Verification of Shares Issued for Cash

Usually, there are three stages in the issue of shares for cash, viz. :

  1.  Receipt of applications for shares along with application money;
  2.  Allotment of shares and receipt of allotment; and
  3.  Making calls and receipt of call money.

The programme of work to be carried out in respect of each of the above mentioned three stages is stated below :
Applications – Verify the amount received alongwith the applications for shares in the following manner :

  • Check entries in the Application and Allotment Book (or Sheets) with the original applications;
  •  Check entries in the Application and the Allotment Book as regards deposits of money, received with the applications, with those in the Cash Book;
  • Vouch amounts refunded to the unsuccessful applicants with copies of Letters of Regret;
  •  Check the totals columns in the Application and Allotment Book and confirm the journal entry debiting Share Application Account and crediting Share Capital Account.


  • Examine Director’s Minutes Book to verify approval of allotments.
  • Compare copies of letters of allotment with entries in the Application and Allotment Book.
  •  Trace entries in the Cash book into the Application and Allotment Book for the verification of amounts collected on allotment.
  •  Trace the amount collected on application as well as those on allotment from the Application and Allotment Book into the Share Register.
  •  Check totals of amounts payable on allotment and verify the journal entry debiting Share Allotment Account and crediting Share Capital Account.


  •  Examine the Director’s resolution making the call.
  •  Vouch amounts received with the counterfoils of receipts.
  • Trace postings of the amounts received from the Calls Book (for calls due) and the Cash Book (for calls collected) into the Share Register.
  • Verify the journal entry, debiting the Call Account and crediting Share Capital with totals of the amounts due.
  •  Note the calls in arrears.


  •  Ascertain that the nominal value of shares allotted does not, exceed the authorised and issued capital and that allotments were made in accordance with conditions contained in the Prospectus.
  • See the returns of allotment have been filed with the Registrar of Companies.
  • Extract balances of shareholders’ accounts contained in the Share Register and tally their total with the balance in the Share Capital Account.
  •  If the issue was underwritten, examine the contract with the underwriters to ensure that all obligations under the contracts have been fully satisfied.
  •  Vouch payment of commission and brokerage, the first by reference to the underwriting contract and the second by reference to stamps of brokers on application forms.
  •  See that the company has delivered share certificates within three months after the allotment of any of its shares in accordance in the procedure laid down under Section 53. Note : The signatories to the Memorandum of Association being the first shareholder of the company, it is usual to make allotment in their favour.
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