222

$show=home

Welcome to Accounting Education

The Accounting University with 3400+ Accounting contents as study material which can watch, read and learn anyone, anywhere.

Start your studies

Our library

Accounting | Auditing | Finance | Accounting software | Inspire

Take Your Course | Learn Accounting Skill

Choose Your Subject

$show=home

Latest $type=three$count=6$author=hide$comment=hide$label=hide$date=hide$show=home$s=0

Journal Entries $type=three$count=6$author=hide$comment=hide$label=hide$date=hide$show=home$s=0

Balance Sheet $type=three$count=6$author=hide$comment=hide$label=hide$date=hide$show=home$s=0

Underwriting of Shares and Debentures

15 0
Today evening, I took the class of student who did call me for learning corporate accounting from me. I taught her underwriting of shares and debentures. Same thing, I am sharing with you.

What is Underwriting of Shares and Debentures

Underwriting of shares and debentures is a contract between company and second party. Second party is called underwriters. They promise to sell all the shares of company to public, if any shares or debentures will be unsold, they will buy all these shares or debentures. For this service, they get underwriting commission.


What is Underwriting Commission

Underwriting commission is payment which is given by company to underwriters for their services of underwriting. Actually, contract of underwriting is same as the contract of insurance. Company gives maximum 5% commission to underwriter for selling his shares. Underwriter will take the risk of takeover the shares which will not be subscribed by public.

How to Calculate Underwriter's liability

For calculating underwriter's net liability, you have to understand marked application, unmarked application and firm underwriting. Suppose, there are three underwriters. Name of them are x, y and z
and they take the gross liability to sell company's share

x = 48,000
y = 20,000
z = 12,000
  • First of all we deduct all unmarked application of shareholders because
    with this liability of underwriters will decrease
  • Then, you will deduct all marked application of shareholders because
    with this liability of underwriters will also decrease
  • Then, you will deduct all the number of shares which will be taken under
    firm underwriting contract.
  • Now balance amount will show the number of shares which will be taken
    under the contract. If there is any negative number, then these will be
    adjusted with other underwriters in gross liability ratio
  • After this adjustment, balance number will show as net liability of
    underwriters.
For calculating underwriter's liability, student has to make statement showing underwriter's liability.




Accounting Treatment of Underwriting in the Books of Company

In the books of company, you will pass following journal entries.

1. When company gets money from public for selling shares under the contract of underwriting.

Bank account Dr. XXXX
Share capital Account Cr. XXXX

2. When underwriter takes the liability of unsold shares

Underwriter's account Dr. XXXX
Share Capital Account Cr. XXXX

3. When underwriting commission will due

Underwriting Commission Account Dr. XXXX
Underwriter's Account Cr. XXXX

4. When Underwriter deduct his commission and send net amount of takeover shares

Bank Account Dr. XXXX
Underwriter Account ( Total receivable amount on takeover shares by underwriter - Underwriter's commission) Cr. XXXX

Categories:

Comments

: 15
  1. AnonymousOctober 11, 2010 at 9:15 PM

    Thank you so much for the information sir..

    ReplyDelete
  2. AnonymousJanuary 28, 2011 at 9:18 AM

    Thanks a lot for this

    ReplyDelete
  3. nitiJuly 26, 2011 at 10:54 PM

    good language for understading the meaning of marked and unmarked application

    ReplyDelete
  4. bharatiSeptember 3, 2011 at 9:22 AM

    Thank u very much for making easy to learn example for underwriting of share,

    ReplyDelete
  5. AnonymousSeptember 13, 2011 at 5:57 AM

    thanx sir

    ReplyDelete
  6. AnonymousOctober 11, 2011 at 9:30 PM

    made it really easy to understand and retain.

    ReplyDelete
  7. AnonymousMarch 11, 2012 at 12:43 PM

    thank you so much for your help, but could you help define the nature of account such as liability,asset or equity cos it's new for me.


    Thank very much for your help

    ReplyDelete
  8. maheshwari vijay kumarJuly 11, 2012 at 12:52 PM

    thanks

    ReplyDelete
  9. AnonymousNovember 8, 2012 at 1:57 PM

    really easy to understand.thank you

    ReplyDelete
  10. UnknownFebruary 9, 2013 at 12:27 PM

    thank u sir for ur best efforts to make me understand

    ReplyDelete
  11. UnknownMay 5, 2014 at 11:50 AM

    sir, how you got less unmarked application:10800 please anyone explain

    ReplyDelete
  12. AnonymousApril 4, 2015 at 10:52 PM

    This is really strange to see the number of unmarked application deducted without any kind of any calculation. Nothing is given in the question itself too. How can anybody understand on what base something is deducted from something? and, the students are also responding as if they are really getting all.

    ReplyDelete
  13. Miqi RatlamSeptember 20, 2016 at 1:04 AM

    Is there any fix percentage to find underwriting commission?

    ReplyDelete
    Replies
    1. AnieFebruary 16, 2017 at 4:20 PM

      If nothing is mentioned in question then 5% as per company law 2013.

      I

      Delete
  14. TejasSeptember 4, 2019 at 2:01 PM

    What will be the journal entries in the Books of underwriter?

    ReplyDelete

In comment, you can give your feedback, reviews, ideas for improving content or ask question relating to written content.

 


Name

access,2,account,86,accountant,95,Accounting,685,accounting definitions,99,accounting ebook,3,Accounting education,85,Accounting Education Ads Help,1,accounting procedure,2,accounting process outsourcing,2,Accounting Software,52,advance,3,advertising,6,africa,7,Amalgamation,6,amendments,16,Amortization,1,announcements,62,Annuity,2,assets,53,audit,47,auditing,41,Australia,2,B.Com.,22,balance sheet,88,bank,111,Bank reconciliation,12,banking,33,basic accounting,110,BBA,1,benefits,13,best,50,bill,12,black money,3,blog,12,bloggers,7,book keeping,4,bookkeeping,3,Branch Accounting - full tutorial,8,budget,35,Budget variance,13,business,65,businessman,9,CA,30,calculator,4,canada,3,capital,72,capital budgeting,27,career,21,cash,40,cash book,8,cash flow statement,11,Chiense,1,children,13,china,6,class,3,coaching,2,coins,2,college,6,commerce,10,commerce students,7,company,36,computer,9,computer accounting,1,conference,4,Contact vinod kumar,1,Control Your Spending,27,corporate accounting,69,cost,160,cost accounting,195,cost center,8,cost centre,1,CPA,2,credit,18,credit card,11,cs,10,currency,35,data,11,Debit and credit,17,debit cards,1,debt,62,debtor,21,degree,6,depletion,2,depreciation,38,Diwali Messages,12,documents,4,dollar,5,domain,3,Downloads,3,Dubai,1,e-accounting,17,earning,17,education,246,Education Loans,6,email,15,employee,4,EPF,2,ERP,7,euromoney,1,examination,7,excel,17,excise duty,6,expenses,65,facebook,7,factor of loan,1,fans,2,feature,32,fifo,5,FII,4,fiji,1,finacle,1,finance,823,Finance Journal Entries,7,Financial,134,financial accounting,147,Financial Statements,4,fire insurance,3,flickr,2,flow,4,forensic,4,forex,21,formula,8,france,1,fraud,6,free,2,fun,34,function,1,fund,48,GAAP,36,GDP,1,gdr,5,germany,1,gold,7,goodwill,4,goodwill accounting,3,google,34,google apps,3,google apps,1,google base,1,google buzz,1,google calendar,1,Google docs,38,google finance,3,google fusion tables,1,google talk,5,govt.,5,GST,33,guide,85,health,6,Hindi,2,Hindi Language,3,history,3,holding company,3,How to treat FBT in Tally 9,1,HRA,3,ICAI,11,ICAWI,3,ICICI Bank,1,IFRS,11,income,17,income statement,19,Income Tax,8,India,57,indian railway,1,Indonesia,1,inflation,4,inflation accounting,3,infographics,8,information,7,inspiration,176,insurance,14,insurance accounting,2,Intangible,3,interest,26,international,7,Internet,40,Introduction of Tally 9,1,inventory,41,investment,135,investment in Shares,6,invoice,3,IT,1,Japan,1,Job costing,4,journal entries,145,Journal Entries eBook Help,4,Kalculate,1,keyboard,3,kuwait,2,laptop,2,law,4,LBT,1,learning,36,lease,5,lecture,11,ledger,17,leducation,1,Leverage Analysis,7,liabilities,16,lifo,3,linkedin,1,loan,74,logical point,1,loss,5,loss of profit,1,M.Com.,5,m.phil,2,malaysia,3,management accounting,129,manual accounting,4,manufacturing account,1,market,11,marketing,3,mastercard,2,material,13,MBA,14,MCA,1,media,4,migration,2,mobile,9,money,61,ms word,3,ms. excel,14,multi currency in tally 9,1,Multicurrency Accounting,3,mutual fund,30,national security,1,new and sacrifice ratio,1,new york times,1,new zealand,1,news,1,NGO,5,nonprofit-accounting,6,North Georgia Mountains,1,Notification,1,NPV,17,NSE,1,odbc,2,office,10,oman,1,online application,2,online accounting,11,Online Accounting Course,6,otcei,1,pakistan,3,parents,3,Partnership,1,pay pal,3,pdf,4,Personal Finance,6,pie chart,1,pie chart of income,2,pnb,5,podcast,1,ppf,1,presentation,10,price,7,privacy policy,2,prof. vinod kumar,13,profit,24,profit and loss account,12,project management,11,provision,14,purchase,9,puzzles,2,quickbooks,3,Quote,22,quotes,42,quotes of svtuition,1,rating agency,2,ratio analysis,34,RBI,7,readers,13,real estate,13,rectification of errors,11,remote control,2,reports,10,reserves,8,responsibility accounting,4,retirement,2,revenue,3,Revenue reserves,2,review,7,risk,11,rupees,9,salary,5,sale,12,SAP,3,saudi arabia,1,saving,19,sbi,9,scholarship,2,school,1,SEBI,13,security,30,service tax,23,share,20,share trading,15,Shares,16,shri lanka,3,singapore,2,sms,6,social accounting,7,society,5,solution,219,South Africa,1,stock,24,stock exchange,22,structure,6,student,39,students,70,study,21,subsidiary company,2,svtuition,14,swiss bank,2,tally,100,tally 9,8,Tally 7.2,8,Tally 9,42,Tally.ERP 9,59,TallyPrime,1,tanzania,2,tax,94,Tax Accounting,30,TDS,15,teacher,62,teaching,112,technology,33,test,40,testimonial,15,testimonials,15,thailand,1,tips,60,trading,5,trading on equity,2,transaction,7,trend,12,trial balance,14,truthfulness,1,tuition,3,twitter,10,UAE,5,UGC - NET Commerce,13,UK,11,United Arab Emirates,1,university,9,usa,25,valuation,9,VAT,22,Video,36,Voucher and vouching,4,Wealth,8,wikipedia,25,working capital,29,youtube,14,
ltr
item
Accounting Education: Underwriting of Shares and Debentures
Underwriting of Shares and Debentures
https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjZ3MZERS3blWvSboR9k8uR6rjxCNG-kH09-1Fay1l2l4AMDWTmSp3BAsyZr_NNxJNfG9ewHCYPA2-dauTrg3dNuRxQQkaO0viXZPVhaAziX_VAaN-oLx-Zd8ikdmgryO06lhyfuy9EJ911/s1600/total+liability.PNG
https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjZ3MZERS3blWvSboR9k8uR6rjxCNG-kH09-1Fay1l2l4AMDWTmSp3BAsyZr_NNxJNfG9ewHCYPA2-dauTrg3dNuRxQQkaO0viXZPVhaAziX_VAaN-oLx-Zd8ikdmgryO06lhyfuy9EJ911/s72-c/total+liability.PNG
Accounting Education
https://www.svtuition.org/2010/10/underwriting-of-shares-and-debentures.html
https://www.svtuition.org/
https://www.svtuition.org/
https://www.svtuition.org/2010/10/underwriting-of-shares-and-debentures.html
true
2410664366776677676
UTF-8
Loaded All Posts Not found any posts VIEW ALL Reply Cancel reply Delete By Home PAGES Contents View All RELATED CONTENTS FOR YOUR LEARNING Topic ARCHIVE SEARCH ALL POSTS Not found any post match with your request Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS PREMIUM CONTENT IS LOCKED STEP 1: Share to a social network STEP 2: Click the link on your social network Copy All Code Select All Code All codes were copied to your clipboard Can not copy the codes / texts, please press [CTRL]+[C] (or CMD+C with Mac) to copy