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Corporate Accounting
accounts (ACC098)
KLE University
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ACCOUNTING ENTRIES RELATING TO UNDERWRITING OF SHARES
AND DEBENTURES
Debit Credit 1 If shares or debentures are issued at par Underwriter’s Account Dr To share capital or debentures A/c (with nominal value of shares allotted to him)
XXX
XXX
2 If shares or debentures are issued at premium Underwriter’s Account Dr To share capital or debentures A/c To Shares or debentures premium A/c (with the capital amount and premium allotted to underwriter)
XXX
XXX
XXX
3 If shares or debentures are issued at discount Underwriter’s Account Dr Discount on issue of shares or debentures A/c Dr To share capital or debentures Account (with shares are issued at discount i. Net price with discount)
XXX
XXX
4 When underwriting commission due to underwriter Commission (shares or debentures) Dr To Underwriter Account (with the commission on shares o debentures)
XXX
XXX
5 If the final balance due from underwriter to the company Bank Account Dr To underwriter Account (with the final balance received from underwriter)
XXX
XXX
6 If the final balance is due from the company to the underwriter Underwriter’s Account Dr To Bank Account (with the amount paid in cash)
XXX
XXX
Uday N
- ABC Company issued applications or 36,000 of equity shares of 100 each. ₹ The issue was fully underwritten by X,Y and Z equally. Applications were received for 32,000 shares out of which marked applications were as follows. A: 12, B: 8, C: 6, Determine liability of X,Y and Z and pass journal entries commission 5%
Calculations of unmarked applications.
Total Applications Received 32,
Marked Applications 26,
6,
Particulars X Y Z Gross liability 12,000 12,000 12, Less: Unmarked applications 2,000 2,000 2, (Gross Liability Ratio 1:1:1) 10,000 10,000 10, Less Marked Applications 12,000 8,000 6, Surplus of X distributed to Y, Z (2,000) 2,000 4, In gross Liability (1:1) 2,000 1,000 1, Net Liability - 1,000 3,
Calculations of Commission:
X – 12000 × 100 = 12,00,000 × 5% = 60,
Y – 12000 × 100 = 12,00,000 × 5% = 60,
Z – 12000 × 100 = 12,00,000 × 5% = 60,
Solution:
Uday N
- A company issue 50,000 shares of 10 each at par. The whole issue has been ₹ underwritten by X & Co a commission of 4%. The company received applications only for 47,000 shares. All the applications were accepted. Give the journal entries to record the above transactions.
Particulars Amount Amount Bank Account Dr. TO equity Share Capital A/c (Being applications money of 47000 shares @ 10, each received)
4,70,
4,70,
X & Co. A/c Dr. To Equity Share Capital A/c (Being the allotment of 3000 shares of 10 each not taken up by the public)
30,
30,
Commissions on issue of shares A/c Dr. To X and Co. A/c (Being commission due to X & Co. @ 4% on 50000 Shares of 10 each)
20,
20,
Bank A/c Dr. To X & Co. (Being balance due from X and Co. Received
10,
10,
Uday N
3. A company issued 10,000 Equity shares of 100 each at par & 500 ₹ debentures of 1000 each at 950. The whole of the issue been ₹ ₹ underwritten by P. Jones & Co. for a commission of 4% on shares &2% on debentures [ Nominal Value]. The whole of the shares were applied for but applications for 400 debentures were received. All the applications were accepted. Give the journal entries to record the above transactions assuming that all amounts due have been received.
Bank Account (10000` X 100) Dr To Equity Share Capital A/c (Being issue of 10,000 Equity shares of 100 Each for cash)₹
10,00,
0 10,00,
Bank Account (400 X 950) Dr Discount on issue of debentures Account (400 X 50) Dr To Debentures Account (Being 400 debentures of 1000 each issued to the public for ₹ cash at a discount of 50 per debentures)₹
3,80,
20,
4,00,
P. Jones & Co. Account (100 X 950) Dr Discount on issue of debentures account (100 X 50) Dr To Debentures Account (Being the issue of 100 debentures of 1,000 each at a discount ₹ of 50 per debentures to the underwriter) ₹
95,
5,
1,00,
Commission on issue of shares A/c (10,00,000 X 4%) Dr Commission on issue of debentures A/c (5,00,000 X 2%) Dr To P. Jones & Co. Account (Being underwriting due to underwriters)
40,
10,
50,
Bank Account (95,000-50,000) Dr To P. Jones & Co. Account (Being the net amount due from underwriters received)
45,
45,
Uday N
Uday N
Corporate Accounting
Course: accounts (ACC098)
University: KLE University
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