Page 43 - IC26 LIFE INSURANCE FINANCE

Types of Shares

(i) Preference Shares : The persons holding preference shares are called preference
shareholders. They carry a preferential right over other shareholders to be paid first, in
case of winding up of the company. They enjoy preferential right in the matter of Payment
of Dividend and Repayment of Capital.

(ii) Equity Shares : Equity shares are those, which are not preference shares. These shares
rights.

Issue of Shares for cash : To issue shares, private companies depend upon Private Placement of
Shares’. Public companies issue a 'Prospectus' and invite general public to subscribe for shares.

Minimum Subscription : As per SEBI guidelines, company must receive a minimum of 90% subscription
against the entire issue. If the company failed to get minimum subscription the issue will be cancelled.

Subscription of Shares

(i) Full Subscription : Issue is fully subscribed if the number of shares offered for subscription
and the number of shares actually subscribed by the public are same.

(ii) Under Subscription: It means the number of shares offered for subscription is more than
tie of shares subscribed by, the public.

(iii) Over Subscription : It means the number of shares offered for subscriptions is less than the
shares subscribed by the public. In case of excess application, either it is rejected or pro-rata
allotment is done or both take place.

Journal Entries
(i) On refund of application money to application to whom Shares have not been allotted

Share Application A/c
To Bank A/c

(ii) When only a part of shares applied for allotted
Share Application A/c
To Share Allotment A/c
To Share Calls-In-Advance A/c

Shares issued at discount :The excess of nominal valure over the issue price represents discount issue
of shares. The government had specified that the rate of discount couldn 't be more than 10% nominal
value of shares. Accounting Treatment will be as follows:

Share Allotment A/c Dr

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