A combined account for share application and share allotment is opened by the company in some situations.
What is the name of that combined account?
Answer & explanation
Correct answer: option 4
The correct answer is option 4- Share Application and Allotment Account.
A combined account for share application and share allotment is opened by the company in some situations which is called Share Application and Allotment Account.
Sometimes a combined account for share application and share allotment called ‘Share Application and Allotment Account’ is opened in the books of a company. The combined account is based on the reasoning that allotment without application is impossible while application without allotment is meaningless. These two stages of share capital are closely inter-related. When a combined account is maintained, journal entries are recorded in the following manner:
For Receipt of Application and Allotment-
Bank A/c
To Share Application and Allotment A/c
(Money received on applications for shares @ Rs. _____ per share).
For Transfer of Application Money and Allotment Amount-
Share Application and Allotment A/c
To Share Capital A/c
(Transfer of application money to Share Capital Account for amount due or allotment of — Share @ Rs. _____ per share)