Page 28 - Ebook Financial Accounting 3

2.3.2 Pay by instalments

This method not commonly practised in Malaysia and is more complex than if the
shares were payable in full on application. The amount and time interval between instalments

are governed by the company’s constitution. The share price is collected in the following steps:

a) Application

➢ The applicants are required to pay a part of the issue price when the apply for
the shares. Applicants are not shareholders of the company.

b) Allotment

➢ No allotment is made unless the sum payable on application for the shares so

subscribed has been received by the company.
➢ On the allotment date the shares are allotted to successful applicants and the

applicants become shareholders.
➢ Successful applicants who are allotted the shares will be required to pay the

balance of the issue price.
➢ When a company makes a pro-rata allotment, it allots shares to all

applicants, but the number of shares allotted is less than the shares applied for.

For example, applicant applied for 10,000 shares, he may only get 8,000
shares.

c) Call

➢ When further funds are required, the directors may issue a ‘letter of call’ on

the shares that are not fully called up.
➢ Calls in advance

✓ Some shareholders may pay for their shares before the call is made.
✓ The money received is treated as a loan to the company.

✓ It cannot be credited to share capital account yet as the company has

not called for the payment.
➢ Calls in arrears

✓ Some shareholders may fail to pay the sum due on call(s).
✓ In financial statement it is shown as a deduction from the issued capital

or as a debt.

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