Paper 5: Advanced Accounting Chapter 4 Unit 2

CA. Rajesh Singh, ACA

} Learn the provisions of companies Act
regarding underwriting of shares.
} Determine the liability of underwriters
whether shares are fully underwritten or
partially underwritten.
} Account for firm underwriting of shares.
Shares/ Debentures may remain Unsubscribed
• Setback in Operations/ Reputation

Underwriter Promotes Subscription

Underwriting is an agreement

made between the person called underwriter and company

where underwriter gives guarantee for subscribing certain

no of shares among the public.

If shares were under subscribed among the public then

shortfall should be taken by the underwriter as per agreement.
By a single person or

Jointly by two or more persons

1 • Individual
2 • Partnership Firm
3 • Company
 Financial Institutions to help
companies raise capital like
Industrial Credit
Life Insurance
Industrial Finance and Investment
Corporation of
Corporation Corporation of
India
India
The underwriter is paid a commission as per the agreement.

Commission can be paid in cash or in kind i.e., by issue of

securities.
 • Commission can be paid only at
a rate authorized by the Articles.
Section 76 • It can not exceed 2½% of the
issue price of debentures and
of the 5% of issue price of shares.
Companies Act • It is paid only on the securities
offered among the public for
subscription
Normal Underwriting

Firm Underwriting
 If the whole of the issue has been
underwritten by one person, he is responsible
to subscribe for all the shares or debentures
that have not been subscribed by the public.
 Marked Unmarked
Application Application
These applications bear the stamp
of the underwriter and the credit for
these applications are given to the
individual underwriter.
These applications do not bear
the stamp of the underwriter.
If the entire issue is underwritten, the credit for these
applications is given to the underwriters either in the
ratio of their gross liability or liability after deducting
the marked application.

If the entire issue is not underwritten, first the credit

goes to the account of the portion not underwritten
and the rest will be apportioned in the same manner
as discussed above.
A company comes out with public issue of 100000 shares of rs
10 each. Only 80% of issue were under written by the
underwriter.
Total application received 82000 Shares
Marked application received 55000 Shares
Unmarked application recd. 27000 Shares

In the above case unmarked application of 27000 shares will be

adjusted to the account of the portion not underwritten by the
underwriter i.e., 20000 shares and balance 7000 unamrked
application will be adjusted with underwriter's liability.
Underwriter has to buy shortfall in shares i.e.,18000 shares.
It is a firm commitment by an underwriter to take
up a specified number of shares irrespective of
the number of shares subscribed by the public.
 Firm underwriting shall be
deducted from the gross
When credit liability first and the
for firm calculation shall be done
underwriting without considering the
given to firm underwriting and
individual after determining the
underwriter liability on account of
underwriting, firm
underwriting is added.
When credit If the credit for firm
underwriting is not to
for firm be given to the
underwriting individual underwriter,
not given to those shall be treated
individual as unmarked
underwriter applications.
Gross liability ***

Less : Firm underwriting ***

Less : Marked applications ***

Less: Unmarked applications ***

+/- : Surplus of any underwriter

• credited to others in G.L. ratio ***

Liability of the underwriter ***

Add: Firm underwriting ***

Total liability of the underwriter ***

Underwriting commission Dr.

To Underwriters
IPCC Dec 2012 Marks 5
Newton Limited incorporated on 1st January, 2011 issued a
prospectus inviting applications for 20,000 equity shares of ` 10
each. The whole issue was fully underwritten by
Adams,Benzamin and Clayton as follows:
Adams 10,000 shares ,Benzamin 6,000 shares ,Clayton
4,000 shares
Applications were received for 16,000 shares, of which
marked applications were as follows:
Adams 8,000 shares
Benzamin 2,850 shares
Clayton 4,150 shares
You are required to find out the liabilities of individual
underwriters.
} Issue size of shares : 20000

} application received : 16000

} Shares to be subscribed by underwriter : 4000

Particulars Adams Benzamin clayton Total

Gross Liability 10000 6000 4000 20000

Less Marked application 8000 2850 4150 15000

------- ------- ------- ------

2000 3150 (150) 5000

Particulars Adams Benzamin clayton Total

2000 3150 (150) 5000

Less credit for unmarked appl. 500 300 200 1000

------- ------- ------- ------

1500 2850 (350) 4000

Surplus of clayton adju. in the

gross liability ratio 219 131 350 ---

------ ------ ------ ------

Net Liability 1281 2719 Nil 4000

IPCC Dec 2012 Marks 10
Rosy Ltd. made a public issue of 4,00,000 equity shares of Rs 10 each, Rs
2 payable on application. The entire issue was underwritten by five
underwriters as follows: A: 25%, B: 25%,C: 25%, D: 10% and E: 15%.
Under the underwriting terms, a commission of 2% was payable on the
amount underwritten. Further, the underwriter was at liberty to apply, during
the tenure of public issue, for any number of shares in which case he was
entitled to a brokerage equal to 1/2% of the par value of shares so applied
for.
Applications received were to be analyzed on the basis of rubber stamp of
the underwriter, who was to be given credit for the number of applications
received bearing his rubber stamp.
Applications received which did not bear any rubber stamp were considered
as “direct applications” to be credited to all the underwriters in the ratio of
their respective underwriting commitment. If, any such credit being given a
“surplus” was to result in respect of any underwriter, as compared to his
commitment, such surplus was to be distributed amongst the remaining
underwriters in the ratio of their respective underwriting commitments.
As a result of the issue the following applications were received:
Bearing rubber stamp of A 1,02,000 shares
-Do- B 95,000 shares
-Do- C 60,000 shares
-Do- D 32,000 shares
-Do- E 51,000 shares
Not bearing any stamp 10,000 shares
Total application received 3,50,000 shares
Included in the number of applications mentioned against D in the above
table was an application made by D himself for 10,000 shares. The
underwriters were informed of the amounts due to or from them, the
amounts were duly received or paid.
Show, with the aid of necessary workings, the entries to record the amount
so received or paid.
Total Issue Size = 400000 Shares
Marked Applications = 340000 Shares
Unmarked Applications = 10000 Shares
Short Fall in Public Subscription = 50000 Shares
Gross Liability Ratio = 5:5:5:2:3
D made Application on his own account for 10000 Shares
on which he is entitled to get brokarage @ ½ %
Statement showing net liability of underwriters:
Particulars A B C D E

Gross Liability 1,00,000 1,00,000 1,00,000 40,000 60,000

Less: Marked application 1,02,000 95,000 60,000 32,000 51,000

(2000) 5,000 40,000 8,000 9,000

Less: Unmarked application (2,500) (2,500) (2,500) (1,000) (1,500)
( in gross liability ratio)
Particulars A B C D E

(4,500) 2,500 37,500 7,000 7,500

Adjustment for surplus of

'A ' in gross liability ratio 4,500 (1,500) (1,500) (600) (900)

Net Liability Nil 1,000 36,000 6,400 6,600

Statement showing amount due from / due to underwriter:

Particulars A B C D E
Net Liability in shares Nil 1000 36000 6400 6600

Amount receivable @ Rs2 per sh.

i.e., net liability X Rs 2 nil x 2 1000 x 2 36000 x 2 6400 x 2 6600 x 2

= nil = 2000 = 72000 = 12800 = 13200

Underwriting commission payable

@2% of issue price 20000 20000 20000 8000 12000

Brokerage payable @1/2% 500

------------------------------------------------------------------------------
20000 18000 52000 4300 1200

Payable Payable Receivable Receivable Receivable

Bank A/C Dr.57,500

Underwriting commission A/c Dr.80,000

Brokerage on shares A/c Dr. 500

To Equity Share Aplication A/c 1,00,000

To Bank A/c 38,000

Equity Share Aplication A/c Dr. 1,00,000

To Equity Share Capital 100000

Alternatively

(1) C A/c Dr.52,000

D A/c Dr. 4,300

E A/c Dr. 1,200

Underwriting Commission A/c Dr. 80,000

Brokerage on shares A/c Dr. 500

To Equity Share Application 1,00,000

To A A/c 20,000

To B A/c 18,000
(2) Bank A/c Dr.57,500

To C A/c 52,000

To D A/c 4,300

To E A/c 1,200

(3) A A/c Dr.20,000

B A/c Dr.18,000

To Bank A/c 38,000

IPCC Dec 2012 Marks 10
J. Ltd. issued 20,000 shares which were underwritten as follows :
A -12,000 shares; B- 5,000 shares and C- 3,000 shares. The
underwriters made applications for firm underwriting as :

A-1,600 shares; B - 600 shares; and C-2,000 shares.

The total subscriptions excluding firm underwriting but including
marked applications were for 10,000 shares.

The marked applications were as under ;

A - 2,000 shares; B- 4,000 shares; and C- 1,000 shares
You are required to show the allocation of liability of the
underwriters.
Total Issue Size = 20000 Shares
Total Application including Firm Underwriting = 14200 Shares
Marked Applications = 7000 Shares
Firm Underwriting = 4200 Shares
Unmarked Applications = 3000 Shares
Short Fall in Public Subscription = 5800 Shares
Gross Liability Ratio = 12:5:3
} Issue Size : 20000
} Total application recd
Including firm underwriting: 10000+1600+600+2000 14200
} Shares to be subscribed by the U/W excluding Firm U/W 5800

} Underwriter A B C Total
} Gross Liability 12000 5000 3000 20000
} Less: Firm U/W 1600 600 2000 4200
-------- -------- --------- --------
10400 4400 1000 15800
} Less: Marked App. 2000 4000 1000 7000
-------- ------- ------ ---------
 8400 400 Nil 8800
} credit for unmarked applic. 1800 750 450 3000
in the gross liability ratio -------- --------- ------- --------
6600 (350) (450) 5800
} Adj. for surplus (800) 350 450
-------- -------- -------- -------
5800 Nil Nil 5800
} Add : Firm Underwriting 1600 600 2000 4200
-------- ------- ------- --------
} No. of shares to be
} purchased by underwriter 7400 600 2000 4200
===== ===== ===== =====
IPCC Dec 2012 Marks 10
Libra Ltd. came up with an issue of 20,00,000 equity shares of Rs10 each at
par. 5,00,000 shares were issued to the promoters and the balance offered
to the public was underwritten by three underwriters Anand, Vijay and
Ashok - equally with firm underwriting of 50,000 shares each. Subscriptions
totalled 12,97,000 shares including the marked forms which were :
Anand 4,25,000 shares
Vijay 4,50,000 shares
Ashok 3,50,000 shares
The underwriters had applied for the number of shares covered by firm
underwriting. The amounts payable on application and allotment were ` Rs
2.50 and Rs 2.00 respectively. The agreed commission was 5%.
Pass summary journal entries for —
(a) The allotment of shares to the underwriters;
(b) The commission due to each of them; and
(c) The net cash paid and or received.
Note: Unmarked applications are to be credited to underwriters equally.
Total Issue Size = 2000000 Shares
Shares Issued to Promoters = 500000 Shares
Shares offered for public subscriptions = 1500000 Shares
Total Application including Firm Underwriting = 1297000 Shares
Marked Applications = 1225000 Shares
Firm Underwriting = 150000 Shares
Unmarked Applications = 72000 Shares
Short Fall in Public Subscription = 53000 Shares
Gross Liability Ratio = 1:1:1
(1) Calculation of Liability of Underwriters
Anand Vijay Ashok
Gross Liability (No. of shares) 5,00,000 5,00,000 5,00,000
Less : Firm Underwriting (50,000) (50,000) (50,000)
4,50,000 4,50,000 4,50,000
Less : Marked Applications (4,25,000) (4,50,000) (3,50,000)
25,000 — 1,00,000
Less : Unmarked Applications (36,000) — (36,000)
(equally)* (11,000) — 64,000
Less : Adjustment of Anand’s surplus 11,000 — (11,000)
Net liability, excluding firm underwriting — — 53,000
Add: Firm underwriting 50,000 50,000 50,000
Gross liability 50,000 50,000 1,03,000
(2) Calculation of Amounts Payable by Underwriters
Anand Vijay Ashok
Liability (No. of shares) 50,000 50,000 1,03,000
Amount payable @ Rs 4.50 per share 2,25,000 2,25,000 4,63,500
Less : Amount paid on Firm Applications
of 50,000 each @ ` 2.50 (1,25,000) (1,25,000) (1,25,000)
Balance payable by underwriter 1,00,000 1,00,000 3,38,500
Underwriting Commission 2,50,000 2,50,000 2,50,000
Amount Paid to underwriter 1,50,000 1,50,000 —
Amount received by the Co. — — 88,500
(1) Bank A/c Dr. 3,75,000
To Share Application A/c 3,75,000
(Application money received on firm applications
for 50,000 each @ ` 2.50 per share from Anand, Vijay & Ashok)

(2) Anand Dr. 1,00,000

Vijay Dr. 1,00,000
Ashok Dr. 3,38,500
Share Application A/c Dr. 3,75,000
To Share Capital A/c 9,13,500
(Allotment of shares to underwriters 50,000 to Anand;
50,000 to Vijay and 1,03,000 to Ashok; application and
allotment money credited to share capital)
(3) Underwriting Commission A/c Dr. 7,50,000
To Anand 2,50,000
To Vijay 2,50,000
To Ashok 2,50,000
(Amount of underwriting commission payable to
Anand, Vijay and Ashok @ 5% on the amount of shares underwritten.)
(4) Bank A/c Dr. 88,500
To Ashok 88,500
(Amount received from Ashok on shares allotted less
Underwriting commission)
(5) Anand Dr. 1,50,000
Vijay Dr. 1,50,000
To Bank A/c 3,00,000
(Amount paid to Anand & Vijay in final settlement of underwriting
commission due less amount payable on shares allotted payable to
him.)
IPCC Dec 2012 Marks 10
A company made a public issue of 1,25,000 equity share of Rs.100
each, Rs. 50 payable on application. The entire issue was
underwritten by four parties, A, B, C, and D in the portion of 30%,
25%, 25% and 20% respectively. Under the terms agreed upon a
commission of 2% was payable on the amounts underwritten.
A, B, C, and D had also agreed on ‘Firm’ underwriting of 4,000,
6,000, Nil and 15,000 share respectively.
The total subscriptions, excluding Firm underwriting, including
marked application were for 90,000 shares, marked applications
received were as under:
A 24,000 C 12,000
B 20,000 D 24,000
Ascertain the liability of the individual underwriter and also show the
journal entries that you would make in the books of the company. All
working should form part of your answer.
Total Issue Size = 125000 Shares
Total Application received including Firm Underwriting = 115000 Shares
Total Applications excluding Firm Underwriting including Marked
Applications = 90000 Shares
Total Marked Applications = 80000 Shares
Unmarked Applications = 10000 Shares
Short Fall in Public Subscription = 10000 Shares
Gross Liability Ratio = 6:5:5:4
When the benefit of firm underwriting is given to individual underwriters

(1) Statement showing total no. of marked application excluding firm

underwriting :
A B C D
24000 + 20000 + 12000 + 24000 = 80,000 Shares

(2) Statement showing total no. unmarked application:

Total application recd. excluding firm underwriting 90000 shares
Total marked application excluding firm underwriting 80000 shares
Unmarked Application 10000 shares
(3) Statement showing Underwriters liability:
Particulars A B C D
GROSS liability in 30:25:25:20 37500 31250 31250 25000
Less-firm underwriting 4000 6000 nil 15000
33500 25250 31250 10000
Less-marked app 24000 20000 12000 24000
9500 5250 19250 (14000)
Less-unmarked app
(in gross liability ratio
i.e.,30:25:25:20 3000 2500 2500 2000
6500 2750 16750 (16000)
surplus of D given
to A;B & C in 30:25:25 (6000) (5000) (5000) 16000
 Particulars A B C D

500 (2250) 11750 -

surplus of B adj with A and C (500) 2250 (1750) -
Net liability - - 10000 -
Add:Firm underwriting 4000 6000 - 15000
Gross liability 4000 6000 10000 15000
Statement showing amount due from underwriter:
A B C D
No. of shares to be subscribed
as per previous table 4,000 6,000 10,000 15,000

Amount due on application 2,00,000 3,00,000 5,00,000 7,50,000

No. Of shares incl. firm
u/w X Rs 50
U/W Commission payable (75000) (62500) (62500) (50000)
1,25,000 2,37,500 4,37,500 7,00,000
Bank A/c Dr 60,00,000
Underwriting Commission A/c Dr 2,50,000
To Equity share Application A/c 62,50,000

Equity share Application A/c Dr 62,50,000

To Equity Share Capital 6250000
When the benefit of firm underwriting is not given to individual
underwriter:
(1) Statement showing total no. of marked application excluding firm underwriting
:
A B C D
24000 + 20000 + 12000 + 24000 = 80,000 Shares

(2) Statement showing total no. unmarked application:

Total application recd. excluding firm underwriting 90000 shares
Total marked application excluding firm underwriting 80000 shares
Unmarked Application 10000 shares
Add: Firm underwriting 25000 shares
Total unmarked application 35000 shares
(3) Statement showing Underwriters liability:
Particulars A B C D
GROSS liability in 30:25:25:20 37500 31250 31250 25000
Less-marked app 24000 20000 12000 24000
13500 11250 19250 1000
Less-unmarked application
35000 in gross liability ratio
i.e.,30:25:25:20 10500 8750 8750 7000
3000 2500 10500 (6000)
surplus of D given
to A;B & C in 30:25:25 (2250) (1875) (1875) 6000
Net liability 750 625 8625 Nil
Add: Firm Underwriting 4000 6000 --- 15000
Total Liability 4750 6625 8625 15000
IPCC Dec 2012 Marks 10
Outset Ltd. invited applications from public for 1,00,000 equity shares of Rs.10
each at a premium of Rs.5 per share. The entire issue was underwritten by
the underwriters P, Q, R and S to the extent of 30%, 30%, 20% and 20%
respectively with the provision of firm underwriting of 3,000, 2,000, 1,000
and 1,000 shares respectively. The underwriters were entitled to the
maximum commission permitted by law.
The company received applications for 70,000 shares (excluding firm
underwriting) from public out of which applications for 19,000, 10,000,
21,000 and 8,000 shares were marked in favour of P, Q, R and S
respectively.
Calculate the liability of each underwriter. Also ascertain the underwriting
commission payable to different underwriters.
Total Issue Size = 100000 Shares
Total Application received excluding Firm Underwriting = 70000 Shares
Total Marked Applications = 58000 Shares
Unmarked Applications = 12000 Shares
Short Fall in Public Subscription = 23000 Shares
Gross Liability Ratio = 3:3:2:2
Firm Underwriting should be treated as Unmarked Applications
So Total no of unmarked Applications = 12000 + 7000=19000 Shares
Assuming that the benefit of firm underwriting is not given to individual
underwriters

(1) Statement showing total no. of marked application excluding firm

underwriting :
P Q R S
19000 + 10000 + 21000 + 8000 = 58,000 Shares

(2) Statement showing total no. unmarked application:

Total application recd. excluding firm underwriting 70000 shares
Total marked application excluding firm underwriting 58000 shares
Unmarked Application 12000 shares
Add: Firm underwriting 7000 shares
Total unmarked application including firm u/w 19000 shares
Statement showing underwriters liability:

P Q R S Total
Gross Liability 30,000 30,000 20,000 20,000 1,00,000
Less: Marked applications
(excluding firm underwriting) (19,000) (10,000) (21,000) (8,000) (58,000)
Balance 11,000 20,000 (1,000) 12,000 42,000
Less: Surplus of R allocated to P,
Q and S in the ratio of 3:3:2 (375) (375) 1,000 (250) - .
Balance 10,625 19,625 - 11,750 42,000
 P Q R S Total

Balance 10,625 19,625 - 11,750 42,000

Less: Unmarked applications
including firm underwriting (5,700) (5,700) (3,800) (3,800) (19,000)
Net Liability 4,925 13,925 (3,800) 7,950 23,000
Less: Surplus of R allocated to P,
Q and S in the ratio of 3:3:2 (1,425) (1,425) 3,800 (950) - .
3,500 12,500 - 7,000 23,000
Add: Firm underwriting 3,000 2,000 1,000 1,000 7,000
Total Liability 6,500 14,500 1,000 8,000 30,000
IPCC Dec 2012 Marks 8
Rathnam Chemicals Limited planned to set up a unit for manufacture of
shoes. For the purpose of financing the unit, the Board of Directors have
issued 15,00,000 equity shares of ` 10 each. 30% of the issue was reserved
for promoters and the balance was offered to the public. P, Q and R have
come forward to underwrite the public issue in the ratio of 3:1:1 and also
agreed for firm undertwriting of 30,000; 20,000 and 10,000 shares
respectively. The underwriting commission was fixed at 4%. The amount
payable on application was ` 2.50 per share and allotment was ` 2.50 per
share. The details of subscriptions excluding firm underwriting are:
Marked forms of P 5,50,000 shares
Marked forms of Q 2,00,000 Shares
Marked forms of R 1,50,000 Shares
Unmarked forms 50,000 Shares
You are required to show
(i) the allocation of liability among underwriters with workings assuming that
the benefit of firm underwriting is given to individual underwriters.
(ii) Journal entries for:
a) the allotment of shares to the underwriters,
b) the commission due to each of them and,
c) the net cash paid or received.
Total Issue Size = 1500000 Shares

Issue of Shares reserved for Promoters = 30% of 1500000=450000 Shares

Shares offered among public = 1050000 Shares

Total Marked Applications excluding Firm Underwriting = 900000 Shares

Unmarked Applications = 50000 Shares

Short Fall in Public Subscription = 1050000-900000-50000 =100000 Shares

Gross Liability Ratio = 3:1:1

Allocation of liability among underwriters
P Q R Total
Gross liability ( in shares ) 6,30,000 2,10,000 2,10,000 10,50,000
Less: Marked Applications (5,50,000) (2,00,000) (1,50,000) (9,00,000)
80,000 10,000 60,000 1,50,000
Less: Unmarked Applications
(In the ratio of 3:1:1) (30,000) (10,000) (10,000) (50,000)
50,000 - 50,000 1,00,000
Less : Firm undertaking (30,000) (20,000) (10,000) (60,000)
20,000 (20,000) 40,000 40,000
Surplus of Q distributed
between P & R in the ratio
of 3:1 (15,000) 20,000 (5,000) - .
5,000 - 35,000 40,000
Add: Firm undertaking 30,000 20,000 10,000 60,000
Underwriters’ Liability 35,000 20,000 45,000 1,00,000
Calculation of amounts payable to/by underwriters:
P Q R
Liabilities (No. of shares) 35,000 20,000 45,000
Less: Firm undertaking (No. of shares) (30,000) (20,000) (10,000)
Net liability (No. of shares) 5,000 - 35,000
Amount payable on application
@ ` 2.50per share 12,500 - 87,500
Underwritting commission
receivable by underwriters @ 4% 2,52,000 84,000 84,000
Amount Payable to underwriters 2,39,500 84,000 -
Amount receivable from underwriters 3,500
Computaion of underwriting commission:
Commission of P @ 4% = 2,52,000 =(6,30,000 shares x ` 10 x 4%)
Commission of Q @ 4% = 84,000 =(2,10,000 shares x ` 10 x 4%)
Commission of R @ 4% = 84,000 =(2,10,000 shares x ` 10 x 4%).
(1) Bank A/c Dr. 1,50,000
To Share application A/c 1,50,000
(Being share application money received on firm application for shares 30,000 to P,
20,000 to Q & 10,000 to R @ ` 2.5 per share)

(2) P’s A/c Dr. 12,500

R’s A/c Dr. 87,500
To Equity share Capital A/c 1,00,000
(Allotment of shares to underwriters: 5,000 shares to P and 35,000 shares to R)

(3) Underwriting Commission A/c Dr. 4,20,000

To P’s A/c 2,52,000
To Q’s A/c 84,000
To R’s A/c 84,000
(Underwriting commission payable @ 4% on the amount of shares underwritten)
(4) P’s A/c Dr. 2,39,500
Q’s A/c Dr. 84,000
To Bank A/c 3,23,500
(Amount paid to P and Q in final settlement)

(5) Bank A/c Dr. 3,500

To R’s A/c 3,500
(Amount received from R on shares allotted less underwriting commission)
v Underwriting is an agreement by which a person called underwriter lakes
the responsibility of taking up the shares and debentures not subscribed by
the public in a public issue in consideration of commission.
v Underwriting can be done by a single person or jointly by two or more
persons.
v As per section 76 of the Companies Act, the commission that can be paid
can not be more than 2.5% of the issue price of the debentures and 5% in
the case of shares.
v Marked Applications : These applications bear the stamp of the
underwriter and the credit for these applications are given to the individual
underwriter.
v Unmarked Applications: These applications do not bear the stamp of the
underwriter. For the credit of these applications following points are
relevant.

a) If the entire issue is underwritten, the credit for these applications

is given to the underwriters either in the ratio of their gross liability or liability
after deducting the marked application.

b) If the entire issue is not underwritten, first the credit goes to the
account of the portion not underwritten and the rest will be apportioned in
the gross liability ratio.
v Firm underwriting: It is a firm commitment by an underwriter to take up a
specified number of shares irrespective of the number of shares subscribed
by the public. So the firm underwriting shall be deducted from the gross
liability first and the calculation shall be done without considering the firm
underwriting (if the credit is to be given for firm underwriting to the individual
underwriters) and after determining the liability on account of underwriting,
firm underwriting is added.

But if the credit for firm underwriting is not to be given to the individual
underwriter, those shall be treated as unmarked applications.