Which account is used to temporarily hold the money received from share applicants?

Share Application Account

The correct answer is option 3- Share Application Account.

The amount of money paid with various instalment represents the contribution to share capital and should ultimately be credited to share capital. However, for the sake of convenience, initially individual accounts are opened for each instalment. All money received along with application is deposited with a scheduled bank in a separate account opened for the purpose.

The money received on rejected applications should be fully returned to the applicant within period prescribed by law/SEBI. In case lesser number of shares have to be allotted, than those applied for the excess application money must be adjusted towards the amount due on allotment from the allottees. The effect of this is to close the share application account which is only a temporary account for share capital transactions.