Lecture on Company Accounts: Issue of Shares

good day welcome to another session of fog accountancy tutorials today we are going to look at company accounts with a special emphasis on the issue of shares we're going to look at company accounts how they issue shares and how it is accounted for in the books of accounts but before we proceed i would want you to subscribe to the channel if you are here to subscribe please subscribe to the channel let us grow together and let us learn and be successful together okay so my focus is to teach you how to account for the issue of shares i'm not going to do much of the theory on company accounts i'll leave you to read on company account with a definition of the company the regulation the types formation of a company and what goes into all that and you can also look at maybe concerning the types let me just talk about a few of them before we can proceed to the accounting aspect we know that we have when it comes to companies companies are organizations that are much larger if you look at the characteristics of a company we look at limited liability as one of the key characteristics even though we have an unlimited company so we have company that is limited by chess we have companies that is limited by guarantee and also we can have an unlimited company which is usually not common but these are the three types of companies that you can have now you can also look at companies from another angle we can also look at it as a public company or a private company whichever way that you want to look at it from you have to study the characteristics of each of these types of companies so a company limited by shares company limited by guarantee and an unlimited company and then we have a public company and a private company now let me just throw some light into some of them a company itself is an organization that is formed to make profit usually from a pool of funds contributed by shareholders usually or more than you know the law usually permits one person to form a company so far as you can meet all the requirements however companies are usually not run by one person it's most of the time a pool of funds from two or more people that comes together to contribute money to run the business for profit now this is different from my partnership in a sense that there are a lot of things that are different in terms of nature from the company and the partnership i would want you to take time and read on that now when we say a company is a public company a public company has so many characteristics one of the key characteristics is that it is allowed to issue shares to the public and that is what we are going to do to account for how the issue shares so they are allowed to issue shares to the public for public to subscribe and become shareholders that is why they are public companies private companies do not issue shares to the public and therefore as a result usually they have limited number of shareholders in a company school of ghana and it's usually between 1 and 50 people minimum and maximum that can form a private company okay and usually they don't allow the transfer of shares to other people and then the issue of sales to the public the public company usually has a minimum of one and a maximum of infinity meaning that public companies sometimes depending on the size they can issue shares and people can subscribe us to a maximum number of shareholders that we cannot fix or determine up to infinity so it means that a public company can actually issue shares to as many shareholders as they want but sometimes they are limited by their regulations of each country where they operate so let us also take note of that so this is what we mean by the public and a private company as far as um we are concerned for this lesson and then we also have can look at them from this angle that it could be a company limited by shares guarantee or unlimited liability company now that is what i may do for now concerning the theory but then when i get to the accounting for issue of shares i'm now going to talk about the theory that relates to the issue of chess so let us take this for now and let us do our reading work on that and i'm sure that for the theoretical aspect of company accounts we will be able to get that it is a very broad topic when it comes to company accounts it has a lot of theory so take time and read that because it is examinable as part of the accounting work itself so please do that all right now we are looking at the accounting for issue of shares before we proceed let us define and share what is a share a share is the right to the ownership of a company it is the interest of the shareholder in the company and so when a company has shareholders their shareholders own shares the shares is what becomes their right to the ownership of a company now every company that is limited by shares will issue shares to the public especially if it's a public company public companies that are limited by shares have their legal mandate to issue shares to the public now what they do in ghana for example we are regulated by the company's quote as amended in 2019 act 992 now what the companies could sees for us and for most countries is that the company will have to register with the registrar general of companies now before the company comes into existence it will be registered with a registered general companies now the registrar of companies will also register the company giving them something that we call authorized share so that is what i'm going to begin with there are some theoretical aspects when it comes to this the authorized share authorized share you may see that as your authorized shared capital or authorized share now what is the meaning of the authorized say the authorized set is a total number of shares that the company has been registered with at the date of registration by the registrar general and so if you go and register your company xyz company limited for example and the registrar general allocates 200 000 shares two hundred thousand shares to you as a company these two hundred thousand shares becomes your authorized stress it means that you cannot issue shares to the public that exceeds this number of shares this is your maximum limit of uh to the number of shares you can issue to the public that is the meaning of your authorized share in other words you have been authorized to issue up to a maximum of 200 000 shares that is the meaning of the authorization and every registered company has their authorized share as stipulated in their memorandum or articles of association now with the authorized shared capital if you have the authorized shared to be 200 000 shares for example when you are issuing shares to the public i told you you cannot issue more than this but it can decide to issue less than that depending on the capital that you want to raise at that very point in time now take note that when shares are assigned to a company in a form of authorization it can come in two ways it's either that at the date of the registration of the shares by the registrar they can tell you that your shares value or your shares price is let's say five dollars per share so in other words these two hundred thousand ready registered shares you have been told that one is five dollars so when you are issuing the shares to the public you are going to sell to the public at five dollars per share that is the meaning now if this was done at the date of the registration when it was being authorized by the registrar general then we will say that these shares are power value shares so let me see that we have something we call power value chess and then shares of low power value now let me guess just get you the difference between the two now power value shares are shares which have value that attached on to them at the days of registration shares will have their values attached at the date of registration but there are some shares that when it's being registered for you by the registrar of companies they will not attach any values to it it means that at the date of issue the company itself will now assign values to the shares based on the market condition and the demand and supply factors and maybe the performance of the company so when the values are not attached to the shares at the date of registration then we call those shares that they are shares of no power value but when values are attached to them at the date of registration we call them shares of power value and so power values are said that has their values attached to them at a date of authorization on registration and then no power value shares our shares that do not have values attached to them at the date of registration so that is the difference between power value shares and no power value now let us also move away from authorized share capital to issued share issue chess or issue share capital now take note of something the i told you that when shares are being authorized and registered for the company it becomes the maximum number of shares they can issue but not the minimum it means that the companies can decide to issue less at a time so let us assume that the company decides that okay i'm now going to issue just uh 100 000 shares to the public okay now at whatever price they want to sell it that is not our focus for now our focus is that if you are authorized with 200 000 shares and you are issuing 100 000 to the public then it means that the portion of the share that you have issued which is this 100 000 becomes your issued share capital if you are issuing out 120 000 shares it means that you'll be left with 80 000 of your shares now take note the 120 000 shares that you are issuing out or inviting the public to come and buy and become shareholders becomes the issued share capital and the 80 000 that is left becomes your own issued or yet to be issued on issued share capital so that is the meaning of the issued share and the unissued the issued cell capital will be defined as the proportion of the authorized share capital which has been issued out to the public for them to subscribe to become shareholders and the on he should say is a portion of the authorized share capital which is yet to be issued out to the public and we do that as and when we need capital and so what is going to happen is that if you issue your 120 000 and it comes with a value you are going to operate with that money as capital for a long time let's say you want to expand the business and you need more shares okay you need more capital sorry you can issue more depending on the amount that you need to expand and you can issue you can decide to maybe issue 50 000 shares out of the 80. you'll be left with 30 on issued share as time goes on if you think you need you can go back and issue the 30 000 and that would be all you cannot issue any more shares to the public after that because you have used all your authorized share if you think that you need to issue some more shares to the public you would have to go back to the register registrar sorry you may have to go back you have to go back to the registrar of companies and then negotiate with a registrar and if the deal goes through an an agreement is reached and the registrar decides to extend or expand your share base or your authorized share capital fair enough but until you are approved by the registrar in the law you are not supposed to issue more than your authorized share capital that is the meaning of the on issue than they should say then that will also take us to subscribe share capita and then unsubscribed now subscribe share now let's assume that like i was explaining the company decides to issue 120 000 shares to the public for subscription now if the public actually applies for 80 000 or let's say 90 000 of these shares you are you you advertise that you are selling your shares a total of 120 000 shares and people start applying to subscribe so oh give me 100 another person applies for a thousand shares and a person so you sum up all the shares that people have applied for and are willing to buy and realize that they have applied for a total of 90 000 shares meanwhile you actually it's your advertising for 120 000. then the 90 000 shares that the people have actually taken up or have agreed to buy or have applied for becomes your subscribed share capital this is what they have actually applied to buy so they are subscribing to 90 000 and the extra 30 000 that you want them to has not been subscribed for so please take note subscribe share capita is a proportion of the issued share not the authorization the proportion of the issue share capital that the public has actually subscribed to okay so the balance that is left which is the 30 000 shares becomes your unsubscribed share capital meaning that you are willing to sell but nobody is buying that is the meaning of unsubscribed share it's not as if it's authorized this time you are issuing it out but people are not taking it up so we call it unsubscribe say they are yet to subscribe to the shares but they subscribe share capita is how much they have actually come and they are ready to buy and take up to become shareholders so that is the difference okay so let us also look at paid up capital paid up share capital and then on paid off share capital the paid up the paid up share capita is the proportion of the subscribe shares okay so we see that it builds up like that the issue shares a proportion of the authorization subscribe share is a proportion of issues say so paid off is the proportion of the subscription so the proportion of the subscribe share that the shareholders has actually paid so they have subscribed for 90 000 shares usually they pay in installments and so maybe you are expecting a total of um 90 000 if that is one dollar per share now if they have actually paid 70 000 okay then it means that the extra 20 000 has not been paid and so based on the agreement and the negotiation with the installments plan you say that the paid off share capital is a proportion of the subscribe share that the shareholders have actually paid for so you have subscribed but you have paid for that amount and the unpaid on paid up share is a proportion of the subscribe share that the shareholders are yet to pay so that is it now since the unpaid yet to pay then it means that there is an easterns where we call them to come and pay so we also have called capita called up share capital and on call share capital on code now you see that as we move on you realize that when we they apply and we unlock the shares to them we there are times where we have to call them to come and pee we call it calls now when you make their calls and they come and pay then maybe to complete what we are supposed to take in total now as long as they are waiting for us to call them they will not come and pay that part of their subscribed capital the proportion of their subscribe capital that the shareholders has been called to come and pee it's what we call the called up share capital and then the on-call capita is when that part of the subscribe shares which they are yet to be called to come and pay so these stems are not very difficult they follow in that order so let us try and understand that as we move to the double entry for the issue of shares actually we are going to do double entries and we are going to also prepare general entries when we are asked so i'm going to look at how to do all that the double entry for the issue of shares and then also we are going to look at how to prepare the general entries and the statement of financial position extract if we are asked to do when it comes to the accounting for the issue of shares it is all about the double entry concepts so we are going to apply the double entry rule regarding the issue of shares and then we are going to look at how the shares are issued the process that it goes through the stages the stages that it goes through i told you earlier that it's going to be done in installments the payments for the shares and so we are going to create account for all those installments and then we are going to do a double entry for them and after that we'll know how to close off the accounts now when shares are issued it means that we have invited the public to subscribe for shares and they are going to apply now i told you that value should be attached to the shares at the time of issue and so if one share is let's say five dollars then it means that when they are applying we charge them but i told you that that five dollar especially will be paid in installments that amount of five dollars per share will be paid in installment and this is how the installment is going to be done now usually when you are applying for shares you are supposed to pay a part of their share value so if it is five dollars per share the that depending on the policy of the company at the time of issue you'll be required to pay a part of the five dollars on the application and it is not automatic that when you apply for shares they will give you the shares as a shareholder now the process of giving you or giving you the shares to become a shareholder is called allotment and so you are going to pay some money on application and then you are going to pay another money on allotments so what they usually do is that sometimes they don't need their money all at once and so they will split the five dollars if it is five dollars that you are supposed to pay they can say that on application when you are applying for the shares you pay two dollars okay and on allotment when the shares are being allotted to you pay one dollar fifty cents for example so you see that you have paid a total of three dollars and fifty cents then you'll be left with one dollar and 50 cent to pay to make a total of five dollars for the value of the share so they can allow the share to you become a shareholder then the extra 1.50 that you have to pay they may call you later to come and pay that now the course can be done once or twice or thrice or even more depending on the policy at that time so what they are going to do is that if they call you let's say it's a first call they are calling you to come and pay one dollar you are left with 50 cent more to pay they can call you a second time that is a second call to come and pay just the 50 cents that is left and then that will make a total of five dollars and so what i'm trying to say is that application for the issue of shares does not require that you pay the full value of the checks on the time of application no because it is likely that the shares will not be allotted to you the process of assigning that share to you and telling you that we have accepted to give you shay to become a shareholders who take this share as your right of ownership for the company that process is what we call allotment okay an application is when you are applying for the shares and then this course most of the time they leave some of the money with you and they call you asking when they need it some companies would give you the date for the course when do you think they will be needing the money and so it's like a flexible payment term even though you are going to buy shares to be a shareholder you are not going to pay all the shares out friendly you are going to pay them in installment and they can spread it like this their cost could be more than even two sometimes it's just one call sometimes there is no call at all it depends on the policy of the company like i said earlier so this is the process of share issue now take note that in with each of these installment plans or dates for the payment of each of these there will be money that is coming into the business because the shareholders or potential shareholders are going to pay these monies most of the time they come at different dates so each of these dates will bring some money into their business and these monies most of the time are going to be paid into the bank account now i'm going to teach you the double entry for all these things for is the focus is not really even on the money for now the focus is on how to do the double entry now when they are applying for shares and they are paying 2 cd per share depending on the number of shares for example an applicant that is applying for 100 shares will be paying 100 times the two dollars now when they are applying for shares and they are paying two dollars per se the focus is not really on the application for example an applicant who is applying for hundred shares will be paying hundred times two dollars on application that makes it two hundred dollars for that person to pay on application and so when shares are being allotted to if all the hundred shares are being allotted to that particular shareholder then on the date of allotment is he or she is going to pay a hundred shares by 1.50 so it will be in that order now it is not going to be only one shareholder it's going to be the total number of applied shares or a law testers at each stage that is going to be multiplied by the value to pay on allotment for the share and so what is going to happen is that when we get our values we do our double entries the double entry for the application is that we are receiving money on application so it's coming into our bank account as a company so we are going to debit bank and then we are going to credit application account so we are going to open account for application we are going to open an account for allotment we are going to open an account for first call and we are going to open an account for second call and what we are going to do is that at each stage the double entry is simple we debit our bank account we credit application with application money is being received then when allotment monies are being received as a company we debit our bank account because the money will be coming into the bank and then we credit allotment account the same with the first call debit bank account credit first call account when it comes to the second call debit bank account credit second call so it is very simple it is a very simple process when it comes to the double entry for the issue of sales and this is the basics so what i want us to do now is to take a question on a basic issue of share question where there are no over subscriptions there are no for features of shares and there is no um premium or discount and then we are just going to solve to understand the double entry for the issue of shares and now what we are also going to do is that after solving for the double entry i'm going to teach you how to also enter the double entry in agenda because you may be required to also show the general entries for the issue of shares and then after that we'll now come back to look at other areas or other advanced areas of the issue of share concerning of our subscription for future of shares and premium and discounts so for now we are going to take a simple question that is going to help us to understand the double entry for the issue of shares okay so let us take this question together leonardo limited issued twenty thousand ordinary shares of no power value at two dollars each payable as follows on application 50 cents per share on allotment 80 cents per share on first call 30 cents per share and on second and final call 40 cents per share applications were received for 20 000 shares and all shares applied for were allotted to shareholders you are required to prepare the necessary ledger accounts and extract a statement of financial position okay so this is a very simple question for leonarda limited so what we are going to do now is that we are going to do double entries for this issue of shares and then we are going to going to show the statement of financial position extract but before we proceed we have to do some workings and know the amount of money that will be received at each installment date of the issue of share process so on application we have to know the money that is received on allotment on first call and on final cut and then also one thing that i want you to notice that this question says that 20 000 shares were issued and 20 000 shares were applied for so there were no over or under subscription so that is the meaning and we are allotting all the shares to them none is rejected and so that is their first assumption and that is going to help us to understand the double entries before we can think of other things okay so workings okay so this is what we are going to do we are going to look at the amount of money that will be received at every stage so on application how much monies were received so we are saying that they will be paying 50 cents on application so 0.5 dollars that is the meaning times the total number of shares that were applied for 20 000 shares were applied for and so that is going to give us a total of 10 000 on applications so this is how much money we took on application and then we look at our own allotment how much money were received so on allotment when we allotted the shares to them the question says that on allotment they paid 80 cents so that is 0.8 dollars and that is also going to be multiplied by 20 000 shares because we are told in the question that all shares applied were allotted you can as we move forward we will get to a place where they will apply for more shares and we are a lot less and so it's not going to be the same that is going to be multiplied at this stage but in this question we are told we allotted all 20 000 shares so that is going to give us a total amount of 16 000 that was received on allotment and then on first call we are told that on first call they are paying 30 cents 30 cents so that is 0.3 dollars multiplied by twenty thousand shares because it's assumed that when we made a call all of them came to pay so zero point three dollars which is thirty cent times twenty thousand shares is going to give us six thousand dollars in total to be received on the first call and then finally on the second call second and final call we are told that they are going to pay 40 cents which is zero point four dollars times twenty thousand shares because we were also not told that any of them had defaulted and so they all paid so twenty thousand shares multiplying um forty cents is going to give us 8 000 so that is what we are going to get for each of them and so having been able to calculate this the rest is very simple you are going to use these figures to complete the double entry and i have told you that when we are receiving application money we debit the bank accounts and then we credit application accounts we debit bank and then we credit allotments with allotment money we debit bank we credit first call we debit bank we credit second and final call that is a double entry we are going to do then afterwards we may think of a transfer so once you can do the double entry i'm sure you should be able to do the general entry as well because the journal entry will also go in the way of the double entry so i'm going to use this workings to prepare accounts for each of these so i'm going to clean the workings and then i'm going to prepare the accounts okay so this is my bank account and then i'll open an account for application so application account i put my currency sign in there let me make it short because there will not be much entries made in there then let me open another one for allotment accounts and then let me also open one for first call and then finally let me open one account for the second and final call so second call account okay so this is what we are going to do we are going to make entries into this account using the figures that we have gotten so let us begin on application when we did the workings we realized that a total of ten thousand dollars will be received on application so this is a double entry we debit bank we credit application account and so when we come to bank account we call it application and the amount is ten thousand dollars so we come to the credit because every debit centry must have a corresponding credit entry so in application account it will be called bank and i will write ten thousand dollars we are done with a double entry for application as simple as that and then the next one was allotment on allotment when we calculated we had sixteen thousand dollars and so that is also coming into the bank accounts on the will write allotments sixteen thousand dollars then we come to the credit side of allotment and then we write bank sixteen thousand dollars this is very very simple and then the next one we calculated was the first call and the amount received for first score was six thousand dollars so we come to the debit and we see first call in a bank account six thousand dollars we come to the credit side of the first core account we call it bank six thousand dollars very very very very easy and then we come to the final one which is the second call the second quote was eight thousand dollars from the workings so second and final call eight thousand dollars so we come to the credit side of the second call account and we say bank eight thousand dollars so this is as simple as abc we are done with the double entry so now what we are going to do is that now the bank account will be closed and balanced off but the application account the allotment first go and the second call they are temporary accounts we cannot close them with a balance carry down they do not have their going consent principles so what we are going to do is that we have to close off all these accounts how are we going to close them i told you that we they are just account that we used to collect capital so now that we are done we have to transfer all of them into the capital account and that is going to be the ordinary share account uh the state capital or the ordinary share capital account and so i'm going to create an account called stata capital account or ordinary share capital account anywhere you want to call it and now we are going to transfer all this amount into the ordinary share capital account or the stated capital account and so i'm going to do this after doing the double entry the next task is to transfer all these temporary accounts balances into the stated capital account so that you can now close off these accounts and so let me open the account for stated capital so i'll call this account stated capital account and then i'll put in my currency sign which is the dollar and then this is what i'm going to do now i have to push all these figures in there and so in transfer we are just going to write on the debit side of the application account to close it so that we can transfer into the state of capital so when i come to the application account on the debit side i will see stated capital take note we are not going to close this account to the balance carry now we call this theta capital and we write the same amount 10 000 to close it off so once we have called the stated capital every debit entry must have a corresponding credit entry so the corresponding entry comes to the credit side of the stated capital in the name of application ten thousand dollars so that is what we are going to do for all the others that are temporary accounts so we transfer from allotment to state capital we transfer from first call to state capital in that order so when we come to the allotment account the amount is 16 000 so we call it stated capital so that we can close it off we we are transferring it stated capital so we must appear on the credit here as allotment in the state of capital account 16 000 and then we transfer from first call so the same procedure stated capital six thousand so we conclude of this account and then to the credits of stated capital we say first call 6000 and then finally in the second call we are going to transfer to state capital 8 000. so we close it off and we come to the credit side of the state capital account 8 000. so that is how it's going to be so we are done with closing the temporary accounts so what we are going to do now is that we are going to close the bank account and the status capital account so let us do that now in closing of the bank account we are going to make sure that two sites are equal and so we are going to add them when you add you see that the total is 40 000 dollars for the debit and that means the credit is also going to be 40 000 and if that is the case then we are going to have a balance carry down on their bank account 40 dollars and we are going to have a balance brought down also as forty thousand dollars on the bank account and then we come to the state capital then we balance that off as well balance carried down is going to be 40 000 dollars so what we are saying is that we do not use the balance carry down to balance the application allotment and the cost because they are temporary accounts but when it comes to the bank and the state capital is going to be used continuously in the book so we are going to balance them off with a going consent principle which is the balance carry down so after doing this they will now come back to say balance broad down is 40 000 so now we are done with the question but we're told to do a statement of financial position extract don't let that be too confusing for you because we don't have much assets and liabilities over here the only thing we have is that we have one asset which is a bank account and then we have a capital and the capital is is 40 000 the bank is 40 000 so the balance sheet or the statement of financial position has already balanced in advance so this is what we are going to do we are just going to say statements of financial position extract it's just an extract okay it's not a full statement so we are just going to show how this is going to be recorded so we start to show with the assets now with the assets we have just one asset which is bank and that is 40 000 so we are going to close it off like this and then that is the only asset we have and so we can see it was financed by our state capital which is also 40 000 and so it has balanced so it's not any big deal it's just to show how these two will go but the most important thing is that you should be able to do your double entries and then you should be able to transfer these things into the state of capital and then you are done with this question i'm sure your understanding has come alive and i'm happy about that what we are going to do now is i'm going to show you how to go about the general entries with this same question i'm going to assume that the question also told us to do general entries and so for every double entry we have done we'll do a journal for that so i may clean the board i'm going to draft a general entry but i'll remember every double entry we have done and i'm going to use that to show you how you will do the general entries in case you are required when we are done with the journal entry then we can proceed to some more complex questions concerning the issue of shares okay so let us do this let's assume these are general entries so we have um debate and a credits for the general debits credits particulars general general put my currency sign dollars now what i'm going to do now is i'm not going to do a complete journal i'm going to show you how the entries are to be made okay so that we you know so for the question that we just solved we started by debiting bank we credited application with application money of ten thousand debit bank credit allotment debit bank credit first call debit bank credit second call so when you are coming into the general you are going to show all those four double entries in agenda and you narrate them except the question told you that narrations are not required and so what you are going to do is that you and when you are coming into the agenda for all the double entries that we are going to transfer the accounts that we received or the debit entry the account that received the wnp will come first just like we did for correction of errors and so in the first instance it was debit bank credit application so a bank will be written first because bank was debited so with ten thousand dollars we should show on the debit side and remember how to record in agenda you don't record it straight you slant it and so we signed it and then the credit was for application so we credit application with a 10 000 and then you narrate it this is application manage received so you can see bin application monies received then you underline it neatly make sure you don't cross to the other side just underline it on the patch at the particular column then you are done so you are going to do the same for bank and allotment debit bank credit allotment bin allotment money is received bank first call being first called money is received bank second call being second call man is received i'm not going to do that i'm just one going to show you that how to record the agenda entries for the transfers as well so you are going to do same for bank allotment first call and second call so i'm assuming you can do that let us look at how to do the transfers now in the transfers we transfer the money from allotment application to state capital from allotment to state capital from first class to state capital and from second court to state capital so what we are going to do is that we are going to show that here and i have told you that the account that was debited should be written first so in that case application was debited in the name of stated capital and then we credited a stated capital account so we are going to write application first when we get there so it will be application debited with 10 000 and then we are going to credit the stated capital with 10 000 then you see being application money transferred to state capital so that is how you are going to narrate this being application money transferred to stated capital ordinary share capital then you can underline that so you do the same for allotment you transfer allotment and stated capital they say being allotment money transfer so what i'm just trying to let you understand is that for every double entry that you do you can do a general entry for that but if the question has not required you to do general entries don't waste your time on the general entries some questions may know if you require the double entry that we did it would just require the general entries okay so you have to be smart that the double entry is the same that we transfer into the journal and then when it comes to the statement of financial positioning strat you know it's very simple okay so i'm sure your understanding has been enhanced a little this is a part one of our video on the issue of chess we are going to bring you the part two in the part two of this lesson we are going to talk about over subscription for future of shares reissue of forfeiture shares and they share those accounts how they work and then we are going to use that to enhance our understanding and be complete as far as the knowledge on accounting of issue of shares is concerned remember to subscribe to this channel share this video and until we meet again another time for the part two it is bye for now

good day welcome to another session of fog accountancy tutorials today we are going to look at company accounts with a special emphasis on the issue of shares we&#39;re going to look at company accounts how they issue shares and how it is accounted for in the books of accounts but before we proceed i would want you to subscribe to the channel if you are here to subscribe please subscribe to the channel let us grow together and let us learn and be successful together okay so my focus is to teach you how to account for the issue of shares i&#39;m not going to do much of the theory on company accounts i&#39;ll leave you to read on company account with a definition of the company the regulation the types formation of a company and what goes into all that and you can also look at maybe concerning the types let me just talk about a few of them before we can proceed to the accounting aspect we know that we have when it comes to companies companies are organizations that are much larger if you look at the characteristics of a company we look at limited liability as one of the key characteristics even though we have an unlimited company so we have company that is limited by chess we have companies that is limited by guarantee and also we can have an unlimited company which is usually not common but these are the three types of companies that you can have now you can also look at companies from another angle we can also look at it as a public company or a private company whichever way that you want to look at it from you have to study the characteristics of each of these types of companies so a company limited by shares company limited by guarantee and an unlimited company and then we have a public company and a private company now let me just throw some light into some of them a company itself is an organization that is formed to make profit usually from a pool of funds contributed by shareholders usually or more than you know the law usually permits one person to form a company so far as you can meet all the requirements however companies are usually not run by one person it&#39;s most of the time a pool of funds from two or more people that comes together to contribute money to run the business for profit now this is different from my partnership in a sense that there are a lot of things that are different in terms of nature from the company and the partnership i would want you to take time and read on that now when we say a company is a public company a public company has so many characteristics one of the key characteristics is that it is allowed to issue shares to the public and that is what we are going to do to account for how the issue shares so they are allowed to issue shares to the public for public to subscribe and become shareholders that is why they are public companies private companies do not issue shares to the public and therefore as a result usually they have limited number of shareholders in a company school of ghana and it&#39;s usually between 1 and 50 people minimum and maximum that can form a private company okay and usually they don&#39;t allow the transfer of shares to other people and then the issue of sales to the public the public company usually has a minimum of one and a maximum of infinity meaning that public companies sometimes depending on the size they can issue shares and people can subscribe us to a maximum number of shareholders that we cannot fix or determine up to infinity so it means that a public company can actually issue shares to as many shareholders as they want but sometimes they are limited by their regulations of each country where they operate so let us also take note of that so this is what we mean by the public and a private company as far as um we are concerned for this lesson and then we also have can look at them from this angle that it could be a company limited by shares guarantee or unlimited liability company now that is what i may do for now concerning the theory but then when i get to the accounting for issue of shares i&#39;m now going to talk about the theory that relates to the issue of chess so let us take this for now and let us do our reading work on that and i&#39;m sure that for the theoretical aspect of company accounts we will be able to get that it is a very broad topic when it comes to company accounts it has a lot of theory so take time and read that because it is examinable as part of the accounting work itself so please do that all right now we are looking at the accounting for issue of shares before we proceed let us define and share what is a share a share is the right to the ownership of a company it is the interest of the shareholder in the company and so when a company has shareholders their shareholders own shares the shares is what becomes their right to the ownership of a company now every company that is limited by shares will issue shares to the public especially if it&#39;s a public company public companies that are limited by shares have their legal mandate to issue shares to the public now what they do in ghana for example we are regulated by the company&#39;s quote as amended in 2019 act 992 now what the companies could sees for us and for most countries is that the company will have to register with the registrar general of companies now before the company comes into existence it will be registered with a registered general companies now the registrar of companies will also register the company giving them something that we call authorized share so that is what i&#39;m going to begin with there are some theoretical aspects when it comes to this the authorized share authorized share you may see that as your authorized shared capital or authorized share now what is the meaning of the authorized say the authorized set is a total number of shares that the company has been registered with at the date of registration by the registrar general and so if you go and register your company xyz company limited for example and the registrar general allocates 200 000 shares two hundred thousand shares to you as a company these two hundred thousand shares becomes your authorized stress it means that you cannot issue shares to the public that exceeds this number of shares this is your maximum limit of uh to the number of shares you can issue to the public that is the meaning of your authorized share in other words you have been authorized to issue up to a maximum of 200 000 shares that is the meaning of the authorization and every registered company has their authorized share as stipulated in their memorandum or articles of association now with the authorized shared capital if you have the authorized shared to be 200 000 shares for example when you are issuing shares to the public i told you you cannot issue more than this but it can decide to issue less than that depending on the capital that you want to raise at that very point in time now take note that when shares are assigned to a company in a form of authorization it can come in two ways it&#39;s either that at the date of the registration of the shares by the registrar they can tell you that your shares value or your shares price is let&#39;s say five dollars per share so in other words these two hundred thousand ready registered shares you have been told that one is five dollars so when you are issuing the shares to the public you are going to sell to the public at five dollars per share that is the meaning now if this was done at the date of the registration when it was being authorized by the registrar general then we will say that these shares are power value shares so let me see that we have something we call power value chess and then shares of low power value now let me guess just get you the difference between the two now power value shares are shares which have value that attached on to them at the days of registration shares will have their values attached at the date of registration but there are some shares that when it&#39;s being registered for you by the registrar of companies they will not attach any values to it it means that at the date of issue the company itself will now assign values to the shares based on the market condition and the demand and supply factors and maybe the performance of the company so when the values are not attached to the shares at the date of registration then we call those shares that they are shares of no power value but when values are attached to them at the date of registration we call them shares of power value and so power values are said that has their values attached to them at a date of authorization on registration and then no power value shares our shares that do not have values attached to them at the date of registration so that is the difference between power value shares and no power value now let us also move away from authorized share capital to issued share issue chess or issue share capital now take note of something the i told you that when shares are being authorized and registered for the company it becomes the maximum number of shares they can issue but not the minimum it means that the companies can decide to issue less at a time so let us assume that the company decides that okay i&#39;m now going to issue just uh 100 000 shares to the public okay now at whatever price they want to sell it that is not our focus for now our focus is that if you are authorized with 200 000 shares and you are issuing 100 000 to the public then it means that the portion of the share that you have issued which is this 100 000 becomes your issued share capital if you are issuing out 120 000 shares it means that you&#39;ll be left with 80 000 of your shares now take note the 120 000 shares that you are issuing out or inviting the public to come and buy and become shareholders becomes the issued share capital and the 80 000 that is left becomes your own issued or yet to be issued on issued share capital so that is the meaning of the issued share and the unissued the issued cell capital will be defined as the proportion of the authorized share capital which has been issued out to the public for them to subscribe to become shareholders and the on he should say is a portion of the authorized share capital which is yet to be issued out to the public and we do that as and when we need capital and so what is going to happen is that if you issue your 120 000 and it comes with a value you are going to operate with that money as capital for a long time let&#39;s say you want to expand the business and you need more shares okay you need more capital sorry you can issue more depending on the amount that you need to expand and you can issue you can decide to maybe issue 50 000 shares out of the 80. you&#39;ll be left with 30 on issued share as time goes on if you think you need you can go back and issue the 30 000 and that would be all you cannot issue any more shares to the public after that because you have used all your authorized share if you think that you need to issue some more shares to the public you would have to go back to the register registrar sorry you may have to go back you have to go back to the registrar of companies and then negotiate with a registrar and if the deal goes through an an agreement is reached and the registrar decides to extend or expand your share base or your authorized share capital fair enough but until you are approved by the registrar in the law you are not supposed to issue more than your authorized share capital that is the meaning of the on issue than they should say then that will also take us to subscribe share capita and then unsubscribed now subscribe share now let&#39;s assume that like i was explaining the company decides to issue 120 000 shares to the public for subscription now if the public actually applies for 80 000 or let&#39;s say 90 000 of these shares you are you you advertise that you are selling your shares a total of 120 000 shares and people start applying to subscribe so oh give me 100 another person applies for a thousand shares and a person so you sum up all the shares that people have applied for and are willing to buy and realize that they have applied for a total of 90 000 shares meanwhile you actually it&#39;s your advertising for 120 000. then the 90 000 shares that the people have actually taken up or have agreed to buy or have applied for becomes your subscribed share capital this is what they have actually applied to buy so they are subscribing to 90 000 and the extra 30 000 that you want them to has not been subscribed for so please take note subscribe share capita is a proportion of the issued share not the authorization the proportion of the issue share capital that the public has actually subscribed to okay so the balance that is left which is the 30 000 shares becomes your unsubscribed share capital meaning that you are willing to sell but nobody is buying that is the meaning of unsubscribed share it&#39;s not as if it&#39;s authorized this time you are issuing it out but people are not taking it up so we call it unsubscribe say they are yet to subscribe to the shares but they subscribe share capita is how much they have actually come and they are ready to buy and take up to become shareholders so that is the difference okay so let us also look at paid up capital paid up share capital and then on paid off share capital the paid up the paid up share capita is the proportion of the subscribe shares okay so we see that it builds up like that the issue shares a proportion of the authorization subscribe share is a proportion of issues say so paid off is the proportion of the subscription so the proportion of the subscribe share that the shareholders has actually paid so they have subscribed for 90 000 shares usually they pay in installments and so maybe you are expecting a total of um 90 000 if that is one dollar per share now if they have actually paid 70 000 okay then it means that the extra 20 000 has not been paid and so based on the agreement and the negotiation with the installments plan you say that the paid off share capital is a proportion of the subscribe share that the shareholders have actually paid for so you have subscribed but you have paid for that amount and the unpaid on paid up share is a proportion of the subscribe share that the shareholders are yet to pay so that is it now since the unpaid yet to pay then it means that there is an easterns where we call them to come and pay so we also have called capita called up share capital and on call share capital on code now you see that as we move on you realize that when we they apply and we unlock the shares to them we there are times where we have to call them to come and pee we call it calls now when you make their calls and they come and pay then maybe to complete what we are supposed to take in total now as long as they are waiting for us to call them they will not come and pay that part of their subscribed capital the proportion of their subscribe capital that the shareholders has been called to come and pee it&#39;s what we call the called up share capital and then the on-call capita is when that part of the subscribe shares which they are yet to be called to come and pay so these stems are not very difficult they follow in that order so let us try and understand that as we move to the double entry for the issue of shares actually we are going to do double entries and we are going to also prepare general entries when we are asked so i&#39;m going to look at how to do all that the double entry for the issue of shares and then also we are going to look at how to prepare the general entries and the statement of financial position extract if we are asked to do when it comes to the accounting for the issue of shares it is all about the double entry concepts so we are going to apply the double entry rule regarding the issue of shares and then we are going to look at how the shares are issued the process that it goes through the stages the stages that it goes through i told you earlier that it&#39;s going to be done in installments the payments for the shares and so we are going to create account for all those installments and then we are going to do a double entry for them and after that we&#39;ll know how to close off the accounts now when shares are issued it means that we have invited the public to subscribe for shares and they are going to apply now i told you that value should be attached to the shares at the time of issue and so if one share is let&#39;s say five dollars then it means that when they are applying we charge them but i told you that that five dollar especially will be paid in installments that amount of five dollars per share will be paid in installment and this is how the installment is going to be done now usually when you are applying for shares you are supposed to pay a part of their share value so if it is five dollars per share the that depending on the policy of the company at the time of issue you&#39;ll be required to pay a part of the five dollars on the application and it is not automatic that when you apply for shares they will give you the shares as a shareholder now the process of giving you or giving you the shares to become a shareholder is called allotment and so you are going to pay some money on application and then you are going to pay another money on allotments so what they usually do is that sometimes they don&#39;t need their money all at once and so they will split the five dollars if it is five dollars that you are supposed to pay they can say that on application when you are applying for the shares you pay two dollars okay and on allotment when the shares are being allotted to you pay one dollar fifty cents for example so you see that you have paid a total of three dollars and fifty cents then you&#39;ll be left with one dollar and 50 cent to pay to make a total of five dollars for the value of the share so they can allow the share to you become a shareholder then the extra 1.50 that you have to pay they may call you later to come and pay that now the course can be done once or twice or thrice or even more depending on the policy at that time so what they are going to do is that if they call you let&#39;s say it&#39;s a first call they are calling you to come and pay one dollar you are left with 50 cent more to pay they can call you a second time that is a second call to come and pay just the 50 cents that is left and then that will make a total of five dollars and so what i&#39;m trying to say is that application for the issue of shares does not require that you pay the full value of the checks on the time of application no because it is likely that the shares will not be allotted to you the process of assigning that share to you and telling you that we have accepted to give you shay to become a shareholders who take this share as your right of ownership for the company that process is what we call allotment okay an application is when you are applying for the shares and then this course most of the time they leave some of the money with you and they call you asking when they need it some companies would give you the date for the course when do you think they will be needing the money and so it&#39;s like a flexible payment term even though you are going to buy shares to be a shareholder you are not going to pay all the shares out friendly you are going to pay them in installment and they can spread it like this their cost could be more than even two sometimes it&#39;s just one call sometimes there is no call at all it depends on the policy of the company like i said earlier so this is the process of share issue now take note that in with each of these installment plans or dates for the payment of each of these there will be money that is coming into the business because the shareholders or potential shareholders are going to pay these monies most of the time they come at different dates so each of these dates will bring some money into their business and these monies most of the time are going to be paid into the bank account now i&#39;m going to teach you the double entry for all these things for is the focus is not really even on the money for now the focus is on how to do the double entry now when they are applying for shares and they are paying 2 cd per share depending on the number of shares for example an applicant that is applying for 100 shares will be paying 100 times the two dollars now when they are applying for shares and they are paying two dollars per se the focus is not really on the application for example an applicant who is applying for hundred shares will be paying hundred times two dollars on application that makes it two hundred dollars for that person to pay on application and so when shares are being allotted to if all the hundred shares are being allotted to that particular shareholder then on the date of allotment is he or she is going to pay a hundred shares by 1.50 so it will be in that order now it is not going to be only one shareholder it&#39;s going to be the total number of applied shares or a law testers at each stage that is going to be multiplied by the value to pay on allotment for the share and so what is going to happen is that when we get our values we do our double entries the double entry for the application is that we are receiving money on application so it&#39;s coming into our bank account as a company so we are going to debit bank and then we are going to credit application account so we are going to open account for application we are going to open an account for allotment we are going to open an account for first call and we are going to open an account for second call and what we are going to do is that at each stage the double entry is simple we debit our bank account we credit application with application money is being received then when allotment monies are being received as a company we debit our bank account because the money will be coming into the bank and then we credit allotment account the same with the first call debit bank account credit first call account when it comes to the second call debit bank account credit second call so it is very simple it is a very simple process when it comes to the double entry for the issue of sales and this is the basics so what i want us to do now is to take a question on a basic issue of share question where there are no over subscriptions there are no for features of shares and there is no um premium or discount and then we are just going to solve to understand the double entry for the issue of shares and now what we are also going to do is that after solving for the double entry i&#39;m going to teach you how to also enter the double entry in agenda because you may be required to also show the general entries for the issue of shares and then after that we&#39;ll now come back to look at other areas or other advanced areas of the issue of share concerning of our subscription for future of shares and premium and discounts so for now we are going to take a simple question that is going to help us to understand the double entry for the issue of shares okay so let us take this question together leonardo limited issued twenty thousand ordinary shares of no power value at two dollars each payable as follows on application 50 cents per share on allotment 80 cents per share on first call 30 cents per share and on second and final call 40 cents per share applications were received for 20 000 shares and all shares applied for were allotted to shareholders you are required to prepare the necessary ledger accounts and extract a statement of financial position okay so this is a very simple question for leonarda limited so what we are going to do now is that we are going to do double entries for this issue of shares and then we are going to going to show the statement of financial position extract but before we proceed we have to do some workings and know the amount of money that will be received at each installment date of the issue of share process so on application we have to know the money that is received on allotment on first call and on final cut and then also one thing that i want you to notice that this question says that 20 000 shares were issued and 20 000 shares were applied for so there were no over or under subscription so that is the meaning and we are allotting all the shares to them none is rejected and so that is their first assumption and that is going to help us to understand the double entries before we can think of other things okay so workings okay so this is what we are going to do we are going to look at the amount of money that will be received at every stage so on application how much monies were received so we are saying that they will be paying 50 cents on application so 0.5 dollars that is the meaning times the total number of shares that were applied for 20 000 shares were applied for and so that is going to give us a total of 10 000 on applications so this is how much money we took on application and then we look at our own allotment how much money were received so on allotment when we allotted the shares to them the question says that on allotment they paid 80 cents so that is 0.8 dollars and that is also going to be multiplied by 20 000 shares because we are told in the question that all shares applied were allotted you can as we move forward we will get to a place where they will apply for more shares and we are a lot less and so it&#39;s not going to be the same that is going to be multiplied at this stage but in this question we are told we allotted all 20 000 shares so that is going to give us a total amount of 16 000 that was received on allotment and then on first call we are told that on first call they are paying 30 cents 30 cents so that is 0.3 dollars multiplied by twenty thousand shares because it&#39;s assumed that when we made a call all of them came to pay so zero point three dollars which is thirty cent times twenty thousand shares is going to give us six thousand dollars in total to be received on the first call and then finally on the second call second and final call we are told that they are going to pay 40 cents which is zero point four dollars times twenty thousand shares because we were also not told that any of them had defaulted and so they all paid so twenty thousand shares multiplying um forty cents is going to give us 8 000 so that is what we are going to get for each of them and so having been able to calculate this the rest is very simple you are going to use these figures to complete the double entry and i have told you that when we are receiving application money we debit the bank accounts and then we credit application accounts we debit bank and then we credit allotments with allotment money we debit bank we credit first call we debit bank we credit second and final call that is a double entry we are going to do then afterwards we may think of a transfer so once you can do the double entry i&#39;m sure you should be able to do the general entry as well because the journal entry will also go in the way of the double entry so i&#39;m going to use this workings to prepare accounts for each of these so i&#39;m going to clean the workings and then i&#39;m going to prepare the accounts okay so this is my bank account and then i&#39;ll open an account for application so application account i put my currency sign in there let me make it short because there will not be much entries made in there then let me open another one for allotment accounts and then let me also open one for first call and then finally let me open one account for the second and final call so second call account okay so this is what we are going to do we are going to make entries into this account using the figures that we have gotten so let us begin on application when we did the workings we realized that a total of ten thousand dollars will be received on application so this is a double entry we debit bank we credit application account and so when we come to bank account we call it application and the amount is ten thousand dollars so we come to the credit because every debit centry must have a corresponding credit entry so in application account it will be called bank and i will write ten thousand dollars we are done with a double entry for application as simple as that and then the next one was allotment on allotment when we calculated we had sixteen thousand dollars and so that is also coming into the bank accounts on the will write allotments sixteen thousand dollars then we come to the credit side of allotment and then we write bank sixteen thousand dollars this is very very simple and then the next one we calculated was the first call and the amount received for first score was six thousand dollars so we come to the debit and we see first call in a bank account six thousand dollars we come to the credit side of the first core account we call it bank six thousand dollars very very very very easy and then we come to the final one which is the second call the second quote was eight thousand dollars from the workings so second and final call eight thousand dollars so we come to the credit side of the second call account and we say bank eight thousand dollars so this is as simple as abc we are done with the double entry so now what we are going to do is that now the bank account will be closed and balanced off but the application account the allotment first go and the second call they are temporary accounts we cannot close them with a balance carry down they do not have their going consent principles so what we are going to do is that we have to close off all these accounts how are we going to close them i told you that we they are just account that we used to collect capital so now that we are done we have to transfer all of them into the capital account and that is going to be the ordinary share account uh the state capital or the ordinary share capital account and so i&#39;m going to create an account called stata capital account or ordinary share capital account anywhere you want to call it and now we are going to transfer all this amount into the ordinary share capital account or the stated capital account and so i&#39;m going to do this after doing the double entry the next task is to transfer all these temporary accounts balances into the stated capital account so that you can now close off these accounts and so let me open the account for stated capital so i&#39;ll call this account stated capital account and then i&#39;ll put in my currency sign which is the dollar and then this is what i&#39;m going to do now i have to push all these figures in there and so in transfer we are just going to write on the debit side of the application account to close it so that we can transfer into the state of capital so when i come to the application account on the debit side i will see stated capital take note we are not going to close this account to the balance carry now we call this theta capital and we write the same amount 10 000 to close it off so once we have called the stated capital every debit entry must have a corresponding credit entry so the corresponding entry comes to the credit side of the stated capital in the name of application ten thousand dollars so that is what we are going to do for all the others that are temporary accounts so we transfer from allotment to state capital we transfer from first call to state capital in that order so when we come to the allotment account the amount is 16 000 so we call it stated capital so that we can close it off we we are transferring it stated capital so we must appear on the credit here as allotment in the state of capital account 16 000 and then we transfer from first call so the same procedure stated capital six thousand so we conclude of this account and then to the credits of stated capital we say first call 6000 and then finally in the second call we are going to transfer to state capital 8 000. so we close it off and we come to the credit side of the state capital account 8 000. so that is how it&#39;s going to be so we are done with closing the temporary accounts so what we are going to do now is that we are going to close the bank account and the status capital account so let us do that now in closing of the bank account we are going to make sure that two sites are equal and so we are going to add them when you add you see that the total is 40 000 dollars for the debit and that means the credit is also going to be 40 000 and if that is the case then we are going to have a balance carry down on their bank account 40 dollars and we are going to have a balance brought down also as forty thousand dollars on the bank account and then we come to the state capital then we balance that off as well balance carried down is going to be 40 000 dollars so what we are saying is that we do not use the balance carry down to balance the application allotment and the cost because they are temporary accounts but when it comes to the bank and the state capital is going to be used continuously in the book so we are going to balance them off with a going consent principle which is the balance carry down so after doing this they will now come back to say balance broad down is 40 000 so now we are done with the question but we&#39;re told to do a statement of financial position extract don&#39;t let that be too confusing for you because we don&#39;t have much assets and liabilities over here the only thing we have is that we have one asset which is a bank account and then we have a capital and the capital is is 40 000 the bank is 40 000 so the balance sheet or the statement of financial position has already balanced in advance so this is what we are going to do we are just going to say statements of financial position extract it&#39;s just an extract okay it&#39;s not a full statement so we are just going to show how this is going to be recorded so we start to show with the assets now with the assets we have just one asset which is bank and that is 40 000 so we are going to close it off like this and then that is the only asset we have and so we can see it was financed by our state capital which is also 40 000 and so it has balanced so it&#39;s not any big deal it&#39;s just to show how these two will go but the most important thing is that you should be able to do your double entries and then you should be able to transfer these things into the state of capital and then you are done with this question i&#39;m sure your understanding has come alive and i&#39;m happy about that what we are going to do now is i&#39;m going to show you how to go about the general entries with this same question i&#39;m going to assume that the question also told us to do general entries and so for every double entry we have done we&#39;ll do a journal for that so i may clean the board i&#39;m going to draft a general entry but i&#39;ll remember every double entry we have done and i&#39;m going to use that to show you how you will do the general entries in case you are required when we are done with the journal entry then we can proceed to some more complex questions concerning the issue of shares okay so let us do this let&#39;s assume these are general entries so we have um debate and a credits for the general debits credits particulars general general put my currency sign dollars now what i&#39;m going to do now is i&#39;m not going to do a complete journal i&#39;m going to show you how the entries are to be made okay so that we you know so for the question that we just solved we started by debiting bank we credited application with application money of ten thousand debit bank credit allotment debit bank credit first call debit bank credit second call so when you are coming into the general you are going to show all those four double entries in agenda and you narrate them except the question told you that narrations are not required and so what you are going to do is that you and when you are coming into the agenda for all the double entries that we are going to transfer the accounts that we received or the debit entry the account that received the wnp will come first just like we did for correction of errors and so in the first instance it was debit bank credit application so a bank will be written first because bank was debited so with ten thousand dollars we should show on the debit side and remember how to record in agenda you don&#39;t record it straight you slant it and so we signed it and then the credit was for application so we credit application with a 10 000 and then you narrate it this is application manage received so you can see bin application monies received then you underline it neatly make sure you don&#39;t cross to the other side just underline it on the patch at the particular column then you are done so you are going to do the same for bank and allotment debit bank credit allotment bin allotment money is received bank first call being first called money is received bank second call being second call man is received i&#39;m not going to do that i&#39;m just one going to show you that how to record the agenda entries for the transfers as well so you are going to do same for bank allotment first call and second call so i&#39;m assuming you can do that let us look at how to do the transfers now in the transfers we transfer the money from allotment application to state capital from allotment to state capital from first class to state capital and from second court to state capital so what we are going to do is that we are going to show that here and i have told you that the account that was debited should be written first so in that case application was debited in the name of stated capital and then we credited a stated capital account so we are going to write application first when we get there so it will be application debited with 10 000 and then we are going to credit the stated capital with 10 000 then you see being application money transferred to state capital so that is how you are going to narrate this being application money transferred to stated capital ordinary share capital then you can underline that so you do the same for allotment you transfer allotment and stated capital they say being allotment money transfer so what i&#39;m just trying to let you understand is that for every double entry that you do you can do a general entry for that but if the question has not required you to do general entries don&#39;t waste your time on the general entries some questions may know if you require the double entry that we did it would just require the general entries okay so you have to be smart that the double entry is the same that we transfer into the journal and then when it comes to the statement of financial positioning strat you know it&#39;s very simple okay so i&#39;m sure your understanding has been enhanced a little this is a part one of our video on the issue of chess we are going to bring you the part two in the part two of this lesson we are going to talk about over subscription for future of shares reissue of forfeiture shares and they share those accounts how they work and then we are going to use that to enhance our understanding and be complete as far as the knowledge on accounting of issue of shares is concerned remember to subscribe to this channel share this video and until we meet again another time for the part two it is bye for now

Transcript for:Lecture on Company Accounts: Issue of Shares

Transcript for:
Lecture on Company Accounts: Issue of Shares