The share application account indicates the money received by shareholders in exchange for shares in the company. The share application account is debited when money is due and credited when paid. It works on the golden rule of accounting i.e. giver is credited and the receiver is debited.
In allotment of shares, A/c is debited and A/c is credited, for receipt of allotment amount.
This is because, you have a system called as Dual aspect- for every debit, there is a corresponding credit. The Dual aspect concept will balance the balance sheet equation. Here, Share application money is transferred to bank- assets increase by 1000₹.
Unless shares are allotted by the company, the receipt of applications is simply an offer and cannot be credited to Share Capital A/c. The applicants are treated as creditors of company.
Share application money represents an investment that has come in to a co without corresponding shares being issued to investors, & can be reversed. … Share application money represents an investment that has come in to a company without corresponding shares being issued to investors, and can thus be reversed.
A debit to a capital account means the business doesn’t owe so much to its owners (i.e. reduces the business’s capital), and a credit to a capital account means the business owes more to its owners (i.e. increases the business’s capital).
Issuer company allows its securities in a span of 60 days from the date of receiving the application money for such securities and if the company is not able to allot securities within the given time, it has to refund the application money to the subscribers within 15 days after the completion of sixty days.
In allotment of shares, for transfer of application money, A/c is debited and A/c is credited.
Share application monies are converted to equity capital of an entity after allotment of shares to qualifying applicants. This means that the share application money becomes equity after the completion of the allotment process.
Share capital is separate from other types of equity accounts. As the name “additional paid-in capital” indicates, this equity account refers only to the amount “paid-in” by investors and shareholders, and is the difference between the par value of a stock and the price that investors actually paid for it.
Section 42(5) mandates acceptance of share application money in the form of a cheque, draft or any other banking channel. Section 42(6) mandates allotment of shares within 60 days of receipt of share application money and if it is not allotted, money shall be refunded within 15 days.
Can application money be deposited in any bank?
Further, in the case of share application money, the companies cannot deal with it in the manner they like. Section 69(4) of the Companies Act, 1956 provides that the application money received is to be deposited and kept deposited in a scheduled bank until the time specified in sub-section (4) of section 69.
An allotment mail will be sent on the registered email id on the day of allotment or day prior to listing. Shares will be credited in the demat account number mentioned on the application form.
How is application money refunded?
(1) If the stated minimum amount has not been subscribed and the sum payable on application is not received within the period specified therein, then the application money shall be repaid within a period of fifteen days from the closure of the issue and if any such money is not so repaid within such period, the …