Company Accounts

Share Capital

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common

In the case of under subscription of shares.

Shares are allotted only when the company receives the subscription and application money on minimum subscription as stated in the prospectus.

Shares are allotted to all applicants without considering anything.

All the issued shares are allotted to all applicants proportionally.

The Issue Is Closed And Application Money Is Refunded.

✅ Correct Option: 1

Under subscription occurs when the number of shares applied for is less than the number of shares offered to the public.

As per the Companies Act, 2013, a company must receive minimum subscription (as stated in the prospectus) before proceeding with any allotment of shares. The minimum subscription is the minimum amount that the Board of Directors believes must be raised to meet the company's stated requirements.

In case of under subscription, two scenarios arise:

If minimum subscription is received: The company can proceed with allotment to all applicants who have applied. All applicants will receive the full number of shares they applied for since the demand is less than supply.

If minimum subscription is NOT received: The company cannot proceed with allotment. The application money must be refunded to all applicants within a specified period (typically 30 days from the issue closing date). Failure to refund results in payment of interest at the prescribed rate.

Option 1 is correct because it accurately captures the legal requirement that allotment can only proceed when minimum subscription (as stated in the prospectus) is received along with the application money.

Option 4 would only be correct if it specified "when minimum subscription is not received" - without this condition, it is incomplete and misleading as it suggests all under subscriptions result in refund, which is not true.

2022: 20 July Shift 1

PQR Ltd. issued 40,000 Equity shares of Rs. 10 each at par payable Rs. 3 on application, Rs. 4 on allotment and balance on first and final call. Applications were received for 1,10,000 shares. Applications for 20,000 shares were refused and allotment was made prorata to remaining applicants. Amount received on allotment is :

2025: 31 May Shift 1

When journal entry for forfeiture of shares is recorded in the Company's books, the Share Capital Account -

2023: 20 June Shift 2

When a company reserve a portion of its uncalled capital to be called in the event of winding up, such uncalled capital is known as:-

2025: 4 June Shift 2

Ashoka Limited Company, which had issued equity shares of Rs.20 each at a premium of Rs. 4 per share, forfeited 1,000 shares for non-payment of final call of Rs.2 per share. 400 of the forfeited shares were reissued at Rs.14 per share out of the remaining shares of 200 shares reissued at Rs.20 per share. Balance of Share Forfeiture Account after reissue of shares will be:

2026: 12 May Shift 1

A company forfeits 200 shares of Rs. 10 each on which Rs. 600 had been received. It can allow a maximum discount of Rs. 600 on their reissue. Assuming that the company reissues these shares for Rs. 1,800 as fully paid up. What will be the journal entry for the treatment of remaining forfeited amount after adjustment of discount ?

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Share Forfeiture A/c Dr.		400
	To Capital Reserve A/c			400

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Capital Reserve A/c Dr.		400
	To Share Forfeiture A/c			400

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Share Forfeiture A/c Dr.		200
	To Capital Reserve A/c			200

Date	Particulars	L.F.	Dr. Amount	Cr. Amount
	Capital Reserve A/c Dr.		200
	To Share Forfeiture A/c			200

2026: 23 May Shift 2

Select the correct statements with regard to accounting for Share Capital from the following:

A. Provisions of 'Table F' authorise the directors to forfeit the shares.

B. The maximum number of members in a private company is 200.

C. The minimum subscription of capital can not be less than 10% of issued capital.

D. Subscribed capital is also called nominal capital.

Choose the correct answer from the options given below:

In the case of under subscription of shares.

Solution

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