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CS Executive · Corporate Accounting and Financial Management · Accounting for Share Capital

Under-subscription: Narmada Steels Ltd offered 1,00,000 equity shares of Rs 10 each but received applications for only 70,000 shares, and the minimum subscription was met. Which statement is correct about the accounting entries?

In an under-subscribed issue where minimum subscription is met, the company allots only the 70,000 shares applied for, so share capital is credited for those shares alone. The unsubscribed shares remain unissued authorised capital and create no calls in arrears, premium or reserve.

  1. AShares are issued only for 70,000 shares, and all share capital accounts reflect 70,000 shares allottedCorrect
  2. BShare capital is credited for 1,00,000 shares, with the unsubscribed portion shown as Calls in arrears
  3. CThe unsubscribed 30,000 shares are credited to Securities Premium
  4. DThe unsubscribed 30,000 shares are debited to Capital Reserve

Explanation

When an issue is under-subscribed and minimum subscription is met, the company allots only the shares actually applied for. Share capital is credited only for 70,000 shares, and unsubscribed shares do not appear as issued capital. They are neither calls in arrears nor premium nor reserve.

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