accounting for underwriting commission

It is contract between a company and other party, if public will not subscribe issued shares or debentures, underwriters will purchase.

They can charge commission in case of debentures up to 2.5% and shares 5%.

Marked applications:

If name of underwriter is shown by applicant against which he is applied known as  a marked application.

Un Marked applications:

If name of underwriter is not shown by applicant against which he is applied known as  a un marked application.

Marked applications will be directly credited to underwriter.

Unmarked applications will be credited in the gross liabilities ratio.

Firm under writing:

When underwriters purchase shares by themselves.

Credit is given – if firm underwriting is treated as a marked application.

Credit is not given – if firm underwriting is treated as a unmarked application.