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Please explain me the entries of issuing shares with reasons

1. Bank a/c Dr.

To Equity Share Application A/c

Here bank a/c is debited beacuse cah is bank is asset and when asset increses we debit it but what is the rule behind crediting the Equity share application a/c and what is its nature?

Equity Share Application A/c Dr.

To Share Captial A/c

Here we are crediting Share capital a/c according to the rule credit increase in capital but what is the rule behind Debiting the Equity share application a/c ?

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2 Replies

Rahul Bansal (Finalist) (35929 Points)
Replied 21 January 2010

When the shares which were earlier issued at premium are reissued, and the share premium amount is not collected from the earlier shareholder, then this account is required to be debited.
When shares issued at premium are reissued and the share premium amount is already collected, then the share premium account need not be
After reissue of forfeited shares, for transferring the unutilised portion of share forfeiture account, this account is credited.
The amount of face value of share capital that is reserved for collecting at the time of winding up of a company is called:
After reissue of forfeited shares, the balance left over in the share forfeiture account is transferred to this account
When shares which were earlier issued at discount are reissued, then at the time of reissue, the discount account is
For transferring the excess application money to allotment in the case of over subscripttion this account is credited
At the time of forfeiture, for cancelling the calls in arrears, the calls in arrears account is requierd to be :
When forfeited shares are reissued at a discount, the amount of discount given should not exceed the amount
For the purpose of refunding the excess application money to the applicants, this account is credited.