Journal Entries for Issuance of Equity Shares

The issuance of equity shares involves the sale of shares to the public in exchange for cash. The following journal entries are required to record the issuance of 25,000 equity shares of 10 each issued by a company to the public:

1. Receipt of Application Money
When a company issues equity shares to the public, it first receives application money from the investors. The journal entry for the receipt of application money is as follows:
Bank Account Debit
To Share Application Account Credit

2. Allotment of Shares
After receiving the application money, the company determines the allotment of shares to the investors. The journal entry for the allotment of shares is as follows:
Share Application Account Debit
To Share Capital Account Credit

3. Receipt of Share Capital
Once the shares are allotted, the company receives the share capital from the investors. The journal entry for the receipt of share capital is as follows:
Bank Account Debit
To Share Capital Account Credit

4. Issue of Share Certificates
After receiving the share capital, the company issues share certificates to the investors. The journal entry for the issue of share certificates is as follows:
Share Capital Account Debit
To Share Certificate Account Credit

Explanation of Journal Entries

The above journal entries explain the process of issuing equity shares to the public and recording the transactions in the books of accounts. The first entry represents the receipt of application money from the investors, which is the first step in the process of issuing equity shares. The second entry represents the allotment of shares to the investors based on the amount of application money received. The third entry represents the receipt of share capital from the investors, which is the final step in the process of issuing equity shares. The fourth entry represents the issue of share certificates to the investors, which is a proof of ownership of shares in the company.