Over Subscription: At the point when the quantity of debentures applied for is more than the quantity of debentures offered by the company to the general public, the issue is said to be oversubscribed.
A company, in any case, can’t assign a bigger number of debentures than it has invited for subscription. However, any abundance of cash received from people to whom debentures have been allotted may be held for adjusting it towards the allotment money or the calls amount.
But to whom no debentures have been provided, their money will be refunded to them within a prescribed time along with a letter of regret.
For eg –
1. Anju Ltd. invited applications for issuing 12000 18 % Debentures of Rs 10 each at a premium of Rs 4 per Debenture. Applications were received for 13500 Debentures .Application for 1500 Debentures were rejected and Application money was refunded. Debentures were allotted to remaining applicants. Journal entry for transferring Application and Allotment money into Debenture account will be:
2. Best Ltd. invited Application for issuing 100000 16 % Debenture of Rs 100 each at a premium of Rs 5 per Debenture. Application were received for 120000 Debentures .Application for 20000 Debentures were rejected and Application money was refunded. Debentures were allotted to remaining applicants.
Journal entry for transferring Application and Allotment money into Debenture account will be:
3. Green Ltd. invited Application for issuing 20000 17 % Debentures of Rs 60 each at a premium of Rs 10 per Debenture. Applications were received for 24000 Debentures .Application for 4000 Debentures were rejected and Application money was refunded. Debentures were allotted to remaining applicants. Journal entry for transferring Application and Allotment money into Debenture account will be:
Thus, in case of oversubscription of debentures, the excess amount is refunded if no debentures are allotted or it is adjusted against future calls.
Chapter 2 – Issue and Redemption of Debentures