Possibilities after Issuing Shares: Oversubscription, Forfeiture, and Accounting Entries

The video tutorial covers the process of issuing shares, including understanding authorized, issued, and applied shares. It explains oversubscription and the options available to companies, such as rejecting applications or allotting shares on a pro-rata basis. The tutorial also details the journal entries required for share transactions, handling calls, discounts, and forfeiture of shares. Finally, it discusses the reissue of shares and how to present these transactions in the balance sheet, providing tips for accurate accounting.

What is the maximum number of shares that Ria and Company can issue?

• 12,000 shares

• 10,000 shares

• 9,200 shares

• 6,000 shares

What does oversubscription of shares mean?

• The public applied for more shares than offered

• The shares were issued at a higher price than face value

• The company issued more shares than authorized

• The company received fewer applications than shares issued

Which option is NOT available to a company during oversubscription?

• Accept on a pro-rata basis

• Reject applications and refund money

• Accept all applications without any adjustments

• Use a combination of rejection and pro-rata acceptance

How many shares were fully allotted to shareholders in Lot A?

• 4,000 shares

• 5,000 shares

• 6,000 shares

• 2,000 shares

What is the first step in recording journal entries for share applications?

• Record receipt of share applications

• Refund rejected share applications

• Adjust excess application money

• Transfer application amount to share capital

How is the excess application money adjusted in the case of pro-rata allotment?

• It is used for future share issues

• It is transferred to the capital reserve

• It is adjusted against allotment money

• It is refunded to the applicants

What happens if a shareholder fails to pay the first call?

• The shares are sold at a discount

• The shares are automatically transferred

• The shares are forfeited

• The shareholder is given an extension

What is the purpose of the discount account in share issuance?

• To track the number of shares issued

• To account for the discount given on shares

• To adjust the face value of shares

• To record the premium received

When reissuing forfeited shares at a premium, what is the first step?

• Adjust the premium in the share capital

• Record the reissue in the bank account

• Transfer the amount to the capital reserve

• Refund the original shareholder

What should be checked before moving to the next step in accounting?

• The debit and credit effects

• The balance sheet totals

• The amount of premium received

• The number of shares issued