Question

22. M/s Shridhar Ltd. invited applications for issuing 80,000 equity shares of 100 each at a premium of 20
The amount was payable as follows:
On Application
*20 per share
On Allotment
*60 (including premium) per share
On First and Final call 40 per share
Applications for 1,20,000 shares were received. Allotment was made on prorata basis to all applicants.
Excess money received on application was adjusted on the sums due on allotment. One shareholder
who applied for 6,000 shares, failed to pay the allotment and other shareholder, a holder of 800 shares,
failed to pay first and final call.
These all shares were forfeited and 4,200 shares were reissued for 90 per share including all shares
of first default shareholder. Pass the journal entries in the books of Shridhar Ltd.
​

Answer 1

Lets pass journal entries in the books of M/S Shridhar Ltd.

Explanation:

Application received     Shares Alotted    

  120000                              80000

1. Bank a/c               dr                                    2400000

    To share application a/c                                                   2400000

(Being application money received for 120000 shares @20 per share)

2. Share application a/c   dr                        2400000

      To share capital a/c (80000*20)                                   1600000

       To share allotment a/c                                                   800000

(Being money received on application is transferred to share capital a/c and excess amount is transferred towards share allotment)

3. Share allotment a/c       dr                    4800000

        To share capital a/c (80000*40)                               3200000

         To securities Premium(80000*20)                           1600000

(Being allotment on 80000 shares is due)

4. Bank a/c                         dr                   4600000

          To share allotment a/c                                            4600000

(Being all money received except on 4000 shares)

5. Share First & Final call a/c   dr           3200000

            To Share capital a/c                                             3200000

(Being First &Final call money is due)

6. Bank a/c                               dr            3016000

              To Share first &Final call a/c                           3016000

(Being call money received except 4800 shares)

7. Share capital a/c              dr                  400000

   Securities Premium a/c    dr                    80000

                To Share allotment a/c                                 200000

                 To Share First & Final call a/c                        160000

                  To Share Forfeiture a/c                               120000

(Being 4000 shares were forfeited for non payment of allotment and call money)

8. Share capital a/c       dr               80000

                To Share First &Final call a/c                          24000

                 To Share Forfeiture a/c                                   56000

(Being 800 shares were forfeited for non payment of call money)

9. Bank a/c                  dr                 378000

   Share Forfeiture a/c   dr                42000

                  To Share capital a/c                                     420000

(Being 4200 forfeited shares were reissued @90 per share)

10. Share Forfeiture a/c    dr                92000

                    To Capital Reserve                                      92000

(Being baiance of forfeiture amount is transferred to capital reserve account)

Working Note:

1.  Number of shares alloted to first default shareholder = shares applied* total number of shares alloted/ total number of shares applied

i.e.,    6000*80000/120000 = 4000

2. Amount transferred to capital reserve =[ 120000 + ( 56000*200/800)]

                                                                           - 42000

                                                                   =[ 120000 + 14000] - 42000

                                                                    =134000