Over Subscription refers to a situation where applications for more shares are received than the number offered to the public for subscription. This usually happens in respect of shares issue of well-managed and financially strong companies.

To deal with over subscription, three alternatives are available to the directors: (1) accept some applications in full and totally reject the others; (2) make a pro-rata allotment to all; and (3) adopt a combination of the above two alternatives, which is the most common course adopted in practice. From the accounting point of view, the situation is placed within the total frame of application and allotment. When directors decide to fully accept some applications and reject others, the application money received on rejected applications is fully refunded.

Under Subscription refers to a situation where the applications received are less than the number of shares offered to the public. In such cases, if the amount of minimum subscription is not received to the extent of 90%, the issue dissolves.

In case of under subscription, the company allots only the number of shares for which subscription has been received. The fact of over subscription is not reflected in the books, and the subscribed capital may be equal to or less than issued capital.