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    a7085302's Avatar
    a7085302 Posts: 2, Reputation: 1
    New Member

    May 30, 2007, 03:09 AM
    Shares applied for and shares alloted
    I am a bit confused - the following is a question in my assignment:

    Xx Ltd was registered on 1 Jan with a capital of R80 000, divided into 10 000 5% preff shares @ R2.00 each, and 30 000 ordinary shares of R2.00 each. Preff shares were fully subscribed and duly allotted, but only 25 000 ordinary shares were applied for and duly allotted.
    Dividend on the Preff shares was paid on 30 June & 31 December.
    Directors declared a dividend of 15 cent per share on the ordinary shares in December.
    Show the entries in the journal.

    I thought shares will only be allotted if all the applied for shares were paid for.

    My journals:
    Application and allotment acc cr 70 000
    Bank dr 70 000

    Preff shares cr 20 000
    Ordinary shares cr 50 000
    Application and allotment acc dr 70 000

    Journal in Dec:
    Dividends declared dr
    Dividends payable cr

    Is this correct?
    Many many thanks
    omsailogistic's Avatar
    omsailogistic Posts: 39, Reputation: -1
    Junior Member

    May 31, 2007, 01:56 PM
    first of all I am not able to understand why you are writing Debit entries below and credit entries above... THE CORRECT FORMAT IS TO PUT DEBIT ENTRIES AT ABOVE AND CREDIT ENTRIES AT BELOW...

    1 UNDERSTAND the concept of application and allotment of shares...


    (I) the company makes an advertisement for allotment of shares... NO ENTRY
    (ii) the company receives application money based on applications
    made by the subscribers Entry required
    (iii) if oversubscribed, application money is to be refunded back Entry required
    (iv) Actual allotment of shares... if some money is paid for allotment Entry required
    (v) first call/second/final call... if money is raised Entry required

    But in your case, its all over in one entry that is "application and allotment" that is fine
    the correct procedure is as follows

    1 jan Bank a/c dr 70000
    To share application and allotment a/c 70000
    ( Being amt received from applicants)
    1 jan share application and allotment a/c dr 70000
    To Ordinary Shares 50000
    To 5 % PREF shares 20000
    (Being share are allotted to applicants)

    30 jun Pref Dividend Dr 500
    To Dividend Payable 500
    ( Being payable entry made for pref dividends)
    30 Jun Dividend Payable Dr 500
    To Bank 500
    ( Being dividend paid by cash / warrants )
    calculations: 20000 * 2.5 % ( for 6 months)
    31 Dec

    31 DEC Dividends Dr 7500
    To Proposed Dividend 7500
    ( Being dividends are declared in an AGM)
    calculations: 50000 * 15 %
    ---------- ----------
    149500 149500
    ====== ======

    the above amount is also includes the dividends of Dec on pref shares

    I hope this will help you
    bye :-)
    a7085302's Avatar
    a7085302 Posts: 2, Reputation: 1
    New Member

    Jun 5, 2007, 02:14 AM
    Hi there
    Thank you for helping me & a Big thanks for explaining the concept of allocation and allotment!

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