Accountancy Part AAccounting for Shares

Identify the subscription related to Earn Limited in above case.

Answer based on following passage.

Earn Limited, with an authorised capital of ₹10,00,000 divided into equity shares of ₹ 10 each, issued 50,000 equity shares at a premium of ₹3 per share payable as follows.

On application - ₹3 per share
On allotment - ₹5 per share (including Premium)
On first and final call- Balance amount.

Applications were received for 60,000 shares. The Directors allotted the shares to all applicants on pro-rata basis. All money received except the first and final call on 1,000 shares issued to Ravi.

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → Over Subscription

Applications were received for 60,000 shares against 50,000 offered – more applications than shares, which is over subscription.

NCERT (2026-27 edition):
Over Subscription – “There are instances when applications for more shares of a company are received than the number offered to the public for subscription. This usually happens in respect of shares issue of well-managed and financially strong companies and is said to be a case of ‘Over Subscription’.”