What is share application money pending allotment?
Share Application Money Pending Allotment means the amount received on the application on which allotment is not yet made (pending allotment). The process starts when any company publicly issues its equity shares to raise funds. First, it receives the application money from its applicants and the equity shares are allotted to the respective applicants on a later date.
Many times, the amount received by way of application is greater than what the company has issued equity for. In cases like this, until the shares are allotted, the amount received is shown under the Share Application Money Pending Allotment. It comes under the head of the Liabilities in the Balance Sheet, in correspondence to the Cash and equivalents on the Assets side. On the contrary, Share Application Money received and against which no allotment will be made (e.g. in case of oversubscription) is shown as Other Current Liability under Current Liabilities as the amount is refundable at some later date. Share Application Money Pending Allotment to the extent not refundable is included in Shareholders’ Fund.