Issuing shares: application, allotment, calls

There are two kinds of share:

• Preference shares: a fixed rate of dividend, paid first, and their capital is returned first if the company is wound up.
• Equity shares: they take whatever is left. Their dividend can be high, low or nothing.

Issuing shares: the company publishes a prospectus, people apply with application money, and the company allots shares. It may allot only if it receives the minimum subscription, at least 90% of the issue; otherwise all the money is refunded.

The money usually comes in instalments: application, allotment, then one or more calls. For each instalment there are two entries: one when it is due, one when it is received.

Under Table F, one call cannot be more than 25% of the face value, and there must be at least one month between calls. Write 'Equity' or 'Preference' in front of each account name, so the two kinds are never mixed.

Example: 10,000 shares of ₹10, ₹3 on application. Applications for 10,000 shares bring 30,000: Bank Dr. To Equity Share Application 30,000, then Equity Share Application Dr. To Equity Share Capital 30,000.