Question:Maple Ltd was registered on 1 March 2017. Directors decided to issue 500?000 ordinary shares on 31 March 2017, payable in full on application at an issue price of $2. The company received applications for 560?000 shares, sent letters of regret to applicants for 10?000 shares and the remaining applicants received partial allotments by issue of 10 shares for every 11 shares applied for, making the total allotment 500?000 shares. Legal costs of issuing the shares, $12?000, were paid.

MY question: why do we need to refunds of excess application money to successful application? the question just mentions that the allotments by issue of 10 shares for every 11 shares applied for.

the answer provided by school:

LUJJ Mar 31 Cash Trust Dr 1 120 000 Application Cr 1 120 000 (Money received on application 560 000 x $2) Application Dr 20 000 Cash Trust Cr 20 000 (Refund to unsuccessful applicants for 10 000 shares) Application Dr 1 000 000 Share Capital Cr 1 000 000 (Issue of 500 000 shares fully paid to applicants for 550 000 shares) Application Dr 100 000 Cash Trust Cr 100 000 (Refunds of excess application money to successful applicants) Cash Dr 1 000 000 Cash Trust Cr 1 000 000 (Transfer on allotment of shares) Share Issue Costs/Share Capital Dr 12 000 Cash Cr 12 000 (Costs of issuing the shares)