Question

Illustration 45.
Sunrise Company Limited offered for public subscription 10,000 shares of ? 10 each at 3 11 per share
.
Money was payable as follows:
3 on application
3+ = 4 on allotment (including premium)
4 on first and final call.
Applications were received for 12,000 shares and the directors made pro-rata allotment.
Mr. Ahmad, an applicant for 120 shares, could not pay the allotment and call money, and Mr. Basu, a
holder of 200 shares, failed to pay the call. All these shares were forfeited.
Out of the forfeited shares, 150 shares (the whole of Mr. Ahmad's shares being included) were issued
at 8 per share. Record journal entries for the above transactions and prepare the share forfeited
(G.N.D.U. B.Com. 2018)​

Answer 1

Answer:

A company may receive applications for shares more than the number of shares it has offered to the public. This is known as over-subscription of shares. Usually, the companies that are financially strong, have a good reputation in the market or have profitable future prospects, receive over-subscription of shares. Thus, Pro Rata Allotment becomes necessary.