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    Question

    In preparing financial statements as per Schedule III of

    the Companies Act, ABC Ltd. classifies ‘Share Application Money Pending Allotment’ under current liabilities. The amount is intended for equity shares and complies with conditions of allotment. Is this classification correct?
    A Yes, if allotment not done within 12 months Correct Answer Incorrect Answer
    B No, it should be shown under equity Correct Answer Incorrect Answer
    C Yes, since it's money received in advance Correct Answer Incorrect Answer
    D No, it should be disclosed in notes Correct Answer Incorrect Answer

    Solution

    If the conditions of allotment are met, such application money is part of equity and not a liability.

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