When the directors opt to make a proportionate allotment to all applicants, the excess application money received is normally adjusted towards the amount due on allotment. In case, the excess application money received is more than the amount due on allotment of shares, such excess amount may either be:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Refunded or credited to calls in advance
In a pro-rata allotment every applicant gets fewer shares than he applied for, so part of his application money is extra. That extra money is first used for the amount due on allotment. Anything still left over after the allotment money is covered can either be refunded to the applicant or kept and credited to Calls in Advance, to be used against future calls.
Why the other options are incorrect
Option (1) Adjusted towards the amount due on the allotment of shares allotted — Incorrect. The allotment money is already fully covered; the question is about the excess beyond it.
Option (3) Refunded money in full — Incorrect. Refund is only one of the two choices; the excess may also be kept as calls in advance.
Option (4) Refunded or credited to Calls in Arrears — Incorrect. Calls in arrears is money not received from shareholders; extra money received can never go there.
NCERT (2026-27 edition): |