Q. 31. SK Ltd. invited applications for issuing 3,20,000 equity shares of 10 each at a
premium of 5 per share. The amount was payable as follows:
On application 3 per share (including premium 1 per share)
On allotment 5 per share (including premium 32 per share)
On first and final call Balance
Applications for 4,00,000 shares were received. Applications for 40,000 shares were
rejected and application money refunded. Shares were allotted on pro-rata basis to the
remaining applicants. Excess money received with applications was adjusted towards sums
due on allotments. Jeevan holding 800 shares failed to pay the allotment money and his
shares were immediately forfeited. Afterwards final call was made. Ganesh who had
applied for 2,700 shares failed to pay the final call. His shares were also forfeited. Out of
the forfeited shares 1,500 shares were re-issued at 8 per share fully paid up. The re-issued
shares included all the forfeited shares of Jeevan.
Assuming that the Company maintains ‘Calls in Arrears Account' pass necessary
Journal entries for the above transactions in the books of the company.
Answers
In the books of SK Ltd.
Journal Entry
Date Particulars L.F. Debit amount Rs. Credit Amount
Rs.
Bank A/c Dr.
To Equity share Application A/c
(Application money received on 4,00,000 equity shares)12,00,000
12,00,000
Equity Share Application A/c Dr.
To Equity Share Capital A/c
To Security Premium A/c
To Equity Share Allotment A/c
To Bank A/c
(Amount of application transferred to Share Capital and access money is adjusted towards allotment) 16,00,000
9,60,000
6,40,000
1,20,000
1,20,000
Equity Shares Allotment A/c Dr.
To Equity Share Capital A/c
To Security Premium A/c
(Amount due on allotment) 16,00,000
9,60,000
6,40,000
Bank A/c (16,00,000 - 1,20,000 - 3,700) Dr.
To Equity Share Allotment A/c
(Amount received on share allotment) 14,76,300
14,76,300
Share Capital A/c Dr.
Securities Premium A/c Dr.
To Share Forfeiture A/c
To Share Allotment A/c
(800 shares of Jeevan are forfeited due to non-payment of allotment money) 4,000
1,600
1,900
3,700
Equity Share First and Final Call A/c Dr.
To Equity Share Capital A/c
To Securities Premium A/c
(Amount due on first and final call on 3,19,200 shares) 22,34,400
15,96,000
6,38,400
Bank A/c (22,34,400 - 16,800) Dr.
To Equity Share First and Final Call A/c
(Amount received on first and final call) 22,17,000
22,17,000
Equity Share Capital A/c Dr.
Security Premium A/c Dr.
To Equity Share Forfeiture A/c
To Equity Share First and Final Call A/c
(Shares of Gupta were forfeited)
24,000
4,800
12,000
16,800
Bank A/c Dr.
Shares Forfeiture A/c Dr.
To Equity Share Capital A/c
(Forfeited shares were reissued at Rs. 8 per share fully paid-up) 12,000
3,000
15,000
Equity Share Forfeiture A/c Dr.
To Capital Reserve A/c
(Excess amount on forfeiture is transferred to capital reserve) 2,400
2,400
Working Notes:
Calculation of amount unpaid on Allotment
Share Applied by Jeevan =
3,20,000
3,60,000
×800=900 shares
Excess money received from Jeevan =Rs.300(100×3)
Amount due on Allotment =2,400(800×3)
Less: Excess Application Money =
300
Amount unpaid on Allotment =2,100
Amount unpaid on Securities Premium =
1,600
(800×2)
Total amount unpaid in allotment =Rs.3,700
Calculation of amount received from Jeevan (Share Forfeiture - Cr.)
Amount received on application =1,600(800×2)⇒ excluding premium
Add: Excess Application money =
300
Share Forfeiture (Cr.) =1,900
Unpaid amount on First and Final Call
Share Allotted to Ganesh =
3,60,000
3,20,000
×2,700=2,400 shares
Unpaid amount on First and Final Call =Rs.16,800 (2,400×7)
Calculation of amount received from Ganesh (Share Forfeiture - Cr.)
Amount received on application =4,800(2,400×2)⇒ excluding premium
Amount received on allotment =7,200 (2,400×3)⇒ excluding premium
Total amount received =Rs.12,000
Calculation of Capital Reserve
(i) 800 shares of Jeevan are reissued
Share Forfeiture (Cr.) =1,900
Less: Share Forfeiture (Dr.) =
1,600
(800×2)
Capital Reserve =Rs.300
(ii) 700 shares of Ganesh are reissued
Shares Forfeiture (Cr.) for 700 shares =3,500(12,000/2,400×700)
Less: Share Forfeiture (Dr.) =1,400 (700×2)
Capital Reserve =Rs.2,100
Total amount of Capital Reserve =Rs.2,400 (2,100+300)