Accounting for retention of

excess application money

General Journal
Application Dr
Allotment Cr
Application money retained
against allotment
Accounting for retention of
excess application money

General Journal
Application Dr
Calls in Cr
Advance
Excess application money
applied to future calls
Accounting for retention of
excess application money

General Journal
Call Dr
Share Capital Cr
First Call
Accounting for retention of
excess application money

General Journal
Cash in Dr
advance
Calls Cr
Records calls in advance against
call
Accounting for retention of
excess application money

General Journal
Bank Dr
Calls Cr
Call money owing is received
Costs associated with share issue
 Preparation of prospectus
 Lodgment with ASIC
 Publication
 Receipt of money
 Issue of shares
 Including stamp duty and taxes, professional advisers’
fees, underwriting costs, commissions and brokerage fees
 The above “equity issue costs” must be recognized in
equity
 Indirect costs are not included as transaction costs.
Costs associated with share issue

General Journal
Transaction Dr
costs
Bank Cr
Recording of transaction costs as
per AASB 1015
 Bookbuilding
 Occurs where an investment banker solicits
bids from institutional investors prior to
pricing an equity issue
 Stapled securities
 Stapling is an arrangement under which
different securities are quoted jointly
 Issuing Debentures
 Issuing of debt
 Attracts interest
 Must be repaid in a specified time frame
 Borrower
 Lender = principal
 Interest = Charge (Fixed or Floating)
 Maturity date
 Redemption
 Issued via prospectus to the general public and also privately to
elite few
 Must appoint a trustee
 Clear disclosure of all matters relating to the debentures
 Mortgage Debenture
 Secured by a first mortgage over land and/or buildings
 Cannot exceed >60% of the value of asset
 Limits rights to resell/transfer asset
 Trustee can take possession and sell to repay debenture
holders
 Unsecured Note
 Debt which is not secured by any charge over assets
 Higher risk = higher rate of interest
 Convertible Note
 Allows debenture holder to convert debt to paid up
share capital or cash upon maturity
Contrast Funds from equity and
debt
Shares Debt
Ownership entitlement No Ownership entitlement
Voting rights No Voting rights
Dilute ownership Do not share profits
Payment of Dividend is at discretion of Fixed regular income
Directors
Does not have to be repaid Must be repaid
No restriction on amount of share issue Specific debt/equity ratio
Dividends = Profit Interest = Expense
Accounting entries for the issue
and redemption of debentures

General Journal
Trust Account- Dr
Debentures
Application - Cr
Debentures
Accounting entries for the issue
of debentures

General Journal
Application - Dr
Debentures
Debentures Cr
Trust Acc - Cr
Debentures
Allot debentures and refund
excess application monies
Accounting entries for the issue
of debentures

General Journal
Bank Dr
Trust Acc - Cr
Debentures
Transfer of trust monies
Making annual interest
payments on debentures

General Journal
Interest Dr
Bank Cr
Payment of interest
Making annual interest
payments on debentures

General Journal
Interest on Dr
debentures
Accrued Cr
expense
Interest incurred but not due for
payment on annual balance date
Making annual interest
payments on debentures

General Journal
Accrued Dr
expense
Interest on Cr
debentures
Reversal entry
Accounting entries for the
redemption of debentures

General Journal
Interest - Dr
Debentures
Bank Cr
Final interest payment
Accounting entries for the
redemption of debentures

General Journal
Debentures Dr
Bank Cr
Payment of debenture holders on
redemption
 Accounting entries for the
redemption prior to maturity
at a discount
General Journal
Debentures Dr
Discount on Cr
debenture redemption
Bank Cr
Payment of debenture holders on
redemption at discount
Alternate accounts for debt
issues
Debenture Mortgage Unsecured
Debenture Note
Applications Applications Applications
Debentures Mortgage Unsecured
Debentures Notes
Interest Interest Interest
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