiture Reserve Acct

Cr Reissue

3. Reissue shares at new priceDr Bank

Cr Reissue

4. Refund any money left overDr Reissue

Cr Bank

The End