Topic 2 ISSUANCE OF SHARES

Topic 2 PART A

Issuance of Shares

• Company must determine how much the minimum amount of capital that it wish to raise• The CA 1965 requires a) the minimum amount of subscription should be received before the company can allot the shares to prospective shareholders.b) If minimum subscription is not received, the monies received needs to return to the applicantsc) In order subscription to be successful, the issuer will appoint UNDERWRITERS to pick up the shares which not subscribed.

2.2: Initial Public Offering (IPO) - ordinary shares

Who is underwriters?

A company or other entity that administers the public issuance and distribution of securities from a corporation or other issuing body. An underwriter works closely with the issuing body to determine the offering price of the securities, buys them from the issuer and sells them to investors via the underwriter's distribution network

Example company underwriting:• MIDF• CIMB Securities Sdn Bhd•UOB Trustee (Malaysia) Bhd. •Kenanga Research•AmSecurities Sdn Bhd•Mayban Securities Sendirian Bhd.


• More shares are applied than available – the issue is said oversubscribed.• Once oversubscribed, company has three options: a) transfer the excess application money to reduce the money due on allotment (assuming payment is made by instalment)

b) Allot of share on pro-rata basis, For eg: 80,000,000 – shares were offered100,000,000 – shares subscribedInvestor A applies for 10,000 shares.

So, how to calculate:10,000 x 80,000,000 = 8,000 shares 100,000,000

c) Reject some of application of share

Oversubcribed (lebih langganan)

• Applicants need to open Central Depository System (CDS) account before can subscribe the share.• The CDS account no must stated in the share application form• Successful applicant will have their CDS account credited number with shares allotted and are now shareholders of the company• They do not received physical share of certificate• Shareholder do not participate in the management of company but appoint BOD to manage the business.• The name of shareholder must be entered in the register of members and kept at the registered office of company• Normally company outsource this work to other company because it is tedious process (example: Symphony Share Registrars Sdn Bhd)


• Company can issue share in:a)Nominal (par value)b)Premium value > Share above nominal (par value)c)Discount value

•The amount collect over the par value (that is premium) is accounted for in separate account called “SHARE PREMIUM ACCOUNT” •The share premium account is a statutory reverse account (legal)•Section 60(2) of the Ac 1965, where company issues share for a premium …… value of premium on those shares should be transferred to an account called Share Premium Account.•The share capital account will be credit at the par value and premium credited to the share premium account

2.3: Issuance of shares at a premium

•ACE Bhd issued 10 million ordinary shares of par value RM2 each at RM2.25 per share for cash.•All the shares were subscribed for and there was no oversubscription.

Discuss the accounting treatment of the issuance of shares:

Premium – 25 centsCompany received – 10,000,000 x 2.25 = RM22,500,000Which RM20,000,000 – par (nominal) valueRM2,500,0000 – share premium

Example - Issuance of shares at a premium

Premium – 25 centsCompany received – 10,000,000 x 2.25 = RM22,500,000Which RM20,000,000 – par (nominal) valueRM2,500,0000 – share premium

The journal entries and an extract of statement of financial positionJournalDt Bank 22,500,000Ct Ordinary share Capital 20,000,000 Share Premium 2,500,000

Extract of SOFP Equity RM 10,000,000 ordinary shares of RM2 each 20,000,000

Reserve Share Premium 2,500,000

• The share premium account is capital reserve, and part of shareholder fund.• As specified by Section 60(3) of the CA 1965, the balance of share premium may be used for the following purposes:a)In paying unissued shares to be issued to members of company as fully paid bonus share (Bonus shares are shares given to share holder at no extra cost)b)In paying up in whole or in part the balance unpaid on share previously issued to members of the companyc)In the payment of dividends in the form of shares to the members of companyd)In case company carrying on an insurance business, to appropriate or transfer to any statutory fund established and maintained pursuant to any law of Malaysia relating to in writing off (i) preliminary expenses of company (ii) transactional coste) Premium payable on redemption of redeemable preference share

2.4: Share Premium Account

• As stated earlier it is compulsory for companies to credit share premium account with any premium on issuance of equity shares.•However, the CA 1965 allows company relief from recognising the premium in specific stringent conditions.•This exemption called merger relief•This is allowed when a company issues its own shares to acquire at least 90% of the equity shares of another company• The issuer can dispense from recognising the share premium on the shares issued

Merger relief

• Companies may issue shares at discount (although it rarely happen), shares issued below par value• A public company may issue shares at a discount provided that the conditions stated in section 59(1) of the company act 1965 fulfilled.•The conditions are:a)The issuance of shares at discount is authorised by a resolution passed at the general meeting of the company and is confirmed by the court;b)The solution specifies the maximum rate of discount at which the shares are to be issued;c)At the date of the issue not less than one year has lapsed since the date on which the company was entitled to commence business; andd)The shares are issued within one month after the date on which the issue in confirmed by order of the court or within such extended time as the court allows.

2.5 Issue of shares at a discount

• Companies may issuing shares at discount has to make a rights issue to the existing shareholders, not offer to public unless the articles of the company allow it• For example company may issue 10,000,000 ordinary shares of par value of RM 1 each for 90 cents.• The difference between share price – par value = share discount• Even though the amount received on the issuance of shares will be less than the nominal or per value, the share capital account will be credited with nominal value and the discount is accounted for in a separate account called discount on shares account• The discount on shares may be written off against the share premium or retained profit depending on the company’s policy

Issue of shares at a discount

A company, if authorised by AOA may allow the applicants for the issuance of equity shares to:a)Pay the full amount of the share upon application;

b) Pay by means of instalments (this is not a common practice in Malaysia)

2.6 TERM OF PAYMENT

Payment in full

• In such situation the applicants are required to pay full amount of the share upon application.• If not successful, the amount will be refunded to them• Check example:

A Bhd was incorporated on 2 January x1 with authorised capital of RM60,000,000 ordinary shares of RM1 each.The directors offered for subscription an initial offering of 20,000,000 ordinary shares of RM1 each comprising:

• 10,000,000 shares to institutional investors at RM3.00 per share and•10,000,000 shares to the general public (retail investors) payable in full upon application at 95% of the price to the institutional investors.

Application for 10,000,000 shares were received from institutional investors and 15,000,000 shares were received from retail investors.The money received on the oversubscribed shares from retail investor was refund.

Application closed on the 31 January x1 and all monies due were received.

Allotment of shares was completed by 14 February x1

Required:Show the journal entries and extract of the statement of financial position upon completion of the above transactions.

2.6 TERM OF PAYMENT

1) 2.1.x1 company incorporated no accounting entries required2) By 31.1.x1 application closed and all money received

31.1.x1 Debit (RM) Credit (RM)Bank 72,750,000 Application (15 million x RM2.85)- RI 42,750,000 Application (10 million x RM3.00) – II 30,000,000(being the amount received on application)Retail investor = 95% x Institutional Investor = 95% x RM3.00 = RM2.85

3) 14.2.X1 – allotment of shares completed14.2.X1Application 58,500,000 Ordinary share capital 20,000,000 Share premium 38,500,000(Being the allotment of 20,000,000 ordinary shares)

Guidance to answer:

3) 14.2.X1 – allotment of shares completed14.2.X1Application 58,500,000 Ordinary share capital 20,000,000 Share premium 38,500,000(Being the allotment of 20,000,000 ordinary shares)

How to calculate share premium 1) Institutional Investors= 10,000,000 x RM2.00 = RM20,000,0002) Retail Investors=10,000,000 x 1.85 = RM18,500,000Total = RM38,500,000

4) Record refund to unsuccessful applicants14.2.X1Application refund 5,000,000 from Retail Investors5,000,000 x RM2.85 = 14,250,000

Guidance to answer:

4) Record refund to unsuccessful applicants14.2.X1Application refund 5,000,000 from Retail Investors5,000,000 x RM2.85 = 14,250,000

14.2.X1Application 14,250,000 Bank 14,250,000(Being refund made to unsuccessful applicants)

Extract of the Statement of Financial Position of A Bhd as at 14.2.X1

EQUITY RM Authorised Capital 60,000,000 ordinary shares of RM1 each 60,000,000

Issued Share Capital 20,000,000 ordinary shares of RM1 each fully paid 20,000,000Share Premium 38,500,000

Guidance to answer:

• Not commonly practice in Malaysia• More complex, better paid in full upon application• The amount and time interval governed by AOA

The share price is collected in the following stages:

a)Applicationb)Allotmentc)Call/calls

a)Application•Applicant are required to pay part of the issue price when they apply for the shares.•Applicants are not shareholder of the company•The minimum amount payable on each share should not by less than 5% of the nominal amount and share premium (if the share issued at a premium)

Payment by Instalment:

• For eg: If 10 million ordinary shares of par value RM 1 are issued at a premium of RM2, the minimum application money will be 5% 0f RM3 (RM1 + RM2) = 15 cent per share

b) Allotment• No allotment should be made unless the sum payable on application

for the shares subscribed has been received by the company• On allotment date the shares are allotted to successful applicants.

Only when the share are alloted they considered shareholders• Successful applicants who are alloted the shares will be required to

pay the balance of the issue price as and when the co. requires a further capital

• At times, applicants may be only partly successful, that is, they are only allotted a proportion of the shares that they had applied for

• As these applicants would have paid the application money on all the shares applied for, the application money pertaining to the unsuccessful application will be used to pay up any amount due as allotment money on shares allotted


c) Call (s)• When further funds are required the directors may issue a “letter of call” on shares that are not fully called up.• The number of calls may vary

d) Calls in Advance• Some shareholders may pay for their shares before the call is made.• This is referred to as “called in advance” • All the money received is credited to the share capital account which is treated as a loan to company.• It cannot be credited to the share capital account yet as the company has not called for the payment of the money. •Most AOA provide for a payment of interest by the company on calls in advance• However, the calls in advance do not rank for dividend• In the SOFP, call in advance will be disclosed as part of paid-up capital


e) Calls in Arrears• Some shareholders may fail to pay the sum due on call (s) due to one reason or another• This is termed as “Calls in Arrears”• In the SOFP it is shown as deduction from issued capital or as a debt• The AOA of companies empower the company to charge interest on the calls in arrears.• In the SOFP the calls in arrears will appear as follows:

Extract of the statement of financial position

Equity RMAuthorised share capital xxx

Issued and called-up capital xxxLess: Calls in arrears (xx) xxx

Add: calls in advance xxPaid-up capital xxx


Success Bhd, with a registered capital of 50,000,000 ordinary shares of RM1 each, invited applications for its first issue of 30,000,000 ordinary shares of RM1 each at RM1.20 on the following terms:

On application 20 centsOn allotment 40 cents (**including premium – 20 cents)On 1st call 30 centsOn 2nd call and final call 30 cents (one entity)Total 1.20

Application were received for 40,000,000 ordinary shares. The directors rejected applications for 5,000,000 shares and allotted the shares on a pro-rata basis among the remaining applicants. Any surplus money on application was used to pay up on allotment.

All monies due on the allotment and calls on the ordinary shares were duly received.

Required:Prepare journal entries to record the above transactions.

Example 3 – Page 27:

Application = 40,000,000Rejected = 5,000,000 (return)Alloted the shares on pro-rata basis among remains applicants = 5,000,000 ----- (b)Accepted = 30,000,000

On closing applicationRM RM

Dr Bank 8,000,000Cr Ordinary share application 8,000,000 (Being money received for 40 million shares)• accept all the money first

On allotment dateDr Ordinary share application 6,000,000Cr Ordinary share capital 6,000,000(Being share alloted: 30 million x 20 cents)

Guidance to answer:

Dr Ordinary share allotment 12,000,000Cr Ordinary share capital 6,000,000

Share Premium 6,000,000(being amount called up on allotment)Notes:30 million share x 20 cents = 6 million30 million share x 20 cents = 6 million (refer to the question)

Dr Ordinary share application 1,000,000Cr Bank 1,000,000(Being refund on rejected application: 5 million x 20 cents)

Dr Ordinary share application 1,000,000Cr Ordinary share allotment 1,000,000(Being transfer of surplus money on application to allotment)***Notes: 5 million (b) x 20 cents = 1 million

On receive allotment money

Dr Bank 11,000,000Cr Ordinary share allotment 11,000,000(Being receipt of the balance of allotment money)Notes: Supposed received RM12 million but surplus money use to fund application to allotment)

On date of 1st callDr 1st call 9,000,000Cr Ordinary share capital 9,000,000(Being 1st call made)

On receipt of money of 1st callDr Bank 9,000,000Cr 1st call 9,000,000(Being receipt of amount due on 1st call)

On date of 2nd and final callDr 2nd call 9,000,000Cr Ordinary share capital 9,000,000(Being 2nd and final call made)

On receipt of money on 2nd callDr Bank 9,000,000Cr 2nd call 9,000,000(Being receipt of amount due on 2nd and final call)

Cheer Bhd, with an authorised capital of 60 million ordinary shares of RM2 each offered for sale to public 40 million ordinary shares at par on the following terms:

On application 40 centsOn allotment 40 centsOn 1st call 60 centsOn 2nd call and final call 60 cents (one entity)Total 2.00

Applications were received for 50 million ordinary shares and the directors resolved that the shares be allotted on a pro-rata basis of four shares for every five shares applied for. Any surplus application monies were transferred to allotment account to reduce the money the money due on allotment. All monies were duly collected when due except for a:• shareholder with 4 million shares who paid the 2nd and final call at the same time as 1st call (It means during 1st call one of the shareholder paid in advance for 2nd and final call)• Other shareholder with 5 million failed to pay the 2nd and final call (during 2nd & Final call)

Required:Prepare journal and ledger entries to record the above transactions and extracts of the statement of financial position of the company after the (1) 1st call and (ii) 2nd call and final


Application = 50,000,000Rejected = No rejectionAlloted the shares on pro-rata basis among remains applicants = 10,000,000 (excess), allowed 40,000,000

On closing applicationRM RM

Dr Bank 20,000,000Cr Ordinary share application 20,000,000 (Being money received for 50 million shares x 40 cents)• accept all the money first

On allotment dateDr Ordinary share application 16,000,000Cr Ordinary share capital 16,000,000(Being share alloted: 40 million x 40 cents)

Guidance to answer:

Dr Ordinary share application 20,000,000Cr Ordinary share capital 16,000,000

Ordinary share allotment 4,000,000(being excess of application money transferred to allotment)Notes:40 million share x 40 cents = 16 million10 million share (excess share) x 40 cents = 4million (refer to the question)

On receive allotment money

Dr Bank 12,000,000Cr Ordinary share allotment 12,000,000(Being balance of allotment money received)40 million x 40 cents = 16 million – 4 million received excess money on allotment = RM12 million

On date of 1st callDr 1st call 24,000,000Cr Ordinary share capital 24,000,000(Being 1st call made)

On receipt of money of 1st callDr Bank 26,400,000Cr 1st call 24,000,000 Call in advance (4 million x 60 cents) 2,400,000 (Being amount received on 1st call and RM2.4 million receive as call in advance)Notes: One of shareholder 4 million x 60 cents = 2.4 million

On date of 2nd and final callDr 2nd call 24,000,000Cr Ordinary share capital 24,000,000(Being 2nd and final call made)

On receipt of money on 2nd callDr Call in advance 2,400,000

Call in arrears (5 million x 60 cents) 3,000,000Bank 18,600,000

Cr 2nd and Final call 24,000,000(Being receipt of amount due on 2nd and final call)

Ledger entries:Ordinary Shares Application

Ordinary Shares Allotment

1st Call

RM

RM RM

RM

RMRM

Ordinary share capital 16,000,000 Bank 20,000,000 Allotment 4,000,000

20,000,000 20,000,000

16,000,000 16,000,000

26,400,000 26,400,000

Ordinary share capital 16,000,000 Application 4,000,000 Bank 12,000,000

Ordinary share capital 24,000,000 Bank 26,400,000 Call in advance 2,400,000

Ledger entries:Call in advance

2nd and Final call

Call in arrears

RM

RM RM

RM

RMRM

1st call 2,400,000 Balance c/d 2,400,000

2,400,000 2,400,000

24,000,000 24,000,000

3,000,000 3,000,000

Ordinary share capital 24,000,000 Bank 18,600,000 Call in arrears 3,000,000 Calls in advance 2,400,000

2nd and final call 3,000,000 Balance c/d 3,000,000

Ledger entries:Call in advance

RM RM

Balance c/d xxx

Balance b/d xxxApplication 20,000,000Allotment 12,000,0001st call 26,400,0002nd and final call 18,600,000

Ordinary share capitalRM RM

Balance b/d 56,000,000

Application 16,000,000 Allotment 16,000,000Balance c/d 56,000,000 1st call 24,000,000

Balance c/d 80,000,000 2nd and Final Call 24,000,0002nd and final call 18,600,000

80,000,000 80,000,000

Statement of Financial Position

Cheers BerhadStatement of Financial Position (extract)

(after 1st call)

Equity RM’000Share CapitalAuthorised capital 60,000,000 ordinary shares of RM2 each 120,000Issued Share capital 40,000,000 ordinary shares, paid at RM1.40 each56,000Call in advance* 2,400

Statement of Financial PositionCheers Berhad

Statement of Financial Position (extract)(after 2nd call)

Equity RM’000Share CapitalAuthorised capital 60,000,000 ordinary shares of RM2 each 120,000Issued Share capital 40,000,000 ordinary shares fully paid 80,000Call in arrears* (3,000)

Cheer Bhd, with an authorised capital of 60 million ordinary shares of RM2 each offered for sale to public 40 million ordinary shares at par on the following terms:

On application 40 centsOn allotment 40 centsOn 1st call 60 centsOn 2nd call and final call 60 cents Total 2.00

Applications were received for 50 million ordinary shares and the directors resolved that the shares be allotted on a pro-rata basis of four shares for every five shares applied for. Any surplus application monies were transferred to allotment account to reduce the money the money due on allotment. All monies were duly collected when due except for a:•A holder of 2 million shares failed to pay the allotment money as well as the 1st call money and 2nd (Final) call money.Understand this: Shareholder failed to pay during allotment, 1st Call, 2nd Call and Final Call • Another holder of 4 million shares had paid in advance the 1st call money during the allotment

Required:Prepare journal and ledger entries to record the above transactions



Calculation (pls understand this)Application Allotment50,000,000 40,000,00010,000,000 8,000,0002,500,000 2,000,000

Additional notes:Total money application received = RM20 millionTotal Excess Application money = RM 4 million(transfer to allotment account)

During allotment2 million shares during allotment basically is 2.5 million during application

Guidance to answer:

Recommend to use this calculation must easy to understand

Please be careful and understand this:2 million fail to pay the allotment money.

Amount due to allotment 2 million x 0.4 RM800,000Less: 2/40 x RM4 m RM200,000(Pro-rate excess money paid the 2 million shareholder who fail to pay allotment)

Arrears (2 million shares still owe) RM600,000

Guidance to answer:

Another alternative can also calculate

Please be careful and understand this:2 million fail to pay the allotment money.

Total amount payable on a applicationAnd allotment of 2 million shares 2 million x 80 cents 1,600,000(Price application + Price allotment)(40 cents + 40 cents)

Less:Payment on applicationDue on allotment 2.5 million x 40 cents 1,000,000

Arrears 600,000

Guidance to answer:

The amount money received an allotment and the call in advance can be calculated as:

Amount due on allotment Received: 40 million – 2 million x 40 cents 15,200,000

38 million x 40 cents

Less: Pro-rate of excess money

40 million – 2 million x RM4million (3,800,000)38 million x RM4 million

Add:Call in advance 2,400,000(Receive advance For 1st call during allotment)

Total amount 13,800,000

Guidance to answer:


Calculation (pls understand this)Application Allotment50,000,000 40,000,00010,000,000 8,000,0002,500,000 2,000,000

Guidance to answer:

On allotment dateDr Ordinary share allotment 16,000,000Cr Ordinary share capital 16,000,000(Being share alloted: 40 million x 40 cents)

Dr Call in arrears 600,000Cr Ordinary Share allotment 600,000(Balance of arrears for 2 million shares Failed to pay allotment money)

Dr Ordinary share allotment 2,400,000Cr Call in advance 2,400,000(4 million shares paid in advance for 1st callDuring allotment)4 million shares x 60 cents = RM2,400,000

Dr Application 4,000,000Cr Ordinary Share Allotment 4,000,000(being excess application money transfer to allotment)

Guidance to answer:

Dr Bank 13,800,000Cr Ordinary Share Allotment 13,800,000(being balance of allotment money received)

Dr 1st Call 24,000,000Cr Ordinary share capital 24,000,000(Being 1st call made)

Dr Call in arrears 1,200,000Cr 1st Call 1,200,000(2 million failed to pay 1st call)2 million x 60 cents = RM1.2 million

Dr Bank 20,400,000Cr 1st call 20,400,00(Being amount received for 1st callRM2,400,0000 received in advance during allotmentRM1,200,000 failed to payRM24,000,000 – (RM2,400,000 + 1,200,000)

Guidance to answer:

Dr 2nd call & Final 24,000,000Cr Ordinary share capital 24,000,000(Being 2nd call made)

Dr Call in arrears 1,200,000Cr 2nd Call 1,200,000(2 million failed to pay 2nd call)2 million x 60 cents = RM1.2 million

Dr Bank 22,800,000Cr 2nd call 22,800,00(Being amount received for 2nd callRM24,000,0000 received in advance during allotmentRM1,200,000 failed to payRM24,000,000 – RM1,200,000 = RM22,800,000

Dr Bank 22,800,000Cr 2nd call 22,800,00(Being amount received for 2nd callRM24,000,0000 received in advance during allotmentRM1,200,000 failed to payRM24,000,000 – RM1,200,000 = RM22,800,000

Guidance to answer:

Ledger entries:Ordinary Shares Allotment

1st call

2nd Call and final call

RM

RM RM

RM

RMRM

Ordinary share capital 16,000,000 Call in arrears 600,000Call in advance 2,400,000 Application 4,000,000

18,400,000 18,400,000

24,000,000 24,000,000

24,000,000 24,000,000

Ordinary share capital 24,000,000 Call in arrears 1,200,000Call in advance 2,400,000

Bank 20,400,000

Ordinary share capital 24,000,000 Call in arrears 1,200,000 Bank 22,800,000

Call in advance 2,400,000 Bank 13,800,000

Ledger entries:

RM RMOrdinary share allotment 600,0001st call 1,200,000

3,000,000 3,000,000

2nd and final call 1,200,000 Balance c/d 3,000,000

Call in arrears

• a company may forfeit shares on which the calls are unpaid after all the formalities regarding the forfeiture have been observed.• The defaulter loses the amount already paid on the shares• On forfeiture, the defaulter ceases to be a shareholder.• The share capital account will be reduced by the amount of capital called up on the nominal value of the forfeited share.•This does not amount to capital reduction•The amount paid up on the forfeited shares will be transferred to the forfeited shares reserved or to the share premium account if the forfeited shares are cancelled and not be reissued.

Forfeited shares may be reissued at a later date• Any balance left after all unpaid calls and accrued interest and expenses have been settled, shall be paid to the person whose shares have been forfeited or to the share premium account (if AOA don’t allowed the balance to the person whose shares have been forfeited)•The power to forfeit the shares is normally include in AOA

2.7: FORFEITURE OF SHARES

RM RMThe shares on which the call was notpaid being forfeitedDr Share capital xxCr Forfeited shares xx(number of shares forfeited x called up capital)

The uncollectible amount, i.e., calls in arrears on shares thatare forfeitedDr Forfeited shares xxCr Call in arrears xx

Pro forma journal entries

Illustration •En. Kassim had paid 80 cents per share on 1,000 shares of RM 1•subsequently failed to pay the final call of 20 cents per share.•The company forfeited the shares after due notice was given.•The journal entries:

RM RMDr Share capital 1,000Cr Forfeited shares 1,000

Dr Forfeited shares 200Cr Call in arrears 200

•The balance of RM800 in the forfeited shares account represents the amount previously collected from the shares forfeited.•If the forfeited shares are not reissued, this amount maybe credited to the share premium account (as a capital gain).•If the forfeited shares are reissued this amount will be transferred to the reissue account.

2.7.1 Reissue of Forfeited Shares

• Forfeited shares may be reissued.• These shares may be reissued as fully or partly paid shares provided that the total amount received from the defaulter (the original shareholder).• The new purchaser is equal to at least the nominal value of the forfeited shares. RM RMDr Reissue account xxCr Share Capital xx(The forfeited shares reissued at theNominal value)

Dr Bank xxCr Reissue account xx(The receipt of the amount due on reissue)

Dr Forfeited shares xxCr Reissue account xx(The amount in the forfeited share account transferred to the Reissue account)

Illustration

•En. Kassim had paid 80 cents per share on 1,000 shares of RM•1 subsequently failed to pay the final call of 20 cents per share.•The company forfeited the shares after due notice was given.•The forfeited shares could be reissued at any price but should not be below 20 cents per share.• Now, 1000 share were forfeited and reissue to En. Akmal at 40 cents per share.•As the amount collected from En. Kassim (1,000 shares x 80 cents ) and En. Akmal (1,000 x 40 cents) exceeded the nominal value of RM1 per share.•The surplus over and above the nominal value would be transferred to the share premium account as gain on reissue.•Therefore, RM200 will be transferred to the Share Premium account.•If the AOA permit, then RM200 may be refunded to En. Kassim.

Let see the double entries.

Solution.

RM RMDr Reissue account 1000Cr Share Capital 1000

Dr Bank 400Cr Reissue account 400

Dr Forfeited shares 800Cr Reissue account 800

Dr Reissue account 200Cr 200

Topic 2 ISSUANCE OF SHARES

Business

Transcript of Topic 2 ISSUANCE OF SHARES