Which of the following account is credited with the amount received on the share application and allotment?
Answer & explanation
Correct answer: option 1
The correct answer is option 1- Share Application & Allotment A/c.
Share Application & Allotment A/c is credited with the amount received on the share application and allotment.
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:
Bank A/c Dr.
To Share Application and Allotment A/c
(Money received on applications for shares @ Rs. _____ per share).