Page 25 - Ebook Financial Accounting 3

2.3 Procedure of Issuance of Equity Shares

A company may allow the applicants for issue of equity shares to pay for the shares

either one of the methods below:
a. Pay the full amount of the share capital upon application

b. Pay by means of instalments (not common practice in Malaysia)

2.3.1 Pay the full amount

Under the payment in full method applicants are required to pay full amount of the issue
price upon application. If the applicants are partly or fully unsuccessful, the full amount of the

money in relation to the unsuccessful application for shares will be refunded to them.
Successful applicants are then known as shareholders.

➢ Journal entries for full payment:

Item Dr Cr

Bank XXX
Application XXX

(Amount received on application)

Application XXX

Share Capital XXX

(Application money transferred to share capital)

➢ Journal entries for the money refunded:

Item Dr Cr
Application XXX

Bank XXX

(Refund to unsuccessful applicants)

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