Mashal Institute of Higher Education Financial Reporting and Analysis



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Mashal Institute of Higher Education


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Financial Reporting and Analysis

Source person: Kamran Khan

M.Com, B.Com, D.Com………..

Lecturer at Mashal Institute of Higher Education

Mashal institute of Higher Education, Chara-e-zanbaq, opposite to Iran Embassy, Kabul

Chapter No. 01

Company Accounts and Financial Reporting




Chapter No. 01 Company Accounts and Financial Reporting

Topic- Accounting and reporting issue of shares

Shares can be issued:



  1. At par

  2. At premium

  3. At discount




  1. Accounting and reporting issue of shares at par

When we advertise the sale of shares, interested investors will apply for ownership by depositing the cash into the bank for the number of shares he or she is interested to purchase. The General Journal entry for the receipt of cash is.
Cash at bank---------Dr.

Shares application------Cr.



(Cash received from application)
After the receipt of investors applications, if it is under or full subscription, then ownership is given to all applicants. This process is called allotment and their applications are converted into ownership.

The General Journal entry is.


Share application-------Dr.

Share capital-----Cr.



(Ownership is given or allotment is given)
After giving ownership to interested investors or accepting their applications for ownership, now we will demand some more cash for their permanent ownership. This money is called allotment money. But before the receipt of cash, we will pass a projected entry that how much cash is receivable from them.

The General Journal entry is.


Share allotment----------Dr.

Share capital--------Cr.



(Allotment money due)
After passing this entry we will inform all the shareholders for the deposit of the cash into our bank account and if they deposit the full amount, The General Journal entry for the receipt of cash is.
Cash at bank---- Dr.

Share allotment---Cr.



(Allotment money received)

After receiving the allotment money, now the company will receive the cash into some more installments which can be only one, two, and three or four depends upon the company’s decision. If it is to be received in three installments, The General Journal entries are.


Share 1st call------Dr.

Share capital-------Cr.



(Share 1st call money due)
After passing this entry we will inform all the shareholders for the deposit of the cash into our bank account and if they deposit the full amount, The General Journal entry for the receipt of cash is.

Cash at bank----------Dr.

Share 1st call ---------Cr.

(Share 1st call money received)

After the receipt of the share 1st call money, now we will demand the 2nd call money from the owners. But before the receipt of cash, first we will calculate how much cash is receivable from the share 1st call. The General Journal entry is.

Share 2nd call --------Dr.

Share capital---------Cr.



(Share 2nd call money due)

After passing this entry we will inform all the shareholders for the deposit of the cash into our bank account and if they deposit the full amount, The General Journal entry for the receipt of cash is.

Cash at bank-----Dr.

Share 2nd call ------Cr.



(Share 2nd call money received)

After the receipt of the share 2nd call money, now we will demand the final call money from the owners. But before the receipt of cash, first we will calculate how much cash is receivable from the share final call. The General Journal entry is.

Share final call-----Dr.

Share capital-----Cr.



(Share final call money due)

After passing this entry we will inform all the shareholders for the deposit of the cash into our bank account and if they deposit the full amount, The General Journal entry for the receipt of cash is.

Cash at bank------Dr.

Share final call-------Cr.

(Share final call money received)

***------------------------------------------------------***

Now we will make some illustrations for the concept.

Concept-1 Full subscription

Accounting entries for under subscription.

ATC Co. issued 100 shares @10 each payable as follows:

Application $4

Allotment 2

1st call 2

2nd call 1

Final call 1

People applied for 100 shares. All the money due received in full.

Requirement: Pass the necessary General Journal entries.
Cash at bank---------Dr. 100*4 400

Shares application------Cr. 400



(Cash received from application)
Share application-------Dr. 400

Share capital-----Cr. 400



(Ownership is given or allotment is given)
Share allotment----------Dr. 100*2 200

Share capital--------Cr. 200



(Allotment money due)
Cash at bank---- Dr. 200

Share allotment---Cr. 200



(Allotment money received)

Share 1st call------Dr. 100*2 200

Share capital-------Cr. 200

(Share 1st call money due)

Cash at bank----------Dr. 100*2 200

Share 1st call ---------Cr. 200

(Share 1st call money received)

Share 2nd call --------Dr. 100*1 100

Share capital---------Cr. 100

(Share 2nd call money due)

Cash at bank-----Dr. 100

Share 2nd call ------Cr. 100

(Share 2nd call money received)

Share final call-----Dr. 100*1 100

Share capital-----Cr. 100

(Share final call money due)

Cash at bank------Dr. 100

Share final call-------Cr. 100

(Share final call money received)

Note: this kind of subscription is called full subscription. Where people apply exactly for the same number of shares we want to sell.

Concept-2 Under subscription

Accounting entries for under subscription.

BBD Co. issued 10 shares @10 each payable as follows:

Application $4

Allotment 2

1st call 2

2nd call 1

Final call 1

People applied for 08 shares. All the money due received in full.



Requirement: Pass the necessary General Journal entries.
Cash at bank---------Dr. 8*4 32

Shares application------Cr. 32



(Cash received from application)
Share application-------Dr. 32

Share capital-----Cr. 32



(Ownership is given or allotment is given)
Share allotment----------Dr. 8*2 16

Share capital--------Cr. 16



(Allotment money due)
Cash at bank---- Dr. 16

Share allotment---Cr. 16



(Allotment money received)

Share 1st call------Dr. 8*2 16

Share capital-------Cr. 16

(Share 1st call money due)

Cash at bank----------Dr. 8*2 16

Share 1st call ---------Cr. 16

(Share 1st call money received)

Share 2nd call --------Dr. 8*1 8

Share capital---------Cr. 8

(Share 2nd call money due)

Cash at bank-----Dr. 8

Share 2nd call ------Cr. 8

(Share 2nd call money received)

Share final call-----Dr. 8*1 8

Share capital-----Cr. 8

(Share final call money due)

Cash at bank------Dr. 8

Share final call-------Cr. 8

(Share final call money received)

Concept-3 Over Subscripton

Accounting entries for oversubscription

BBD Co. issued 10 shares @10 each payable as follows:

Application $4

Allotment 2

1st call 2

2nd call 1

Final call 1

People applied for 12 shares. Cash on extra shares is refunded. All the money due received in full.



Requirement: Pass the necessary General Journal entries.

Cash at bank---------Dr. 12*4 48

Shares application------Cr. 48

(Cash received from application)
Share application--------Dr. 2*4 8

Cash at bank---------Cr. 8



(Cash on extra shares refunded)
Share application-------Dr. 40

Share capital-----Cr. 40



(Ownership is given or allotment is given)
Share allotment----------Dr. 10*2 20

Share capital--------Cr. 20



(Allotment money due)
Cash at bank---- Dr. 20

Share allotment---Cr. 20



(Allotment money received)

Share 1st call------Dr. 10*2 20

Share capital-------Cr. 20

(Share 1st call money due)

Cash at bank----------Dr. 10*2 20

Share 1st call ---------Cr. 20

(Share 1st call money received)

Share 2nd call --------Dr. 10*1 10

Share capital---------Cr. 10

(Share 2nd call money due)

Cash at bank-----Dr. 10

Share 2nd call ------Cr. 10

(Share 2nd call money received)

Share final call-----Dr. 10*1 10

Share capital-----Cr. 10

(Share final call money due)

Cash at bank------Dr. 10

Share final call-------Cr. 10

(Share final call money received)

Topic: Issue of shares at premium

Premium means the money received which is more than the face value of the share. For exampel the face value of a share is $10 and we want to receive $12 from the investors.



Accounting treatments:

Share premium amount can be collected with application money as well as at the time of allotment.



  1. When premium amount is collected with application money.

BBD Co. issued 10 shares @10 each with a $2 premium per share payable as follows:

Application-including premium $4

Allotment 2

Final call 6

Public applied for 10 shares. All the money received.

Requirement: Pass the necessary Journal entries.

Cash at bank---------Dr. 10*4 40

Shares application------Cr. 40



(Cash received from application)
Share application-------Dr. 40

Share premium---Cr. 10*2 20

Share capital-----Cr. 10*2 20

(Ownership is given or allotment is given)
Share allotment----------Dr. 10*2 20

Share capital--------Cr. 20



(Allotment money due)
Cash at bank---- Dr. 20

Share allotment---Cr. 20



(Allotment money received)

Share final call-----Dr. 10*6 60

Share capital-----Cr. 60

(Share final call money due)

Cash at bank------Dr. 60

Share final call-------Cr. 60

(Share final call money received)


  1. When premium amount is collected at the time of allotment.

BBD Co. issued 10 shares @10 each with a $2 premium per share payable as follows:

Application $2

Allotment-including premium 4

Final call 6

Public applied for 10 shares. All the money received.

Requirement: Pass the necessary Journal entries.

Cash at bank---------Dr. 10*2 20

Shares application------Cr. 20



(Cash received from application)
Share application-------Dr. 10*2 20

Share capital-----Cr. 10*2 20



(Ownership is given or allotment is given)
Share allotment----------Dr. 10*4 40

Share premium---Cr. 10*2 20

Share capital--------Cr. 20

(Allotment money due)
Cash at bank---- Dr. 40

Share allotment---Cr. 40



(Allotment money received)

Share final call-----Dr. 10*6 60

Share capital-----Cr. 60

(Share final call money due)

Cash at bank------Dr. 60

Share final call-------Cr. 60

(Share final call money received)

Topic: Issue of share at discount

discount means a deducito in the price. Share discount means selling shares at a price which is less than the face value. For exampel the face value of a share is $10 and we want to receive $8 from the investors.

The accounting entry for discount is passed at the time of allotment.

Accounting treatments:

BBD Co. issued 10 shares @10 each with a $2 discount per share payable as follows:

Application $4

Allotment 2

Final call 3

Public applied for 10 shares. All the money received.

Requirement: Pass the necessary Journal entries.

Cash at bank---------Dr. 10*4 40

Shares application------Cr. 40

(Cash received from application)
Share application-------Dr. 10*4 40

Share capital-----Cr. 10*4 40



(Ownership is given or allotment is given)
Share allotment----------Dr. 10*2 20

Discount on issue of shares--Dr. 10* 1 10

Share capital--------Cr. 10*3 30

(Allotment money due)
Cash at bank---- Dr. 20

Share allotment---Cr. 20



(Allotment money received)

Share final call-----Dr. 10*3 30

Share capital-----Cr. 30

(Share final call money due)

Cash at bank------Dr. 30

Share final call-------Cr. 30

(Share final call money received)

Showing issue of shares in the financial reports



  1. To show the issue of shares at par in the financail statements

ATC Co. issued 10 shares @10 each payable as follows:

Application $4

Allotment 4

Final call 2

People applied for 10 shares. All the money due received in full.

Requirement: Pass the necessary General Journal entries.

Cash at bank---------Dr. 10*4 40

Shares application------Cr. 40



(Cash received from application)
Share application-------Dr. 10*4 40

Share capital-----Cr. 10*4 40



(Ownership is given or allotment is given)
Share allotment----------Dr. 10*4 40
Share capital--------Cr. 40

(Allotment money due)
Cash at bank---- Dr. 40

Share allotment---Cr. 40



(Allotment money received)

Share final call-----Dr. 10*2 20

Share capital-----Cr. 20

(Share final call money due)

Cash at bank------Dr. 20

Share final call-------Cr. 20

(Share final call money received)

Now, we will psot the journal entries to leder.



Dr Cash at bank

No. 1 Cr

1 share Appli 40

3 share allot 40



5 share final 20

Closing Bal.

100









































































 100

100




 Dr.

 Share

Application

No.

2

Cr.

2

Share

Capital 40

1

Bank

40







 
















 
















 










Closing

Balance

-0-
















 
















 40

40








 Dr.

Share

Capital

No.

3

Cr.

Closing

Balance

100

2

Share

Applications40










3

Share

Allotment 40










5

Share

Final call 20





























































100

100







Dr.

Share

Allotment

No4

Cr




3

Shre

Capital 40

4

Bank

40


























































Closing

Balance-0-

































40

40








 Dr.


 Final

cal

No

5

Cr.

5share

capital

20

6

bank

20







 
















 
















 










Closin

Balance

-0-
















 
















 20

20






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