Share Issue Example
The directors of Alpine Ltd meet on 1 April 2012
and resolve to issue 10,000 shares to the
general public with a value of $2 per share
deemed to be fair and reasonable at that time.
Applications close on 2 May 2012, fully
subscribed. The shares are issued on 6 May.
2
Application for shares
 Money must be held in trust, separate from the
general ledger of the issuer (Alpine)
 Journal in Trust’s records:
2012
May 2
Dr
20,000
Cr
Bank
Alpine trust account
20,000
Monies held in trust for Alpine’s share
application
3
Transfer from Trust Account
 On date of issue monies are transferred from
the trust to the issuer and the receipt is
recorded against the issue of the share capital
 Journal in Trustee’s books:
2012
May 6
Dr
20,000
Cr
Alpine trust account
Bank
20,000
Payment of share application monies to
Alpine
4
Share issue
 Journal in Alpine’s books:
2012
May 6
Dr
20,000
Cr
Bank
Issued capital
20,000
Issue of 10,000 shares paid to $2 per
share, as per Directors’ Resolution No. X
5
Partly Paid Shares - Example
The directors of Alpine Ltd meet on 1 April 2012
and resolve to issue 10,000 shares with a value
of $2 per share deemed to be fair and
reasonable at that time. $1.50 per share is to be
paid on application and applications close on 2
May 2010, fully subscribed. The shares are
issued on 6 May 2012. The remaining 50c per
share will be paid at some later, unspecified,
date.
6
Application for shares
 Money goes into a Trust account
 Journal recorded by the trust:
2012
Dr
Cr
May 2 Bank
15,000
Alpine trust account
15,000
Monies held in trust for Alpine’s share
application
7
Transfer from Trust Account
 Journal in Trust’s records:
2012
May 6
Dr
15,000
Cr
Alpine trust account
Bank
15,000
Payment of share application monies to
Alpine
8
Share issue
 Journal in Alpine’s books:
2012
May 6
Dr
15,000
Cr
Bank
Issued Capital
15,000
Issue of 10,000 shares paid to $1.50 per
share, as per Directors’ Resolution No. X
9
Payment of balance
 When the date is set for the payment of the
remainder this is recorded as a Receivable by
Alpine
 Journal:
2012
Date
Dr
5,000
Cr
Equity Receivable
Issued Capital
5,000
Call on 10,000 shares @ 50c/share
10
Oversubscription Example
The directors of Alpine Ltd meet on 1 April 2012
and resolve to issue 10,000 shares with a value
of $2 per share deemed to be fair and
reasonable at that time. $2 per share is to be
paid on application and applications, closing on 2
May 2012, were for 11,000 shares. The shares
are issued on 6 May 2012.
11
Approaches to oversubscription
1. Satisfy the demand of a certain number of
subscribers and refund the funds advanced by
others; or
2. Issues shares to all subscribers on a pro rata
basis, refunding excess monies (or reducing
further monies owing on allotment)
12
Pro-rata issue
 Money received on application for 11,000
shares at $2 each goes into a Trust account
 Journal in trust’s records:
2012
May 2
Dr
Bank
Alpine trust account
Cr
22,000
22,000
Monies held in trust for Alpine’s share
application
13
Transfer from Trust Account
 Only the money related to the successful share
applicants is paid to Alpine.
 Journal in the books of the trustee:
2012
May 6
Dr
20,000
Cr
Alpine trust account
Bank
20,000
Pay the application monies of the
successful applicants to Alpine
14
Share issue
 For every 11 shares applied for, only 10 are
issued .
 Journal in Alpine’s books:
2012
May 6
Dr
20,000
Cr
Bank
Issued Capital
20,000
Issue of 10,000 shares paid to $2 per
share, as per Directors’ Resolution No. X
15
Surplus refunded
 Surplus application money is refunded by the
trustees to applicants because of
oversubscription
 Journal in trust’s records:
2012
Date
Dr
2,000
Cr
Alpine trust account
Bank
2,000
Refund of surplus on share application
16
Share splits
 Subdivision of the company’s shares into shares
of smaller value
 Undertaken because it is felt that a company’s
shares will be more marketable at a smaller
value
 There is no change to owner’s equity
 No journal entries required
 Company must amend share register
17
Bonus Issues
 Existing shareholders receive additional shares at no cost, in
proportion to their shareholding at the date of the bonus issue
 Bonus issues come from retained earnings or general
reserves unless there is no present cash value
 Example – a company has a share capital of 300,000 and
makes a 1 for 10 bonus issue at $1/share
 Journal:
Date
Dr
General reserves
Share capital
Cr
30,000
30,000
Bonus issue of 30,000 shares from general reserves
18