Oversubscription occurs when applications for shares exceed the number of shares offered for issue. Management: Company can: 1) Allot proportionately to all applicants (pro-rata allotment), 2) Accept applications from existing shareholders preferentially, 3) Reject applications selectively, 4) Issue additional shares if authorized. Pro-Rata Allotment: Each applicant receives shares in proportion to application. Example: If 1,000 shares offered but 2,000 applied, each applicant gets 50% of their application. Journal Entry Treatment: Share Application Account is debited with total applications; on allotment, transferred to Share Capital based on allotted amounts. Refund of Excess Application Money: Excess money from rejected/partially allotted applicants is refunded. Journal Entry: Debit Share Application Account, Credit Bank. Example: Application £10,000 (1,000 shares at £10), Pro-rata allotment 500 shares (£5,000), Refund £5,000. Over-subscription conditions: Market demand strong, Company reputation good, Favorable market conditions. Over-subscription is favorable as it indicates investor confidence. Bank Account: Oversubscribed amounts are held in bank temporarily till allotment. Careful record-keeping required to track each applicant's share, allotment, and refund. Exam tip: Practice pro-rata allotment calculations; understand refund mechanics; create clear schedules showing applications, allotments, and refunds; handle money held temporarily correctly.