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Chapter 12
2.2 Rights issue
A rights issue is an offer by the company to issue shares to current shareholders on
a pro-rata basis in relation to their existing shareholding. A rights issue is normally
made at less than market value in order to encourage shareholders to take up the
share issue.
A rights issue is very similar to an issue at market price. This means that the
accounting entries will be the same, with entries made in the share capital and share
premium accounts.
The accounting entries to record the share issue would therefore be:
Debit Bank account (issue price × no. of shares)
Credit Share capital account (nominal value × no. of shares)
Credit Share premium account (premium raised × no. of shares)
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