acct2542 tut wk 2 - Tutorial Week 3 Blackboard Questions and Solutions Chapter 2 Financing company operations REVIEW QUESTIONS 1 Describe the purpose of

acct2542 tut wk 2 - Tutorial Week 3 Blackboard Questions...

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Tutorial Week 3 Blackboard Questions and Solutions 1 Chapter 2 – Financing company operations REVIEW QUESTIONS 1. Describe the purpose of each of the ledger accounts used to record the issue of shares. Cash Trust : used to record money received from applicants subscribing for shares. These amounts remain in the trust account until the shares have been allotted to applicants. The balance will then be transferred to the company’s general bank account. Application : used to record the amount of money received from applicants subscribing for shares. Once the directors decide to allot the shares to the applicants, then this account is cleared out and transferred to the Share Capital Account or to Allotment, Calls in Advance and refunds from Cash Trust if appropriate. Share Capital : used to record the amount called up from successful applicants who have now been allotted shares in the company. The amount is transferred in from the Application Account or the Allotment and Call accounts. Other accounts that may be used depending on the details of the share issue will be the Allotment Account and the Call Account. These accounts are used if shares are payable by instalments. 3. If a share issue is oversubscribed, what action can be taken in relation to excess money received on application? Excess monies received on application for shares will be refunded to the applicant.
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  • Fall '09
  • Corporation, Share capital, Cash Trust

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