30 August 2011
Sir, Please say me about in the simple meaning what is share application money & how is treated as in the accounts & how the money come to business?
Share Application Money is the money which a company receipts for issue of share of the company for a consideration. A company may issue its share at face value or above it.
Money receipts above the face value falls under the "Share premium account" and shown under the head share capital with separate heading share premium account.
Un-till allotment of the share, the amount receipt will be shown under heading "share application money"
Example: Money receipt from Mr. A for issue of 1000 Shares @ Rs 100 (Face value Rs 10 each share)
AT THE TIME OF MONEY RECEIPT: Cash/Bank A/c Dr Rs 100000 To Share Appl.Money A/c Rs 100000
UPON ALLOTMENT: Share Appl. Money A/c Dr Rs 100000 To Share Capital A/c Rs 10000 To Share Premium A/c Rs 90000
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