AccountancyCBSE Class 12 · Accounting for Share Capital

Pro-Rata Allotment of Shares Class 12: Oversubscription, Excess Money and Entries

Updated 15 October 2026 · Fact-checked

Pro-rata allotment is allotting shares in proportion to the shares applied for when an issue is oversubscribed. The excess application money is first adjusted towards the amount due on allotment (and, if the Articles allow, towards calls); any balance is refunded. Applications that are rejected outright get their money back in full.

Excess application money on unallotted shares is used first for allotment, then calls in advance if allowed, and only then refunded; rejected applicants get eve

Illustration drawn for QuestionBuddy.

Understand Pro-Rata Allotment of Shares

Oversubscription. When applications exceed the shares offered, the directors may: (1) reject some applications and allot in full to the rest; (2) allot pro-rata (proportionately) to all; or (3) a combination: reject some, allot in full to some, and pro-rata to others. A company cannot allot more shares than it offered.

Pro-rata ratio. Shares allotted : shares applied (for that category). An applicant for 600 shares in a 2 : 3 category gets 400.

Excess application money. Application money received on shares not allotted to a pro-rata applicant is excess. It is:
1. adjusted towards the allotment money due from him;
2. if more remains and the Articles permit, adjusted towards calls (held as calls in advance until the call is made);
3. otherwise refunded.

Journal entries (aggregate).

Receipt: Bank A/c Dr; To Share Application A/c.
Transfer and adjustment: Share Application A/c Dr (total received); To Share Capital A/c (application on shares allotted); To Share Allotment A/c (excess adjusted); To Calls in Advance A/c (if any); To Bank A/c (refunds, including rejected applications).
Allotment due: Share Allotment A/c Dr; To Share Capital A/c (and To Securities Premium A/c if premium is payable on allotment).
Allotment received: Bank A/c Dr; To Share Allotment A/c (allotment due − excess adjusted − any defaults).

Per-applicant working (for forfeiture questions).

Shares allotted = shares applied × pro-rata ratio.
Excess = (shares applied − shares allotted) × application money per share.
Allotment payable by him = shares allotted × allotment per share − excess.

If he fails to pay, the net amount is the allotment unpaid, and the excess counts as money received at forfeiture (see Forfeiture of Shares).

Undersubscription and minimum subscription. If applications are fewer than shares offered, shares are allotted to all applicants, provided the minimum subscription of 90% of the issue is received; otherwise the money is refunded.

Pro-Rata Allotment of Shares: key facts

Shares allotted: Shares applied × (shares allotted in category ÷ shares applied in category)
Excess application money: (Shares applied − shares allotted) × application money per share
Allotment payable: Shares allotted × allotment money − excess; If negative, adjust to calls (if allowed) or refund.
Application entry check: Application received = capital on allotted shares + excess adjusted + refunds

How to answer Pro-Rata Allotment of Shares questions

Make a category table before passing entries: applied, allotted, money received, money needed, excess, refund.

1List categories: rejected, full allotment, pro-rata (with each ratio).
2Rejected: refund all their application money.
3Pro-rata: excess = (applied − allotted) × application money.
4Pass the application transfer entry: capital, allotment (excess), calls in advance (if any), bank (refunds).
5Allotment received = allotment due − excess adjusted (− any default).
6For a named applicant, repeat the per-applicant working before forfeiture.

Pro-Rata Allotment of Shares in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Excess money is adjusted before it is refunded

Suppose Riya applies for 300 shares of ₹10 each in a heavily oversubscribed public issue of Brightline Foods Ltd (a fictional company): ₹4 on application and ₹6 on allotment. Shares are allotted pro-rata, 1 share for every 3 applied for, and the Articles do not allow excess money to be kept for calls.

How many shares does she get, how much of her application money is excess, and does she pay anything on allotment?

Try it first, then show the solutionSolution

Allotted = 300 × 1/3 = 100 shares.
Paid ₹1,200; needed 100 × 4 = ₹400; excess ₹800.
Allotment due = 100 × 6 = ₹600; adjusted from the excess.
Balance excess 800 − 600 = ₹200 is refunded.

Answer: Riya gets 100 shares, pays nothing more on allotment because ₹600 of her ₹800 excess covers it, and receives a refund of ₹200.

Memory hook: Excess first pays allotment; only the leftover comes home.

Tricks to remember Pro-Rata Allotment of Shares

Short memory aids. Say each one aloud once, then use it on a question the same day.

Adjust, Advance, Refund
A-A-R: Allotment first, calls in Advance next (if allowed), Refund the rest.
Use it when: Order of using excess money.
Applied minus allotted, times application
Excess = (Ap − Al) × A.
Use it when: Per-applicant excess.
Five-line application entry
Share Application Dr; To Capital, To Allotment, To Calls in Advance, To Bank.
Use it when: Aggregate entry.

Pro-Rata Allotment of Shares: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Excess for one applicant · 1 mark · MCQBoard level

A company received applications for 1,50,000 shares against 1,00,000 offered and allotted pro-rata. Application money was ₹3 per share. Ajay applied for 600 shares. The excess application money adjusted towards his allotment is:
(a) ₹1,800
(b) ₹1,200
(c) ₹600
(d) ₹300

Try it first, then show the solutionSolution

Allotted = 600 × 1,00,000/1,50,000 = 400.
Excess = (600 − 400) × 3 = ₹600.

Answer: (c) ₹600

Example 2: Rejection and pro-rata · 3 marks · Short answerBoard level

A company offered 50,000 shares of ₹10 each: application ₹4, allotment ₹3, call ₹3. Applications were received for 80,000 shares. Applications for 10,000 shares were rejected, and the rest were allotted 50,000 shares pro-rata, excess money being adjusted towards allotment. Pass the entries for application money. (3 marks)

Try it first, then show the solutionSolution

Bank A/c Dr 3,20,000 To Share Application A/c 3,20,000.
Rejected refund = 10,000 × 4 = 40,000; excess on pro-rata = (70,000 − 50,000) × 4 = 80,000.
Share Application A/c Dr 3,20,000; To Share Capital A/c 2,00,000; To Share Allotment A/c 80,000; To Bank A/c 40,000.

Answer: Two entries as shown; cash to be received on allotment = 1,50,000 − 80,000 = ₹70,000.

Example 3: Allotment payable with a premium · 3 marks · Short answerHarder board level

Shares of ₹10 each were issued at a premium of ₹2: application ₹3, allotment ₹5 (including premium), call ₹4. Applications for 2,40,000 shares were received for 1,60,000 shares and allotted pro-rata. Priya applied for 1,200 shares. How much must she pay on allotment? (3 marks)

Try it first, then show the solutionSolution

Ratio 1,60,000 : 2,40,000 = 2 : 3; allotted = 800.
Excess = (1,200 − 800) × 3 = ₹1,200.
Allotment due = 800 × 5 = 4,000; payable = 4,000 − 1,200 = ₹2,800.

Answer: Priya pays ₹2,800 on allotment.

Example 4: Excess larger than allotment · 3 marks · Short answerHarder board level

Shares of ₹10 each: application ₹6, allotment ₹2, call ₹2. Applications were three times the shares offered, and all applicants received shares pro-rata. The Articles permit excess money to be adjusted towards calls; any balance is refunded. Amar applied for 900 shares. Show how his application money is used. (3 marks)

Try it first, then show the solutionSolution

Allotted = 300; paid 900 × 6 = 5,400; needed 300 × 6 = 1,800; excess 3,600.
Adjust to allotment 300 × 2 = 600; to the call (calls in advance) 300 × 2 = 600.
Refund = 3,600 − 600 − 600 = ₹2,400.

Answer: ₹1,800 to capital, ₹600 to allotment, ₹600 held as calls in advance, ₹2,400 refunded.

Example 5: Combination of rejection, full and pro-rata · 6 marks · Long answerHOTS / competency

A company offered 30,000 shares of ₹10 each: application ₹3, allotment ₹4, call ₹3. Applications were received for 50,000 shares: applicants for 10,000 shares were rejected; applicants for 15,000 shares got 10,000; applicants for 25,000 shares got 20,000. Excess money is adjusted towards allotment. (i) Pass the entry transferring application money. (ii) Calculate the cash due on allotment. (iii) Sita applied for 600 shares in the second category; how much does she pay on allotment? (6 marks)

Try it first, then show the solutionSolution

Received = 50,000 × 3 = 1,50,000; refund 10,000 × 3 = 30,000.
Excess: category 2 (15,000 − 10,000) × 3 = 15,000; category 3 (25,000 − 20,000) × 3 = 15,000; total 30,000.
(i) Share Application A/c Dr 1,50,000; To Share Capital A/c 90,000; To Share Allotment A/c 30,000; To Bank A/c 30,000.
(ii) Allotment due 30,000 × 4 = 1,20,000; cash due = 1,20,000 − 30,000 = ₹90,000.
(iii) Sita: allotted 400; excess 200 × 3 = 600; payable 400 × 4 − 600 = ₹1,000.

Answer: (i) As shown. (ii) ₹90,000. (iii) Sita pays ₹1,000.

Example 6: Excess is not simply refunded · 1 mark · Assertion-reasonHOTS / competency

Assertion (A): In pro-rata allotment, the whole excess application money is refunded to applicants.
Reason (R): Excess application money is first adjusted towards the amount due on allotment.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is true, but R is false.
(d) A is false, but R is true.

Try it first, then show the solutionSolution

Only the part left after adjusting allotment (and calls, if allowed) is refunded.

Answer: (d) A is false, but R is true.

Where students lose marks in Pro-Rata Allotment of Shares

The slips examiners see most often, and what to write instead.

Mistake: Refunding all excess money
Ignoring the adjustment rule.
Wrong working
Share Application Dr; To Share Capital; To Bank (all excess).
Right working
Credit Share Allotment with the excess (up to the allotment due).
Do this: Adjust first, refund last.
Usually costs: 1-2 marks.
Mistake: Computing excess on shares allotted
Mixing applied and allotted.
Wrong working
Excess = 400 × 3.
Right working
Excess = (600 − 400) × 3 = 600.
Do this: Excess is on shares not allotted.
Usually costs: 1 mark.
Mistake: Forgetting the premium in allotment due
Using only the capital part.
Wrong working
Allotment due = 800 × 3.
Right working
800 × 5 (₹3 capital + ₹2 premium).
Do this: Allotment money includes premium if payable then.
Usually costs: 1 mark.
Mistake: Applying one ratio to all categories
Not separating categories.
Wrong working
Overall ratio 30,000 : 40,000 for everyone.
Right working
2 : 3 for category 2 and 4 : 5 for category 3.
Do this: Work category by category.
Usually costs: 2 marks.

Exam tips

Show the category table even if not asked; it supports every later figure.
Narration: 'being application money transferred to share capital, excess adjusted towards allotment and balance refunded'.
When the question names an applicant who defaults, his excess money matters at forfeiture.
Pro-rata allotment is examined in 4- and 6-mark journal questions almost every year.

Practice questions on Pro-Rata Allotment of Shares

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

Q1 · 1 mark · MCQBoard level
The entry to adjust excess application money towards allotment is:
(a) Share Allotment A/c Dr To Share Application A/c
(b) Share Application A/c Dr To Share Allotment A/c
(c) Share Application A/c Dr To Bank A/c
(d) Bank A/c Dr To Share Allotment A/c
Hint
Money moves from application to allotment.
Answer
(b) Share Application A/c Dr To Share Allotment A/c
Q2 · 1 mark · MCQBoard level
An issue is said to be oversubscribed when:
(a) shares are issued at a premium
(b) applications are received for more shares than offered
(c) the minimum subscription is not received
(d) calls are paid in advance
Hint
Demand exceeds supply.
Answer
(b) applications are received for more shares than offered
Q3 · 3 marks · Short answerBoard level
Shares were allotted pro-rata in the ratio 2 : 3 (allotted : applied). Application money ₹2 and allotment money ₹3 per share. A applied for 900 shares. Calculate the amount A pays on allotment. (3 marks)
Hint
Allotted 600.
Answer
Allotted = 600; excess = 300 × 2 = 600; allotment due 600 × 3 = 1,800; payable = ₹1,200.
Q4 · 3 marks · Short answerHarder board level
A company offered 20,000 shares; application money ₹5, allotment ₹3. Applications for 30,000 shares were received and all applicants were allotted pro-rata. Pass the entry for the transfer of application money. (3 marks)
Hint
Excess on 10,000 shares.
Answer
Share Application A/c Dr 1,50,000; To Share Capital A/c 1,00,000; To Share Allotment A/c 50,000.
Q5 · 3 marks · Short answerHarder board level
A company offered 40,000 shares; application ₹2, allotment ₹3. Applications for 70,000 shares were received: those for 10,000 were rejected; the rest were allotted pro-rata. Calculate the refund, the excess adjusted and the cash due on allotment. (3 marks)
Hint
60,000 → 40,000.
Answer
Refund = 10,000 × 2 = ₹20,000. Excess = 20,000 × 2 = ₹40,000. Allotment due 1,20,000; cash due = ₹80,000.
Q6 · 3 marks · Short answerHarder board level
Application ₹5, allotment ₹2; issue allotted pro-rata, 1 share for every 2 applied. The Articles do not permit adjustment towards calls. Rohit applied for 400 shares. How is his excess money used? (3 marks)
Hint
Allotment due only ₹400.
Answer
Allotted 200; excess = 200 × 5 = 1,000; adjust ₹400 towards allotment; refund ₹600.
Q7 · 3 marks · Short answerHarder board level
A company issued 10,000 shares of ₹10 each at a premium of ₹2: application ₹3, allotment ₹5 (including premium). Applications for 15,000 shares were received and all allotted pro-rata. How much cash is received on allotment (no default)? (3 marks)
Hint
Excess on 5,000 shares.
Answer
Allotment due = 10,000 × 5 = 50,000; excess = 5,000 × 3 = 15,000; cash received = ₹35,000.
Q8 · 1 mark · Assertion-reasonHarder board level
Assertion (A): A company can proceed to allot shares only if it receives the minimum subscription of 90% of the issue.
Reason (R): If minimum subscription is not received, the application money must be refunded.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is true, but R is false.
(d) A is false, but R is true.
Hint
Both statements describe the same rule.
Answer
(b) Both A and R are true, but R is not the correct explanation of A. R states the consequence of not meeting the requirement; it does not explain why allotment depends on it.
Q9 · 3 marks · Short answerHOTS / competency
A company offered 50,000 shares with ₹4 payable on application and allotted pro-rata to all applicants. The excess application money adjusted towards allotment was ₹1,00,000. How many shares were applied for, and what was the pro-rata ratio? (3 marks)
Hint
Excess shares = excess ÷ 4.
Answer
Excess shares = 1,00,000 ÷ 4 = 25,000; applications = 75,000; ratio allotted : applied = 50,000 : 75,000 = 2 : 3.
Q10 · 3 marks · Short answerHOTS / competency
Shares were allotted pro-rata. Application money was ₹3 and allotment money ₹5 per share. Kavya was allotted 450 shares and paid ₹1,800 on allotment. How many shares had she applied for? (3 marks)
Hint
Find the excess first.
Answer
Allotment due = 450 × 5 = 2,250; excess adjusted = 2,250 − 1,800 = 450 = 150 shares × ₹3. Applied = 450 + 150 = 600 shares.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1.What is the first use of excess application money in pro-rata allotment?Show answer
Adjustment towards the amount due on allotment.
2.Applied 500, ratio 4 : 5, application ₹2: excess?Show answer
Allotted 400; excess 100 × 2 = ₹200.
3.What happens to money of rejected applicants?Show answer
Refunded in full.
4.What is the minimum subscription for a public issue?Show answer
90% of the issue.
5.If excess exceeds allotment and the Articles allow, where does the rest go?Show answer
Calls in Advance (adjusted against calls when made).

Pro-Rata Allotment of Shares: frequently asked questions

What is pro-rata allotment in Class 12?

Allotting shares proportionately to applicants when an issue is oversubscribed, so each pro-rata applicant gets the same fraction of what he applied for.

How is excess application money treated?

Adjusted towards allotment, then towards calls if the Articles allow (as calls in advance), and any balance is refunded.

Is interest on calls in advance in the syllabus?

No. Calls in advance and in arrears are asked without interest in 2026-27.

Why does excess money matter in forfeiture questions?

It counts as money received from the defaulter, so it is credited to Share Forfeiture and reduces the allotment unpaid.