Accountancy, asked by vickysmilevick5134, 11 months ago

Benolac Paints Ltd. invited application for issuing 1,20,000 equity shares of 10 each at a
premium of 2 per share. The amount was payable as follows:
On Application
3 per share (including Premium (1)
On Allotment
3 per share
On first and final call 6 per share. (including Premium 1)
Applications for 1,40,000 shares were received. Applications for 10,000 shares were rejected
and pro-rata allotment was made to the remaining applicants. Over payments on
application were adjusted towards sums due on allotment. All calls were made and were
duly received except allotment and final call on 6,000 shares allotted to Sharvi. These
shares were forfeited. Afterwards, half of the forfeited shares were re-issued for 33,000 as
fully paid-up.​

Answers

Answered by isyllus
6

Capital Reserve 6750

Explanation:

This Question is Related to Pro-rata Allotment

we can know whether the Question is Pro-Rata or not from the following 2 Condition:

1. Allotment Money not Received

2. Over Subscription Case

to Solve this Question first we make summary of Instalment

                                      10-12

                       Application 3 (2+1)

                       Allotment    3 (2+1)

            First & Final Call    6

Share issue = 120000

Application Received = 140000

  • Applications for 10,000 shares were rejected

and issue 120000 to 130000 category Shareholders

Note : we also give you format of above Description in attachment to understand you easily.

For Pass Journal entry we already discussed some basic rules in earlier Questions

Basic rules of accounts

Increase in Asset (Debit)

Decrease in Asset (Credit)

Increase in Liability (Credit)

Decrease in Liability (debit)

Expenses and losses (debit)

Income and gain (credit)

By applying above rules you can do each and every entry of accounts

we try to explain you above rules in this Question

First entry

1. When Share Application money is Received

Aspect 1. Bank is Increased and Bank is our Asset so Increase in Asset means Debit

Aspect 2. Till when share are not issue , money will keep in Share Application Account , Share Application Account is increased and it's Liability for Company that's means its Credited

2. When Share Application money transfer to share capital

Aspect 1. Share Application  is  decreased for transfer of money and it's Liability for Company and Decreased in Liability means (Debit)

Aspect 2.   Due to transfer of money Share Capital is increased and we very well know share capital is liability and Increase in Liability means

credit).

Aspect

Now, other Further entry of allotment , First and Final call are down-up

with relation to Application ,entry of allotment, first and final call are same

but down-up Because when Public wants to purchased shares then public paid first but after that first company due after that public paid,

(we also give the chart of above discussion in attachment)Chart No.1

Chart No. 1 tell you First of all Received entry come after that due/transfer entry come but this situation for only application

on Allotment , First and Final Call , Criteria is Reversed

then come first due entry , after that Received entry (Reason of this we discussed above)

 Note : In Over Subscription always pass First Entry with Over-Subscribed

Shares

Now Come on Main Part

Journal

Particulars                                  LF    Dr.(Amount)       Cr.(Amount)

Bank A/C   Dr.                                          420000 (140000x3)

          To Share Application A/C                                420000

( Being Share Application money is Received on 140000 Shares)

Share Application  A/C     Dr.                   420000(140000x3)

         To Share Capital A/C                                          240000(120000x3)

         To Security Premium Reserve A/C                     120000(120000x1)

         To Share Allotment                                               30000(10000x3)

         To Bank A/C                                                           30000(10000x3)

(Being  Share Application money transfer to Share Capital with excess  to be Adjust on allotment and 10000 shares  were Rejected)

Share Allotment    A/C    Dr.                    360000(120000x3)

         To Share Capital A/C                                           360000(120000x3)

(Being Share allotment is due on 120000 Shares @ Rs.3)

Bank A/C   Dr.                                       313500

      To Share Allotment A/C                                       313500

(360000-30000-16500)

(Being Share Allotment money is Received after deducting Excess and default by Sahrvi)

Share First and Final call   A/C    A/C    Dr.      720000(120000x6)

         To Share Capital   A/C                                                600000(120000x5

        To Security Premium Reserve A/C                             120000(120000x1))

(Being Share First and Final call  is due on 120000 Shares @ Rs.6 including (including Premium 1)

Bank A/C   Dr.                                                  684000                                                

      To Share First and Final call   A/C                                684000

(720000-36000)

(Being Share First and Final call  is Received , after deduction 36000for non-payment of Rs 36000 )

Share Capital A/C   Dr.        60000 (6000 x 10)

Security Premium Reserve A/C      Dr.   6000 (6000 x 1 )

     To Share forfeiture A/C                               13500 (balancing figure)

     To Share Allotment A/C                               16500 (from attachment 3)

     To Share First & Final Call                            36000 from above

(Being 6000 Shares are Forfeited for  non payment for allotment and first & Final call)

Bank A/C            Dr.             33000

   To Share Capital A/C                            30000 (3000 x 10

    To Security Premium Reserve A/C      3000 (balancing figure)

(Being Shares are Re-issued at 33000 at a Profit)

Share Forfeiture A/C   Dr.         6750 (from attachment 3 )

   To Capital Reserve A/C                      6750

(Being Share forfeiture transfer to Capital Reserve )

Note: 1 Share Capital is always Credited with Face Value

          2 Capital reserve is income for company that's why credited

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