AccountsISC Class 12 · Issue of Shares

Pro-rata Allotment and Over-subscription of Shares: ISC Class 12 Accounts

Updated 16 October 2026 · Fact-checked

An issue is over-subscribed when applications exceed the shares offered. The company may reject the excess applications, allot pro rata, or combine both. In pro-rata allotment, excess application money is refunded or adjusted towards allotment and calls. Under the CISCE rule, at a premium the excess is adjusted first towards share capital, then towards premium.

When applications exceed the offer, pro rata scales each applicant down (3:2 here) and the excess application money is adjusted towards allotment.

Illustration drawn for QuestionBuddy.

Understand Pro-rata Allotment and Over-subscription

Under- and over-subscription. If applications are fewer than the shares offered, the issue is under-subscribed and shares are allotted only to applicants (provided the minimum subscription is received). If applications exceed the offer, the issue is over-subscribed. A company may:
1. reject the excess applications and refund their money;
2. allot to every applicant pro rata (in proportion); or
3. reject some applications in full and allot the rest pro rata, which is the usual exam case.

Pro-rata ratio = shares applied for by the applicants who are allotted : shares allotted. An applicant's allotment = his application × shares allotted ÷ shares applied for by that group.

Excess application money of pro-rata applicants is normally adjusted towards allotment (Share Application A/c Dr; To Share Allotment A/c). If it exceeds the allotment money, the question will say whether the rest goes towards calls (held as Calls in Advance until the call is made) or is refunded.

The CISCE premium rule. When shares are issued at a premium, the syllabus states that excess money received on application is adjusted first towards share capital and any excess thereon towards Securities Premium. This matters when a pro-rata allottee defaults: the unpaid amount must be split into unpaid capital and unpaid premium before forfeiture. ISC examiners in 2025 reported candidates unable to split calls in arrears into share capital and securities premium.

Entries on application.

Bank Dr; To Share Application (all money received).
Share Application Dr; To Share Capital (shares allotted × application money); To Share Allotment (excess adjusted); To Bank (refund on rejected applications).

Calls in Arrears. Any allotment or call money unpaid after adjustment is transferred to Calls in Arrears, as the syllabus requires.

Pro-rata Allotment and Over-subscription: key facts

Pro-rata allotment of an applicant: Shares allotted = Shares applied for × (Shares allotted to group ÷ Shares applied for by group)
Excess application money: (Shares applied for − Shares allotted) × Application money per share; For pro-rata applicants only.
Cash due on allotment (no default): Allotment money due − Excess application money adjusted
CISCE order of adjustment at a premium: Excess → Capital part of allotment first
Then premium part
Then calls (if allowed)
Then refund; Unpaid allotment = remaining capital + remaining premium.
Application money accounted for: Received = Transferred to capital + Adjusted to allotment (or calls) + Refunded; Check that the Share Application A/c closes.

How to answer Pro-rata Allotment and Over-subscription questions

Pro-rata questions carry heavy marks in ISC share problems because one error carries into allotment, calls in arrears and forfeiture.

1Split applications: rejected, pro-rata group, and the shares offered.
2Find the pro-rata ratio for the group that receives shares.
3Calculate total excess application money and the refund on rejected applications.
4Pass the application entries; check the Share Application A/c closes.
5Raise allotment; deduct excess adjusted to find cash due.
6For a defaulting allottee, apply excess to capital first, then premium, and split Calls in Arrears accordingly.

Pro-rata Allotment and Over-subscription 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.

Pro-rata sharing of an over-booked event

Suppose a school concert has 500 seats but receives requests for 800 passes. The organisers decide to give every family seats in proportion to what it asked for.

How many passes does a family that asked for 8 receive?

Try it first, then show the solutionSolution

Ratio of passes given to passes requested = 500 : 800 = 5 : 8.
Passes for the family = 8 × 5/8 = 5.

Answer: The family receives 5 passes, exactly as a pro-rata share allotment would work.

Memory hook: Everyone gets the same fraction of what they asked for.

Tricks to remember Pro-rata Allotment and Over-subscription

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

Applied ÷ allotted
Pro-rata ratio is always shares applied for by the group to shares allotted to it; write it as 'applied : allotted'.
Use it when: Finding an individual's allotment.
Capital before premium (CISCE)
Excess money pays the capital part first; only the leftover touches premium.
Use it when: Splitting calls in arrears at a premium.
In = Capital + Allotment + Refund
Application money received must equal what goes to capital, what is adjusted and what is refunded.
Use it when: Checking the application entry.

Pro-rata Allotment and Over-subscription: solved examples

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

Example 1: Options on over-subscription · 1 mark · MCQBoard level

Which of the following is NOT an option for a company whose issue is over-subscribed?
(a) Reject the excess applications and refund their money
(b) Allot shares pro rata to all applicants
(c) Reject some applications and allot the rest pro rata
(d) Allot more shares than were offered in the prospectus

Try it first, then show the solutionSolution

Options (a), (b) and (c) are the recognised ways to deal with over-subscription.
A company cannot allot more shares than it offered.

Answer: (d) Allot more shares than were offered in the prospectus

Example 2: Application entries with rejection and pro rata · 3 marks · Short answerBoard level

Hazel Ltd offered 60,000 shares of ₹10 each, ₹2 payable on application. Applications were received for 96,000 shares; applications for 6,000 shares were rejected and the rest were allotted pro rata. Pass the entries for receipt and adjustment of application money. (3 marks)

Try it first, then show the solutionSolution

Bank Dr 1,92,000; To Share Application 1,92,000.
Share Application Dr 1,92,000; To Share Capital 1,20,000; To Share Allotment 60,000 (30,000 excess × 2); To Bank 12,000 (refund).

Answer: Received ₹1,92,000: ₹1,20,000 to capital, ₹60,000 adjusted to allotment, ₹12,000 refunded.

Example 3: Cash due from one pro-rata applicant · 3 marks · Short answerHarder board level

In Hazel Ltd above, allotment money is ₹4 per share. Kiran applied for 1,800 shares in the pro-rata group. How many shares does she get, and how much must she pay on allotment? (3 marks)

Try it first, then show the solutionSolution

Pro-rata group: 90,000 applied for 60,000 allotted (3:2). Kiran gets 1,800 × 2/3 = 1,200 shares.
Excess = 600 × 2 = ₹1,200.
Allotment due = 1,200 × 4 = 4,800; she pays 4,800 − 1,200 = ₹3,600.

Answer: 1,200 shares; she pays ₹3,600 on allotment.

Example 4: Pro rata at a premium: application and allotment · 6 marks · Long answerHarder board level

Birch Ltd issued 40,000 shares of ₹10 at a premium of ₹2: ₹4 on application, ₹5 on allotment (including premium), ₹3 on call. Applications for 64,000 shares were received and allotment was made pro rata to all applicants. Pass the application and allotment-due entries and find the cash due on allotment, assuming no default. (6 marks)

Try it first, then show the solutionSolution

Bank Dr 2,56,000; To Share Application 2,56,000.
Share Application Dr 2,56,000; To Share Capital 1,60,000; To Share Allotment 96,000 (24,000 × 4).
Share Allotment Dr 2,00,000; To Share Capital 1,20,000; To Securities Premium 80,000.
Cash due on allotment = 2,00,000 − 96,000 = ₹1,04,000.

Answer: Excess ₹96,000 adjusted; cash due on allotment ₹1,04,000.

Example 5: Defaulting pro-rata allottee: splitting Calls in Arrears · 6 marks · Long answerHOTS / competency

In Birch Ltd above (pro-rata ratio 8:5), Rahul applied for 1,200 shares and failed to pay allotment. Using the CISCE rule, calculate his unpaid allotment and split it between share capital and securities premium. (6 marks)

Try it first, then show the solutionSolution

Allotted = 1,200 × 5/8 = 750 shares; excess = 450 × 4 = ₹1,800.
Allotment due on 750: capital 750 × 3 = 2,250; premium 750 × 2 = 1,500; total 3,750.
CISCE rule: excess goes to capital first: capital unpaid 2,250 − 1,800 = ₹450; premium unpaid ₹1,500.
Calls in Arrears = ₹1,950 (capital 450 + premium 1,500).

Answer: Unpaid allotment ₹1,950: share capital ₹450 and securities premium ₹1,500.

Example 6: Excess beyond allotment · 3 marks · Short answerHOTS / competency

Shares of ₹10: ₹5 on application, ₹3 on allotment, ₹2 on call. Asha applied for 2,000 shares and was allotted 800. Excess money is to be adjusted towards allotment and the call, and any balance refunded. Calculate the amounts adjusted and refunded. (3 marks)

Try it first, then show the solutionSolution

Excess = 1,200 × 5 = ₹6,000.
Allotment 800 × 3 = ₹2,400; call 800 × 2 = ₹1,600 (held as Calls in Advance until the call is made).
Refund = 6,000 − 2,400 − 1,600 = ₹2,000.

Answer: ₹2,400 to allotment, ₹1,600 to the call (in advance) and ₹2,000 refunded.

Where students lose marks in Pro-rata Allotment and Over-subscription

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

Mistake: Splitting excess to premium first
Following a different textbook convention.
Wrong working
Excess 1,800 → premium 1,500, capital 300
Right working
Excess 1,800 → capital 1,800 first
Do this: The CISCE syllabus adjusts excess towards share capital first.
Usually costs: 1-2 marks.
Mistake: Not splitting Calls in Arrears
Treating all arrears as capital.
Wrong working
Calls in Arrears 1,950 (all capital)
Right working
Capital 450; premium 1,500
Do this: ISC examiners in 2025 reported this error; show the split.
Usually costs: 1 mark.
Mistake: Wrong pro-rata ratio
Using total applications, including rejected ones.
Wrong working
96,000 : 60,000
Right working
90,000 : 60,000 (after rejecting 6,000)
Do this: Remove rejected applications first.
Usually costs: 1 mark.
Mistake: Refunding the pro-rata excess
Forgetting the adjustment to allotment.
Wrong working
To Bank 72,000 (refund)
Right working
To Share Allotment 60,000; To Bank 12,000
Do this: Only rejected applications are refunded unless the question says otherwise.
Usually costs: 1 mark.

Exam tips

Write a working note: applied, rejected, pro-rata group, allotted, ratio.
For a defaulter, show a per-share table of capital and premium against the excess.
Close the Share Application A/c in the Cash Book or Ledger to show it balances.
Write the narration for each adjustment; ISC examiners value complete entries.

Practice questions on Pro-rata Allotment and Over-subscription

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
When an issue is under-subscribed (with minimum subscription received), the company allots:
(a) all shares offered
(b) shares equal to the applications received
(c) no shares
(d) shares pro rata
Hint
It cannot allot to people who did not apply.
Answer
(b) shares equal to the applications received
Q2 · 1 mark · MCQBoard level
In pro-rata allotment, the excess application money of allottees is normally:
(a) refunded
(b) adjusted towards allotment
(c) transferred to Capital Reserve
(d) transferred to Securities Premium
Hint
The next amount they owe.
Answer
(b) adjusted towards allotment
Q3 · 3 marks · Short answerBoard level
A company offered 20,000 shares with ₹2 on application. Applications were received for 32,000 shares; 4,000 were rejected and the rest allotted pro rata. Calculate the refund, the amount adjusted to allotment and the amount transferred to capital. (3 marks)
Hint
Pro-rata group 28,000.
Answer
Refund ₹8,000; adjusted to allotment ₹16,000; to capital ₹40,000.
Q4 · 3 marks · Short answerHarder board level
Pro-rata ratio 7:5; application ₹3, allotment ₹5. Neha applied for 700 shares. How much does she pay on allotment? (3 marks)
Hint
She gets 500 shares.
Answer
Excess = 200 × 3 = 600; allotment due 2,500; she pays ₹1,900.
Q5 · 3 marks · Short answerHarder board level
A defaulting pro-rata allottee's excess application money is ₹2,000. His allotment due is capital ₹1,500 and premium ₹1,000. Under the CISCE rule, how much premium remains unpaid? (3 marks)
Hint
Capital first.
Answer
Capital covered fully (1,500); 500 goes to premium; unpaid premium ₹500.
Q6 · 1 mark · Assertion-reasonHarder board level
Assertion (A): Application money of applicants who receive no shares is refunded in full.
Reason (R): No contract arises between the company and an applicant who is not allotted shares.
(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
Allotment is acceptance.
Answer
(a) Both A and R are true, and R is the correct explanation of A.
Q7 · 6 marks · Long answerHarder board level
A company issued 30,000 shares of ₹10 at ₹1 premium: ₹3 on application, ₹4 on allotment (including premium), ₹4 on call. Applications for 45,000 shares: 5,000 rejected, the rest allotted pro rata. All allotment money due was received. Calculate the refund, excess adjusted, allotment due and cash received on allotment. (6 marks)
Hint
Pro-rata group 40,000.
Answer
Refund ₹15,000; excess ₹30,000; allotment due ₹1,20,000 (capital 90,000, premium 30,000); cash received ₹90,000.
Q8 · 3 marks · Short answerHarder board level
25,000 shares were allotted with ₹4 due on allotment, and excess application money of ₹36,000 was adjusted. All shareholders paid. How much cash was received on allotment? (3 marks)
Hint
Due minus adjusted.
Answer
1,00,000 − 36,000 = ₹64,000.
Q9 · 6 marks · Long answerHOTS / competency
Shares of ₹10 at a premium of ₹3: ₹5 on application, ₹5 on allotment (₹2 capital + ₹3 premium), ₹3 on call. Pro rata: an applicant for 900 shares received 500 and paid nothing on allotment. Calculate his unpaid allotment and split it. (6 marks)
Hint
Excess ₹2,000 against capital ₹1,000 first.
Answer
Excess 400 × 5 = 2,000: capital 1,000 covered; 1,000 to premium; unpaid allotment ₹500, all premium.
Q10 · 3 marks · Short answerHOTS / competency
An issue was over-subscribed 2.5 times and every applicant received shares pro rata. Leela received 400 shares. For how many did she apply? (3 marks)
Hint
Applied = allotted × 2.5.
Answer
400 × 2.5 = 1,000 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.Pro-rata ratio when 90,000 apply for 60,000 shares?Show answer
3:2.
2.Under CISCE, excess at a premium is adjusted first towards?Show answer
Share capital.
3.Excess beyond allotment, adjusted to a call not yet made, is held as?Show answer
Calls in Advance.
4.Who gets a full refund?Show answer
Applicants whose applications are rejected.
5.Unpaid allotment after adjustment goes to?Show answer
Calls in Arrears A/c.

Pro-rata Allotment and Over-subscription: frequently asked questions

Can a company keep excess application money without the shareholder's consent?

Only as stated in the prospectus terms; the question tells you whether excess is adjusted towards allotment, calls, or refunded.

Is pro-rata allotment possible if all applicants are treated equally?

Yes. If no applications are rejected, the ratio is total applications to shares offered.

Why does the CISCE premium rule matter?

It decides how much of a defaulter's unpaid allotment is capital and how much is premium, which changes the forfeiture entry.

Is interest paid on excess money held for calls?

If the Articles provide, interest on calls in advance is paid from the date received to the date the call falls due.