Question 1: Issue of Shares at Par – Journal

Shipping Limited issued 10,000 equity shares of $25 each, payable $5 on application, $10 on allotment, and $10 on first and final call. All the shares are subscribed and the amount duly received. Pass the journal entries.


Journal Entries

Shipping Limited Journal Entries

Question 2: Issue of Shares at Par – Journal and Cash Book

M Limited issued 10,000 equity shares of $10 each payable as to:

  • $2 per share on application
  • $5 per share on allotment
  • $3 per share on first and final call

All money was duly received. Show the necessary journal and cash book entries to record the above transactions.


Journal Entries

M Limited Journal Entries

Cash Book

M Limited Cash Book
Note: In actual practice, cash transactions are not jounalized but are passed through a cash book (bank column). Journal entries are passed only in respect of other transactions. It is also common practice to pass separate entries for equity shares and preference shares.

Question 3: Issue of Shares at Par – Journal, Cash Book, and Balance Sheet

A limited company issued 25,000 ordinary shares of $25 each, payable $5 on application, $10 on allotment, and $5 each on subsequent calls. 20,000 shares were fully subscribed and money dully received.

You are required to prepare journal entries, a cash book, and a balance sheet for the company.


Journal Entries

Limited Company Journal Entries
Limited Company Accounts
Limited Company Balance Sheet

Question 4: Issue of Two Classes of Shares at Par

A company was registered with an authorized capital share of $2,500,000 divided into 10,000 preference shares of $100 each and 15,000 equity shares of $100 each.

Out of these, 4,000 preference shares and 8,500 equity shares were issued. These shares were payable as under:

Preference Shares Equity Shares
On Application 20 20
On Allotment 30 40
On First Call 50 40

All shares were paid in full. You are required to prepare the necessary journal entries, a cash book, and a balance sheet.


Journal Entries


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Frequently Asked Questions

What is the difference between an issue of shares and the allotment of shares?

Generally, allotment of shares (or capitalization) means the issuance of stock certificates to the new shareholders. On the other hand, an issue of shares simply means recording on the account ledger that a specific number of equity or preference shares have been issued to a new shareholder.

How do you record shares issued in accounting?

You can record the issue of shares by debiting your opening balance "capital work-in-progress" account and crediting it to your opening 'paid-up capital' account.

What is the issue of shares sums?

Issue of shares sums is the total amount a company receives from shareholders when shares are issued.

How would you record the issue of shares in the stock book?

You can record the issue of shares in the stock book by giving an opening balance as 'capital work-in-progress'.

What are the limitations of the issue of shares?

The limitations of the issue of shares are; shares must be issued for consideration otherwise it would be recorded as an expense, the maximum number of shares that can be allotted to one person or group should not exceed 10% while the minimum number should not be less than 1%, etc.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

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