NCERT Solution for Class 12 Accountancy Chapter 1 - Accounting for Share Capital

NCERT Solutions are said to be an extremely helpful book while preparing for the CBSE Class 12 Accountancy examinations. This study material owns a deep knowledge and the Solutions collected by the subject matter exerts are no distinct.
NCERT Solution For Class 12 Accountancy Chapter 1 – Accounting For Share Capital furnishes us with an all-inclusive data to all the concepts. As the students would have learnt the basic fundamentals about the subject of accountancy in class 11, this curriculum for class 12 is a continual part of it; which explains the concepts in a great way.

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Access the Solution for class 12 Accountancy Chapter 1 – Accounting For Share Capital

Short Questions for NCERT Accountancy Solutions Part 2 Class 12 Chapter 1

1. What is public company?

A Public company as per section Sec 2(71) and Sec.3 (1) (a) of Company Act, 2013 means a company which

a. Is not a private company

b. Has a minimum paid-up share capital of five lakh rupees or such higher paid-up capital, as may be prescribed

c. Is a private company, being a subsidiary of a company which is not a private company.

The stock of a public company can be acquired by any individual and it may be through IPO or through trading on stock market.

2. What is private limited company?

As per Section 2(68) of Companies Act, 2013, Private limited companies are defined as companies that have following characteristics:

1. Companies whose article of association restricts transfer of shares

2. No minimum paid up capital

3. Minimum 2 members and maximum of 200 members (Only one in case of One Person Company)

4. Must include “private limited” or “Pvt Ltd” in their names

5. Shares of a private company are not traded in stock exchanges

3. When can shares be forfeited?

A shareholder has to pay allotment money for holding the shares and has to pay the calls which are part of share allotment. When a shareholder fails to do so, a 14 days’ notice is served to the shareholder, if the shareholder does not pay in these 14 days, the shares will be forfeited.

4. What is meant by Calls-in-Arrears?

When an investor (shareholder) fails to pay all the instalments for the allotted shares in the due time, the company expects the investor to pay the amount on subsequent calls or stages. The amount of money that is paid at later stages is called as Call-in-Arrears.

5. What do you mean by a listed company?

Public companies whose shares are listed in recognised stock exchanges for public trading are called as Listed Company. Such companies are also known as Quota Companies. Once the securities are listed it helps the investors in knowing the value of their investment in a listed company. It provides the potential investors an idea about the goodwill of the company and helps them on taking future investment decisions and evaluate the viability of investing in the company.

6. What are the uses of securities premium?

Securities premium can be used for these activities:

1. Issuing fully paid up bonus shares to existing shareholders.

2. Writing off expense of issue of shares and debentures, such as discount given on issue of shares.

3. Writing off preliminary expenses

4. Buying back shares

5. For paying premium payable on redemption of debentures.

7. What is meant by Calls-in-Advance?

When the shareholder pays the whole amount before the share payment date becomes due i.e. before the share issuing company makes a call for it. It is known as Calls-in-advance.

8. Write a brief note on ‘Minimum Subscription’.

It refers to the minimum amount of shares that must be subscribed by the public, so that the share allotting company can allot shares to the applicants, is termed as Minimum Subscription. If Minimum Subscription is not attained, the company cannot allot shares to its applicants and it should refund the amount received to the public. Minimum Subscription should not be less than 90% of the amount issued.

Long Questions for NCERT Accountancy Solutions Part 2 Class 12 Chapter 1

1. What is meant by the word ‘Company’? Describe its characteristics.

Section 2(20) of the Companies Act 2013, defines the term “company” to mean “a company incorporated under the Companies Act, 2013 or any previous company law. In general parlance, a company is an artificial person, created by law and having a separate legal entity, common seal, perpetual succession and limited liability. It is a voluntary association of persons who come together and contribute capital for doing business. Capital of a company is available in form of shares and the ownership of shares is subject to certain terms and conditions. Public and private are two forms of company.

Characteristics of a Company

1. A company is an association formed voluntarily by a group of persons having a common business goal. Minimum number of members required for a private company is two and that for a public company is seven.

2. Company is a juristic and artificial person created by law.

3. Company is a separate legal entity from shareholders and directors. It has the authority to open a bank account, sign contracts and own property in its name.

4. The liability of the members of a company is limited to the unpaid value of the shares they are holding.

5. The company is having perpetual existence which means the existence of the company is not affected by death, insolvency or retirement of any of its members

6. The company being an artificial person has no individual signature, hence it carries a common seal for validating the official documents.

7. Shares of a public company is transferrable while private companies do not allow transfer of shares without member’s consent.

2. Explain in brief the main categories in which the share capital of a company is divided.

Following categories of share capital are there:

1. Authorised Capital: This is the maximum amount a company can raise by issuing of shares. It is the amount mentioned during the formation of Memorandum of Association.

2. Issued Capital: A portion of authorised share capital that is offered by the company to general public for subscription.

3. Unissued Capital: A part of authorised capital that is not yet offered to general public for subscription but can be offered in near future.

4. Subscribed Capital: A part of issued capital which is subscribed by the general public.

5. Unsubscribed Capital: Referred to as that part of issued capital that has not been subscribed by the people (public).

6. Called up Capital: It is a portion of the subscribed capital for which the shareholders are called to pay

7. Uncalled up capital: It is that part of a subscribed capital that is not yet called up, but can be called up as per requirement.

8. Paid Up Capital: It is part of called up share capital that is received by the shareholders

9. Reserve Capital: A company may call up certain part of uncalled share capital when a company is winding up. This cannot be used for any other purpose other than paying back creditors, hence it is called reserve capital.

3. What do you mean by the term ‘share’? Discuss the type of shares, which can be issued under the Companies Act, 2013 as amended to date.

In a company the capital is split into small denominations which are known as shares. Shares can be easily transferred from one person to another and this transfer is bound by certain terms and conditions. Shareholder is that person who is contributing capital in form of shares. Ownership is limited to the value of shares possessed by the shareholder. There are two types of shares:

1) Preference Shares and 2) Equity Shares

1)Preference Share: Section 43 of the Company Act, 2013 defines preference shares as which entitles the holder to receive dividend and also the right to receive capital invested in order of preference before equity share holders when the company is wind up.

2) Equity Shares: Equity shareholders manage the affairs of the company and also have a voting right. These type of share do not possess any preferential right for dividend payment or capital repayment. The dividend rate is not fixed and varies year on year which is dependent on available profit left after distributing to preference shareholders.

4. Discuss the process for the allotment of shares of a company in case of over subscription.

Over-subscription: It is referred to as the situation where the total number of applications received for share allotment exceeds the available number of shares that are issued by the company for public. 

In case of over subscription there are 3 ways to deal with it:

1

2

3

5. What is a ‘Preference Share’? Describe the different types of preference shares.

Preference Share: Section 43 of the Company Act, 2013 defines preference shares as shares which entitles the holder to receive dividend and also the right to receive capital invested in order of preference before equity share holders when the company is wind up.

The different types are:

1. Cumulative Preference Share: When arrears of a dividend are cumulative and such arrears are paid before paying any dividend to equity shareholders, such shares are known as cumulative shares.

2. Non-Cumulative Preference Share: Shares where the dividend is paid from the net profits earned each year are known as non-cumulative preference share. If the company does not earn profits in any of the year, the arrears of dividend cannot be claimed.

3. Participating preference share: In these type of shares the preference shareholder has the luxury of participating in the surplus profit (i.e. apart from fixed rate of dividend) which is remaining after paying equity shareholders.

4. Non-participating Preference Share: The condition in which the shareholder is entitled only to a fix dividend pay-out and no share in surplus profits is known as non-participating preference share.

5. Convertible Preference Share: Type of shares which can be converted to equity shares within a period of time.

6. Non-Convertible Preference Share: Type of shares which do not have the right to convert into equity shares.

7. Redeemable Preference Shares: Those shares that can be repaid to the shareholders after a certain period as per provisions mentioned in Companies Act, 1956

8. Guaranteed Preference Shares: These shares have the provision of getting fixed dividend, even if the company is making no profits

6. Describe the provision of law relating to ‘Calls-in-Arrears’ and ‘Calls-in-Advance’.

When an investor (shareholder) fails to pay all the instalments for the allotted shares in the due time, the company expects the investor to pay the amount on subsequent calls or stages. The amount of money that is paid at later stages is called as Call-in-Arrears. The company is authorized by its Article of Association for charging a interest at a specified rate on the call in arrears amount from due date till the date of payment. If Article of Association does not mention or is silent about such a case, then a 5% charge is levied.

The amount is deducted from called up share capital on the liabilities side of Balance Sheet. If the due amount is not paid the shares can forfeited with proper notice to shareholders.

When the shareholder pays the whole amount before the share payment date becomes due i.e. before the share issuing company makes a call for it. It is known as Calls-in-advance. In case of advance payment the company has provision in their article of association to pay interest to shareholders from date of payment till date of call. If the article of association is silent in this regard, then a default 6% interest is provided.

It is shown on liabilities side of Balance Sheet under the heading of current liabilities.

7. Explain the terms ‘Over-subscription’ and ‘Under-subscription’. How are they dealt with in accounting records?

Over-subscription: It is referred to as the situation where the total number of applications received for share allotment exceeds the available number of shares that are issued by the company for public.

Under-subscription: This is the situation when the number of applications for share allotment are less than the number of shares issued by the company. A 90% subscription of the shares is called as Mini Subscription. If 90% subscription does not take place, the company should refund the money back to applicants.

In case of over subscription there are 3 ways to deal with it:

4

5

6

8. Describe the purposes for which a company can use ‘Securities Premium Account’.

Securities premium account can be used for these activities:

1. Issuing fully paid up bonus shares to existing shareholders.

2. Writing off expense of issue of shares and debentures, such as discount given on issue of shares.

3. Writing off preliminary expenses

4. Buying back shares

5. For paying premium payable on redemption of debentures

9. State clearly the conditions under which a company can issue shares at a discount.

Under the following conditions a company can issue shares at a discount:

1. The shares issued must belong to a class of shares that are already issued.

2. Shares can be issued at discount after a minimum time frame of 1 year from the date business has started

3. The issue of shares at discount is authorised by a resolution that is passed by the company in general meeting and approved by Company law board.

4. Shares can be issued at discount within two months of obtaining sanction company law board.

5. Maximum rate of discount must not cross 10% of face value or as decided by company law board.

10. Explain the term ‘Forfeiture of Shares’ and give the accounting treatment on forfeiture.

A shareholder has to pay allotment money for holding the shares and has to pay the calls which are part of share allotment. When a shareholder fails to do so, a 14 days’ notice is served to the shareholder, if the shareholder does not pay in these 14 days, the shares will be forfeited.

Table A of the Company Act, 2013 deals with Memorandum of Association for a company limited by shares. It has the following procedure for forfeiting of shares:

1. Notice sent to shareholder for making payment related to call arrears and interest on outstanding call money within a period of 14 days of receipt of the notice.

2. On non-payment of dues, the company can forfeit the share by passing a resolution

3. Forfeit notice resolution sent to the shareholder and a statement published in daily newspaper

4. Name of shareholder removed from registered shareholders list. 

Accounting Treatment for Forfeiture of Shares:

7

8 

9 

 

 

 

 

 

Numerical Questions for NCERT Accountancy Solutions Part 2 Class 12 Chapter 1

1. Anish Limited issued 30,000 equity shares of ₹ 100 each payable at ₹ 30 on application, ₹ 50 on allotment and ₹ 20 on Iast and final call. All money was duly received.

Record these transactions in the journal of the company.

 

Books of Anish Limited

 

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

 ₹

 

Bank A/c

Dr.

 

9,00,000

 

 

 

To Equity Share Application A/c

 

 

9,00,000

 

(Application money received on application for 30,000 equity shares @ ₹ 30 per share)

 

 

 

 

 

 

 

 

 

 

 

Equity Share Application A/c

Dr.

 

9,00,000

 

 

 

To Equity Share Capital A/c

 

 

9,00,000

 

(Share Application money transferred to Share Capital

Account)

 

 

 

 

 

 

 

 

 

 

Equity Share Allotment A/c

Dr.

 

15,00,000

 

 

 

To Equity Share Capital A/c

 

 

15,00,000

 

(Allotment money due on 30,000 @ ₹ 50 per share)

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

15,00,000

 

 

 

To Equity Share Allotment A/c

 

 

15,00,000

 

(Share Allotment money received for   30,000 shares @

₹ 50 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Share First and Final Call A/c

Dr.

 

6,00,000

 

 

 

To Equity Share Capital A/c

 

 

6,00,000

 

Share First and Final call due on 30,000 shares @ ₹ 20

per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

6,00,000

 

 

 

To Equity Share First and Final Call A/c

 

 

6,00,000

 

(Share First and Final Call money received for 30,000

shares @ ₹20 per share)

 

 

 

 

 

 

 

 

 

 

 

2. The Adersh Control Device Ltd was registered with the authorised capital of ₹ 3, 00,000 divided into 30,000 shares of ₹ 10 each, which were offered to the public. Amount payable as ₹ 3 per share on application, ₹ 4 per share on allotment and ₹ 3 per share on first and final call. These share were fully subscribed and all money was dully received. Prepare journal and Cash Book.

Books of Adersh Control Device Ltd

 

Journal

 

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

 

Equity Share Application A/c

Dr.

 

90,000

 

 

 

To Equity Share Capital A/c

 

 

90,000

 

(Share Application money for 30,000 shares @ ₹ 3 per share

transferred to Share Capital Account)

 

 

 

 

 

 

 

 

 

 

Equity Share Allotment A/c

Dr.

 

1,20,000

 

 

 

To Equity Share Capital A/c

 

 

 

1,20,000

 

(Share Allotment money due on 30,000 @ ₹ 4 per share)

 

 

 

 

 

 

 

 

 

 

 

Equity Share First and Final Call A/c

Dr.

 

90,000

 

 

 

To Equity Share Capital A/c

 

 

 

90,000

 

(Share First and Final Call due on 30,000 @ ₹ 3 per share)

 

 

 

 

 

 

 

 

 

 

 

Cash Book (Bank Column)

Dr.

Cr.

Date

Particulars

J.F.

Amount

Date

Particulars

J.F.

Amount

 

Equity Share Application

 

90,000

 

 

 

 

 

Equity Share Allotment

 

1,20,000

 

 

 

 

 

Equity Share First and Final Call

 

90,000

 

By Balance c/d

 

3,00,000

 

 

 

3,00,000

 

 

 

3,00,000

 

 

 

 

 

 

 

 

 

 

3. Software solution India Ltd inviting application for 20,000 equity share of ₹ 100 each, payable ₹ 40 on application, ₹ 30 on allotment and ₹ 30 on call. The company received applications for 32,000 shares. Application for 2,000 shares were rejected and money returned to Applicants. Applications for 10,000 shares were accepted in full and applicants for 20,000 share allotted half of the number of share applied and excess application money adjusted into allotment. All money received due on allotment and call. Prepare journal and cash book.

Books of Software Solution India Ltd.

Journal

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

 

Equity Share Application A/c

Dr.

 

12,00,000

 

 

 

To Equity Share Capital A/c

 

 

8,00,000

 

 

To Equity Share Allotment A/c

 

 

4,00,000

 

(Application money transferred to Equity Share Capital for 20,000 shares @ ₹ 40 and ₹ 4,00,000 is adjusted towards allotment)

 

 

 

 

 

 

 

 

 

 

Equity Share Allotment A/c

Dr.

 

6,00,000

 

 

 

To Equity Share Capital A/c

 

 

 

6,00,000

 

(Equity Share Allotment money due on 20,000 @ ₹ 30

per share)

 

 

 

 

 

 

 

 

 

 

 

Equity Share First and Final call A/c

Dr.

 

6,00,000

 

 

 

To Equity Share Capital A/c

 

 

 

6,00,000

 

(Equity share on First and Final call due on 20,000 @

₹ 30 per share)

 

 

 

 

 

 

 

 

 

 

 

Cash Book (Bank Column)

Dr.

Cr.

Date

Particulars

J.F.

Amount

Date

Particulars

J.F.

Amount

 

Equity Share Application

 

12,80,000

 

Equity Share Application

 

80,000

 

Equity Share Allotment

 

2,00,000

 

Balance c/d

 

20,00,000

 

Equity Share First and Final Call

 

6,00,000

 

 

 

 

 

 

 

20,80,000

 

 

 

20,80,000

 

 

 

 

 

 

 

 

 

Working Note:

 

Amount due on Allotment for 20,000 shares @ ₹ 30 per share

6,00,000

Money adjusted on application 10,000 shares @ ₹ 40 each

4,00,000

Money to be received on Allotment

2,00,000

 

4. Rupak Ltd. issued 10,000 shares of ₹ 100 each payable ₹ 20 per share on application, ₹ 30 per share on allotment and balance in two calls of ₹ 25 per share. The application and allotment money were duly received. On first call all member pays their dues except one member holding 200 shares, while another member holding 500 shares paid for the balance due in full. Final call was not made.

Give journal entries and prepare cash book.

Books of Rupak Ltd.

 

Journal

 

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

 

Share Application A/c

Dr.

 

2,00,000

 

 

 

To  Share Capital A/c

 

 

 

2,00,000

 

(Application money for 10,000 shares transferred to Share Capital

Account)

 

 

 

 

 

 

 

 

 

 

Share Allotment A/c

Dr.

 

3,00,000

 

 

 

To Share Capital A/c

 

 

 

3,00,000

 

(Allotment money due on 10,000 shares @ ₹ 30 per share)

 

 

 

 

 

 

 

 

 

 

 

Share First Call A/c

Dr.

 

2,50,000

 

 

 

To Share Capital A/c

 

 

 

2,50,000

 

(Share First Call due on 10,000 shares @ ₹ 25 per share)

 

 

 

 

 

 

 

 

 

 

Calls in Arrears A/c

Dr.

 

5,000

 

 

 

To Share First Call A/c

 

 

 

5,000

 

(Call in arrears on 200 shares @ ₹ 25 per share)

 

 

 

 

 

 

 

 

 

 

 

Cash Book (Bank Column)

Dr.

Cr.

Date

Particulars

J.F.

Amount

Date

Particulars

J.F.

Amount

 

Share Application

 

2,00,000

 

 

 

 

 

Share Allotment

 

3,00,000

 

 

 

 

 

Share first call

 

2,45,000

 

By Balance c/d

 

7,57,500

 

Calls in Advance

 

12,500

 

 

 

 

 

 

 

 

7,57,500

 

 

 

7,57,500

 

 

 

 

 

 

 

 

 

 

Working Note:

 

Money due on First Call for 10,000 shares @ 25 each

2,50,000

 

Less: Calls in Arrear for 200 shares @ ₹ 25 per Share

(5,000)

 

Money Received on First Call

2,45,000

 

Add: Calls received in advance on 500 shares @ ₹25 per share

12,500

 

 

 

2,57,500

 

 

 

 

 

 

5. Mohit Glass Ltd. issued 20,000 shares of ₹ 100 each at ₹ 110 per share, payable ₹ 30 on application, ₹ 40 on allotment (including Premium), ₹ 20 on first call and ₹ 20 on final call. The applications were received for 24,000 shares and allotted 20,000 shares and reject 4,000 shares and amount returned thereon. The money was duly received.

Give journal entries.

Books of Mohit Glass Ltd.

 

Journal

 

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

 

Bank A/c

Dr.

 

7,20,000

 

 

 

To Share Application A/c

 

 

7,20,000

 

(Application money received on application for 24,000 shares @ ₹ 30 per share)

 

 

 

 

 

 

 

 

 

 

Share Application A/c

Dr.

 

7,20,000

 

 

 

To Share Capital A/c (Bank Column)

 

 

 

6,00,000

 

 

To Bank A/c

 

 

 

1,20,000

 

(Share Application of 20,000 shares @ ₹ 30 transferred to Share

Capital Account and the balance returned)

 

 

 

 

 

 

 

 

 

Share Allotment A/c

Dr.

 

8,00,000

 

 

 

To Share Capital A/c

 

 

6,00,000

 

 

To Share Premium A/c

 

 

 

2,00,000

 

(Allotment money due on 20,000 shares @ 40 per share including

₹ 10 for premium)

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

8,00,000

 

 

 

To Share Allotment A/c

 

 

8,00,000

 

(Allotment money received on 20,000 shares @ ₹ 40 per share)

 

 

 

 

 

 

 

 

 

 

Share First Call A/c

Dr.

 

4,00,000

 

 

 

To Share Capital A/c

 

 

 

4,00,000

 

(Share First Call money due on 20,000 shares @ ₹ 20 per share)

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

4,00,000

 

 

 

To Share First Call A/c

 

 

4,00,000

 

(Share First Call money received on 20,000 shares @ ₹ 20 per

share)

 

 

 

 

 

 

 

 

 

 

Share Final Call A/c

Dr.

 

4,00,000

 

 

 

To Share Capital A/c

 

 

 

4,00,000

 

(Share Final Call money due on 20,000 shares @ ₹ 20 per share)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

4,00,000

 

 

 

To Share Final Call A/c

 

 

 

4,00,000

 

(Share Final Call money received on 20,000 shares @ ₹ 20 per share)

 

 

 

 

 

 

 

 

 

 

 

6. A limited company offered for subscription of 1, 00,000 equity shares of ₹ 10 each at a premium of ₹ 2 per share. 2, 00,000. 10% Preference shares of ₹ 10 each at par.

The amount on share was payable as under:

 

 

Equity Shares

Preference Shares

On Application

₹ 3 per share

₹ 3 per share

On Allotment

₹ 5 per share

₹ 4 per share

 

(including a premium)

 

On First Call

₹ 4 per share

₹ 3 per share

 

All the shares were fully subscribed, called-up and paid.

Record these transactions in the journal and cash book of the company:

 

 

Books of A Ltd.

 

Journal

 

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

 

Equity Share Application A/c

Dr.

 

3,00,000

 

 

10% Preference Share Application A/c

Dr.

 

6,00,000

 

 

 

To Equity Share Capital A/c

 

 

3,00,000

 

 

To 10% Preference Share Capital A/c

 

 

 

6,00,000

 

(Application money transferred to Equity Share Capital )

 

 

 

 

 

 

 

 

 

 

Equity Share Allotment A/c

Dr.

 

5,00,000

 

 

10% Preference Share Allotment A/c

Dr.

 

8,00,000

 

 

 

To Equity Share Capital A/c

 

 

3,00,000

 

 

To Securities Premium A/c

 

 

2,00,000

 

 

To 10% Preference Share Allotment A/c

 

 

8,00,000

 

(Amount due on allotment)

 

 

 

 

 

 

 

 

 

 

Equity Share First and Final Call A/c

Dr.

 

4,00,000

 

 

10% Preference Share First and Final Call A/c

Dr.

 

6,00,000

 

 

 

To Equity Share Capital A/c

 

 

4,00,000

 

 

To 10% Preference Share Capital A/c

 

 

6,00,000

 

(Amount on First and Final call due)

 

 

 

 

 

 

 

 

 

 

 

Cash Book( Bank Column)

Dr.

Cr.

Date

Particulars

J.F.

Amount

Date

Particulars

J.F.

Amount

 

Equity Share Application

 

3,00,000

 

 

 

 

 

10% Preference Share Application

 

6,00,000

 

 

 

 

 

Equity Share Allotment

 

5,00,000

 

 

 

 

 

10% Preference Share Allotment

 

8,00,000

 

 

 

 

 

Equity Share First and Final Call

 

4,00,000

 

 Balance c/d

 

32,00,000

 

10% Preference Share First & Final Call

 

6,00,000

 

 

 

 

 

 

 

 

32,00,000

 

 

 

32,00,000

 

 

 

 

 

 

 

 

 

 

 

7. Eastern Company limited, having an authorised capital of ₹ 10, 00,000 in shares of ₹ 10 each, issued 50,000 shares at a premium of ₹ 3 per share payable as follows:

 

On Application

₹ 3 per share

On Allotment (including premium)

₹ 5 per share

On first call (due three months after allotment) and the balance as and when required.

 

₹ 3 per share

 

Applications were received for 60,000 shares and the directors allotted the shares as follows:

(a) Applicants for 40,000 shares received shares, in full.

(b) Applicants for 15,000 shares received an allotment of 8,000 shares.

(c) Applicants for 500 shares received 200 shares on allotment, excess money being returned.

 

All amounts due on allotment were received.

The first call was duly made and the money was received with the exception of the call due on 100 shares.

Give journal and cash book entries to record these transactions of the company. Also prepare the Balance Sheet of the company.

 

Note: In order to solve this question, applicants of category C has been assumed as 5000 instead of 500 and allotment to the applicants of this category has been taken as 2000 in place of 200. 

Books of Eastern Company Limited

 

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

 

Share Application A/c

Dr.

 

1,80,000

 

 

 

To Share Capital A/c

 

 

1,50,000

 

 

To Share Allotment A/c

 

 

30,000

 

(Share Application money for 50,000 shares transferred to Share Capital Account and the excess money transferred to Share Allotment Account)

 

 

 

 

 

 

 

 

 

Share Allotment A/c

Dr.

 

2,50,000

 

 

 

To Share Capital A/c

 

 

1,00,000

 

 

To Share Premium A/c

 

 

1,50,000

 

(Allotment money due on 50,000 share @ ₹ 5 per share including ₹ 3 security premium)

 

 

 

 

 

 

 

 

 

 

Share First Call A/c

Dr.

 

1,50,000

 

 

 

To Share Capital A/c

 

 

 

1,50,000

 

(First call due on 50,000 share @ ₹ 3 per share)

 

 

 

 

 

 

 

 

 

 

 

Cash Book (Bank Column)

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Date

Particulars

J.F.

Amount

 

Share Application

 

1,80,000

 

 

 

 

 

Share Allotment

 

2,20,000

 

Balance c/d

 

5,49,700

 

Share First Call

 

1,49,700

 

 

 

 

 

 

 

5,49,700

 

 

 

5,49,700

 

 

 

 

 

 

 

 

 

Eastern Company Limited

Balance Sheet

Particulars

Note No.

Amount 

(₹)

I. Equity and Liabilities

 

 

1.Shareholders’ Funds

 

 

a. Share Capital

1

3,99,700

b. Reserves and Surplus

2

1,50,000

2.Non-Current Liabilities

 

 

3.Current Liabilities

 

 

Total

 

5,49,700

 

 

 

II. Assets

 

 

1.Non-Current Assets

 

 

2.Current Assets

 

 

a. Cash and Cash Equivalents

3

5,49,700

Total

 

5,49,700

 

 

 

NOTES TO ACCOUNTS

Note No.

Particulars

Amount  

(₹)

1

Share Capital

 

 

Authorised Share Capital

 

 

1,00,000 shares of ₹ 10 each

10,00,000

 

Issued Share Capital

 

 

 50,000 shares of ₹ 10 each

5,00,000

 

Subscribed, Called up and Paid up Share Capital

 

 

 50,000 shares of ₹ 10 each, ₹ 8 called-up

4,00,000

 

 

Less: Calls-in-Arrears

     (300)

3,99,700

 

 

 

2

Reserves and Surplus

 

 

Securities Premium

1,50,000

 

 

 

3

Cash and Cash Equivalents

 

 

Cash at Bank

5,49,700

 

 

 

 

8. Sumit Machine Ltd. issued 50,000 shares of ₹. 100 each at premium of 5%. The shares were payable ₹. 25 on application, ₹. 50 on allotment and ₹. 30 on first and final call. The issue was fully subscribed and money was duly received except the final call on 400 shares. The premium was adjusted on allotment.

Give journal entries and prepare balance sheet.

Books of Sumit Machine Ltd.

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

 

Bank A/c

Dr.

 

12,50,000

 

 

 

To Share Application A/c

 

 

12,50,000

 

(Share Application money received on application for 50,000 shares @ ₹25 per share)

 

 

 

 

 

 

 

 

 

Share Application A/c

Dr.

 

12,50,000

 

 

 

To Share Capital A/c

 

 

12,50,000

 

(Share Application money of 50,000 shares transferred to Share Capital Account)

 

 

 

 

 

 

 

 

 

Share Allotment A/c

Dr.

 

25,00,000

 

 

 

To Share Capital A/c

 

 

 

22,50,000

 

 

To Securities Premium A/c

 

 

 

2,50,000

 

(Share Allotment money due on 50,000 shares @ ₹45 each at a premium of ₹5)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

25,00,000

 

 

 

To Share Allotment A/c

 

 

 

25,00,000

 

(Allotment money received for 50,000 shares @ ₹50 per share)

 

 

 

 

 

 

 

 

 

Share First and Final Call A/c

Dr.

 

15,00,000

 

 

 

To Share Capital A/c

 

 

15,00,000

 

(Share First and Final call due on 50,000 shares @ ₹30 per share)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

14,88,000

 

 

Calls in Arrears A/c

Dr.

 

12,000

 

 

 

To Share First and Final Call A/c

 

 

15,00,000

 

(Share First and Final Call received except 400 shares)

 

 

 

 

Sumit Machine Ltd.

Balance Sheet

Particulars

Note No.

Amount 

(₹)

I. Equity and Liabilities

 

 

1. Shareholders’ Funds

 

 

 a. Share Capital

1

49,88,000

b. Reserves and Surplus

2

2,50,000

 

 

 

2. Non-Current Liabilities

 

 

3. Current Liabilities

 

 

Total

 

52,38,000

II. Assets

 

 

  1. Non-Current Assets

 

 

  1. Current Assets

 

 

a. Cash and Cash Equivalents

3

52,38,000

Total

 

52,38,000

 

 

 

 

NOTES TO ACCOUNTS

Note
No.

Particulars

Amount  

(₹)

1

Share Capital

 

 

Authorised Share Capital

 

 

…….. shares of ₹ 100 each

 

Issued Share Capital

 

 

 50,000 shares of ₹ 100 each

50,00,000

 

Subscribed, Called-up and Paid-up Share Capital

 

 

50,000 shares of ₹ 100 each

50,00,000

 

 

Less: Calls-in-Arrears

  (12,000)

49,88,000

 

 

 

2

Reserves and Surplus

 

 

Securities Premium Reserve

2,50,000

 

 

 

3

Cash and Cash Equivalents

 

 

Cash at Bank

52,38,000

 

 

9. Kumar Ltd. purchased assets of ₹. 6, 30,000 from Bhanu Oil Ltd. Kumar Ltd. issued equity share of ₹. 100 each fully paid in consideration. What journal entries will be made, if the shares are issued, (a) at par, and (b) at premium of 20%?

Case (a)

Books of Kumar Ltd

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

 

Sundry Assets A/c

Dr.

 

6,30,000

 

 

 

To Bhanu Oil Ltd

 

 

6,30,000

 

(Assets purchased from Bhanu Oil Ltd.)

 

 

 

 

 

 

 

 

(a)

Bhanu Oil Ltd

Dr.

 

6,30,000

 

 

 

To Share Capital A/c

 

 

6,30,000

 

(6,300 shares issued at par to Bhanu Ltd.)

 

 

 

 

 

 

 

 

10

11

Case (b)

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

 

Sundry Assets A/c

Dr.

 

6,30,000

 

 

 

To Bhanu Oil Ltd

 

 

6,30,000

 

(Assets purchased from Bhanu Oil Ltd.)

 

 

 

 

 

 

 

 

 

Bhanu Oil Ltd

Dr.

 

6,30,000

 

 

 

To Share Capital A/c

 

 

5,25,000

 

 

To Securities Premium A/c

 

 

1,05,000

 

(5,250 share are issued at 20% premium to Bhanu Ltd. in consideration of assets purchased)

 

 

 

 

 

 

 

 

12

13

10. Bansal Heavy machine Ltd purchased machine worth ₹ 3, 20,000 from Handa Trader. Payment was made as ₹ 50,000 cash and remaining amount by issue of equity share of the face value of ₹ 100 each fully paid at an issue price of ₹ 90 each.

Give journal entries to record the above transaction.

 

Book of Bansal Heavy Machine Ltd

 

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

 

Machinery A/c

Dr.

 

3,20,000

 

 

 

To Cash A/c

 

 

50,000

 

 

To Handa Traders

 

 

2,70,000

 

(Machine purchased from Handa Traders paid ₹ 50,000 in

cash immediately)

 

 

 

 

 

 

 

 

 

Handa Trader

Dr.

 

2,79,000

 

 

Discount on Issue of Shares A/c

Dr.

 

30,000

 

 

 

To Share Capital A/c

 

 

3,00,000

 

(3,000 share issued at ₹ 90 face value of ₹ 100 each to

Handa Traders in consideration of amount due to him for

machinery purchased)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Working Notes:-

1. Number of share issued

14

11. Naman Ltd issued 20,000 shares of ₹ 100 each, payable ₹ 25 on application, ₹ 30 on allotment, ₹ 25 on first call and the balance on final call. All money duly received except Anubha, who holding 200 shares did not pay allotment and calls money and Kumkum, who holding 100 shares did not pay both the calls. The directors forfeited shares of Anubha and Kumkum.

Give journal entries.

Books of Naman Ltd

 

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

 

Bank A/c

Dr.

 

5,00,000

 

 

 

To Share Application A/c

 

 

5,00,000

 

(Shares Application money received for 20,000 shares @ ₹ 25 each)

 

 

 

 

 

 

 

 

 

Share Application A/c

Dr.

 

5,00,000

 

 

 

To Share Capital

 

 

5,00,000

 

(Share Application money of 20,000 shares @ ₹ 25 each

transferred to Share Capital Account)

 

 

 

 

 

 

 

 

 

Share Allotment A/c

Dr.

 

6,00,000

 

 

 

To Share Capital A/c

 

 

 

6,00,000

 

(Share Allotment due on 20,000 shares @ ₹ 30 each)

 

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

5,94,000

 

 

 

To Share Allotment A/c

 

 

 

5,94,000

 

(Allotment money received for 19,800 shares @ ₹ 30 per share)

 

 

 

 

 

 

 

 

 

Share First Call A/c

Dr.

 

5,00,000

 

 

 

To Share Capital A/c

 

 

5,00,000

 

(Share First Call money due on 20,000 @ ₹ 25 per share)

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

4,92,500

 

 

 

To Share First Call A/c

 

 

 

4,92,500

 

(Share First Call received @ ₹ 25 per share for 19,700 shares)

 

 

 

 

 

 

 

 

 

Share Final Call A/c

Dr.

 

4,00,000

 

 

 

To Share Capital A/c

 

 

4,00,000

 

(Share Final Call money due on 20,000 shares @ 20 per share)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

3,94,000

 

 

 

To Share final call A/c

 

 

3,94,000

 

(Share Final Call received @ ₹ 20 per Share  for 19,700

shares and 300 shares failed to pay the call)

 

 

 

 

 

 

 

 

 

Share Capital A/c

Dr.

 

30,000

 

 

 

To Share Forfeiture A/c (200×25+100×55)

 

 

10,500

 

 

To Share Allotment (200×30)

 

 

 

6,000

 

 

To Share First Call A/c (300×25)

 

 

 

7,500

 

 

To Share Final Call A/c (300×20)

 

 

 

6,000

 

(300 Shares forfeited)

 

 

 

 

 

 

 

 

 

 

 

It can also be solved by debiting Calls in Arrears Account

 

Books of Naman Ltd

 

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

 

Bank A/c

Dr.

 

5,00,000

 

 

 

To Share Application A/c

 

 

 

5,00,000

 

(Share Application money received on application for 20,000 shares @ ₹ 25 per share)

 

 

 

 

 

 

 

 

 

 

Share Application A/c

Dr.

 

5,00,000

 

 

 

To Share Capital A/c

 

 

 

5,00,000

 

(Share Application money for 20,000 shares @ ₹ 25 per share

transferred to Share Capital Account)

 

 

 

 

 

 

 

 

 

 

Share Allotment A/c

Dr.

 

6,00,000

 

 

 

To Share Capital A/c

 

 

6,00,000

 

(Share Allotment money due on 20,000 shares @ ₹ 30 per share)

 

 

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

5,94,000

 

 

Calls in Arrears A/c

Dr.

 

6,000

 

 

 

To Share Allotment A/c

 

 

6,00,000

 

(Allotment money received for 19,800 shares @ ₹ 30 per

share and 200 shares failed to pay the Allotment)

 

 

 

 

 

 

 

 

 

 

 

 

Share First Call A/c

Dr.

 

5,00,000

 

 

 

To Share Capital A/c

 

 

5,00,000

 

(Share First Call money due on 20,000 shares @ ₹ 25 per share)

 

 

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

4,92,500

 

 

Calls in Arrears A/c

Dr.

 

7,500

 

 

 

To Share First Call A/c

 

 

5,00,000

 

(Share First Call money for 19,700 shares @ ₹ 25

each received except 300 shares)

 

 

 

 

 

 

 

 

 

Share Final Call A/c

Dr.

 

4,00,000

 

 

 

To Share Capital A/c

 

 

4,00,000

 

(Share Final Call money due on 20,000 shares @ ₹ 20 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

3,94,000

 

 

Calls in Arreras A/c

Dr.

 

6,000

 

 

 

To Share final call A/c

 

 

4,00,000

 

(Share Final Call money received for 19,700 shares @ ₹ 20 per share

except 300 shares)

 

 

 

 

 

 

 

 

 

Share Capital A/c

Dr.

 

30,000

 

 

 

To Share Forfeiture A/c (200×25+100×55)

 

 

10,500

 

 

To Calls in Arrears A/c

 

 

19,500

 

(300 Shares forfeited on account failed to pay the money due)

 

 

 

 

 

 

 

 

 

Working Note:

 

1. Forfeited Amount

 

Amount on application

(300 shares @ ₹ 25 each)

=

7,500

Amount on allotment

(100 Shares @ ₹ 30 each)

=

3,000

 

 

 

10,500

 

 

12. Kishna Ltd issued 15,000 shares of ₹ 100 each at a premium of ₹ 10 per share, payable as follows:

 

On application

₹ 30

On allotment

₹ 50 (including premium)

On first and final call

₹ 30

 

All the shares subscribed and the company received all the money due, With the exception of the allotment and call money on 150 shares. These shares were forfeited and reissued to Neha as fully paid share of ₹ 12 each.

 

Give journal entries in the books of the company.

 

Books of Krishna Ltd

 

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

 

Bank A/c

Dr.

 

4,50,000

 

 

 

To Share Application A/c

 

 

 

4,50,000

 

(Share Application money received for 15,000 shares @ ₹ 30 per share)

 

 

 

 

 

 

 

 

 

Share Application A/c

Dr.

 

4,50,000

 

 

 

To Share Capital A/c

 

 

 

4,50,000

 

(Share Application money of 15,000 shares transferred to Share

Capital Account)

 

 

 

 

 

 

 

 

 

Share Allotment A/c

Dr.

 

7,50,000

 

 

 

To Share Capital A/c

 

 

6,00,000

 

 

To Securities Premium A/c

 

 

1,50,000

 

(Share Allotment money on 15,000 shares @ ₹ 50 per share

including ₹ 10 securities premium due)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

7,42,500

 

 

 

To Share Allotment A/c

 

 

 

7,42,500

 

(Share Allotment received on 14,850 shares and 150 shares

failed to pay the money due)

 

 

 

 

 

 

 

 

 

Share First and Final Call A/c

Dr.

 

4,50,000

 

 

 

To Share Capital A/c

 

 

 

4,50,000

 

(Share First and Final Call for 15,000 shares @ ₹ 30 per share due)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

4,45,500

 

 

 

To Share First and Final Call A/c

 

 

4,45,500

 

(Share First and Final Call received for 14,850 shares @ ₹ 30 per share and 150 shares failed to pay amount due)

 

 

 

 

 

 

 

 

 

Share Capital A/c (150×100)

Dr.

 

15,000

 

 

Share Premium A/c (150×10)

Dr.

 

1,500

 

 

 

To Share Allotment A/c (150×50)

 

 

7,500

 

 

To Share First and Final Call A/c (150×30)

 

 

4,500

 

 

To Share Forfeiture A/c (150×30)

 

 

4,500

 

(150 shares forfeited for non-payment of Share Allotment and Share

First and Final Call  )

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

18,000

 

 

 

To  Share Capital A/c

 

 

 

15,000

 

 

To Securities Premium A/c

 

 

 

3,000

 

(150 shares of ₹ 100 each reissued @ ₹ 120 to Neha)

 

 

 

 

 

 

 

 

 

 

Share Forfeiture A/c

Dr.

 

4,500

 

 

 

To Capital Reserve A/c

 

 

 

4,500

 

(Balance of Share Forfeiture Account transferred to Capital Reserve

Account)

 

 

 

 

 

 

 

 

 

 

Note: In the solution, the reissued price of ₹ 12 has been assumed as ₹ 120 per share.

 

13. Arushi Computers Ltd. issued 10,000 equity shares of ₹. 100 each at 10% premium. The net amount payable as follows:

 

On application

₹. 20

On allotment

₹. 50 (₹. 40 + premium ₹. 10)

On first call

₹. 30

On final call

₹. 10

 

A shareholder holding 200 shares did not pay final call. His shares were forfeited. Out of these 150 shares were reissued to Ms. Sonia at ₹. 75 per share.

 

Give journal entries in the books of the company.

Books of Arushi Computers Ltd.

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

 

Bank A/c

Dr.

 

2,00,000

 

 

 

To Share Application A/c

 

 

 

2,00,000

 

(Share Application money received for 10,000 shares @ ₹20 per share)

 

 

 

 

 

 

 

 

 

Share Application A/c

Dr.

 

2,00,000

 

 

 

To Share Capital A/c

 

 

2,00,000

 

(Share Application money for 10,000 shares transferred to Share

Capital Account)

 

 

 

 

 

 

 

 

 

Share Allotment A/c

Dr.

 

5,00,000

 

 

 

To Share Capital A/c

 

 

4,00,000

 

 

To Securities Premium Reserve A/c

 

 

1,00,000

 

(Allotment money due on 10,000 shares @ ₹40 per share

excluding premium ₹10)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

5,00,000

 

 

 

To Share Allotment A/c

 

 

5,00,000

 

(Share Allotment money received for 10,000 shares @ ₹50 per

share)

 

 

 

 

 

 

 

 

 

Share First Call A/c

Dr.

 

3,00,000

 

 

 

To Share Capital A/c

 

 

3,00,000

 

(Share First Call money due on 10,000 shares @ ₹30 per share)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

3,00,000

 

 

 

To Share First Call A/c

 

 

3,00,000

 

(First Call money received for 10,000 shares @ ₹30 per share)

 

 

 

 

 

 

 

 

 

Share Final Call A/c

Dr.

 

1,00,000

 

 

 

To Share Capital A/c

 

 

1,00,000

 

(Final Call money due on 10,000 shares @ ₹10 per share)

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

98,000

 

 

 

To Share final call A/c

 

 

98,000

 

(Final Call money received for 9800 shares @ ₹10 per share and 200 shares failed to pay)

 

 

 

 

 

 

 

 

 

Share Capital A/c (200×100)

Dr.

 

20,000

 

 

 

To Share Final Call A/c (200×10)

 

 

2,000

 

 

To Share Forfeiture A/c (200×90)

 

 

18,000

 

(200 shares forfeited for non-payment of Final Call ₹ 10 per share)

 

 

 

 

 

 

 

 

 

Bank A/c (150×75)

Dr.

 

11,250

 

 

Share Forfeiture A/c (150×25)

Dr.

 

3,750

 

 

 

To Share Capital A/c (150×100)

Dr.

 

 

15,000

 

(150 forfeited shares reissued at ₹100 per share for ₹75)

 

 

 

 

 

 

 

 

 

 

Share Forfeiture A/c

Dr.

 

9,750

 

 

 

To Capital Reserve A/c

 

 

 

9,750

 

(Balance of 150 reissue shares after adjustment transferred to

Capital Reserve Account)

 

 

 

 

 

 

 

 

 

Working Notes:

 

Amount Transferred to Capital Reserve A/c

 

Amount credited to Share Forfeiture

₹ 90 per share

Less: Amount debited to Share Forfeiture

₹25 per share

Balance after adjustment

₹ 65 per share

Amount transferred to Capital Reserve Account = Balance per share after adjustment × Number of shares reissued

₹ 9,750 = ₹ 65 × ₹ 150 per share

14. Raunak Cotton Ltd. issued a prospectus inviting applications for 6,000 equity shares of ₹ 100 each at a premium of ₹ 20 per shares, payable as follows:

 

On application

₹ 20

On allotment

₹ 50 (including premium)

On first call

₹ 30

On final call

₹ 20

 

Applications were received for 10,000 shares and allotment was made Pro-rata to the applicants of 8,000 shares, the remaining applications Being refused. Money received in excess on the application was adjusted toward the amount due on allotment.

 

Rohit, to whom 300 shares were allotted failed to pay allotment and calls money, his shares were forfeited. Itika, who applied for 600 shares, failed to pay the two calls and her share were also forfeited. All these shares were sold to Kartika as fully paid for ₹ 80 per shares.

 

Give journal entries in the books of the company.

 

Books of Raunak Cotton Ltd.

 

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

 

Bank A/c

Dr.

 

2,00,000

 

 

 

To Share Application A/c

 

 

2,00,000

 

(Share Application money received on 10,000 shares)

 

 

 

 

 

 

 

 

 

 

Share Application A/c

Dr.

 

2,00,000

 

 

 

To Share Capital A/c

 

 

 

1,20,000

 

 

To Share Allotment A/c

 

 

40,000

 

 

To Bank

 

 

40,000

 

(Share Application money adjusted)

 

 

 

 

 

 

 

 

 

 

Share Allotment A/c

Dr.

 

3,00,000

 

 

 

To Share Capital A/c

 

 

1,80,000

 

 

To Share Premium A/c

 

 

1,20,000

 

(Share allotment money due)

 

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

2,47,000

 

 

 

To Share Allotment A/c

 

 

2,47,000

 

(Allotment money received except 300 shares)

 

 

 

 

 

 

 

 

 

 

Share First Call A/c

Dr.

 

1,80,000

 

 

 

To Share Capital A/c

 

 

1,80,000

 

(Share First Call money due)

 

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

1,57,500

 

 

 

To Share First Call A/c

 

 

1,57,500

 

(Share First Call money received except 750 (300+450 shares)

 

 

 

 

 

 

 

 

 

 

Share Final Call A/c

Dr.

 

1,20,000

 

 

 

To Share Capital A/c

 

 

1,20,000

 

(Share Final Call money is due)

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

1,05,000

 

 

 

To Share Final Call

 

 

1,05,000

 

(Share Final Call money received except 750 shares)

 

 

 

 

 

 

 

 

 

 

Share Capital A/c (750×100)

Dr.

 

75,000

 

 

Share Premium A/c (300×20)

Dr.

 

6,000

 

 

 

To Share Allotment A/c

 

 

13,000

 

 

To Share first call A/c (750×30)

 

 

 

22,500

 

 

To Share final call A/c (750×20)

 

 

 

15,000

 

 

To Share Forfeiture A/c

 

 

 

30,500

 

(750 shares were forfeited)

 

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

60,000

 

 

Share Forfeiture A/c

Dr.

 

15,000

 

 

 

To Share Capital A/c

 

 

75,000

 

(Forfeited shares reissued @ 80 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share Forfeiture A/c

Dr.

 

15,500

 

 

 

To Capital Reserve A/c

 

 

15,500

 

(Share Forfeiture Account transferred capital reserve)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Working Note:

 

16 

 2. Call in arrears by Rohit on allotment

Money received on Application

(400×20)

8,000

 

Less: Transferred to share capital

(300×20)

6,000

Excess adjusted on allotment

 

2,000

 

 

 

Allotment due

(300×50)

15,000

 

Less: Excess adjustment on allotment

 

2,000

Call in arrear

 

13,000

 

 

 

17

 

4. Share Forfeiture amount

 

Amount on application

 

 

 

300×20

6,000

 

450×20

9,000

Excess amount received from Rohit for allotment on pro-rata basis

2,000

Amount received on Allotment by Kartika

13,500

 

30,500

 

 

15. Himalaya Company Limited issued for public subscription of 1, 20,000 equity shares of ₹ 10 each at a premium of ₹ 2 per share payable as under:

With Application

₹ 3 per share

On allotment (including premium)

₹ 5 per share

On First call

₹ 2 per share

On Second and Final call

₹ 2 per share

Applications were received for 1, 60,000 shares. Allotment was made on pro-rata basis. Excess money on application was adjusted against the amount due on allotment.

Rohan, whom 4,800 shares were allotted, failed to pay for the two calls. These shares were subsequently forfeited after the second call was made. All the shares forfeited were reissued to Teena as fully paid at ₹ 7 per share.

Record journal entries in the books of the company to record these transactions relating to share capital. Also show the company’s balance sheet.

 

Books of Himalaya Company Ltd.

Journal

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

 

Bank A/c

Dr.

 

4,80,000

 

 

To Share Application A/c

 

 

4,80,000

 

(Share Application money received for 1,60,000 shares @ ₹ 3 per share)

 

 

 

 

 

 

 

 

 

Share Application A/c

Dr.

 

4,80,000

 

 

To Equity Share Capital A/c

 

 

3,60,000

 

To Share Allotment A/c

 

 

1,20,000

 

(Share Application for 1,20,000 shares @ ₹ 3 per share transferred to Share Capital Account and remaining amount adjusted to Allotment)

 

 

 

 

 

 

 

 

 

Share Allotment A/c

Dr.

 

6,00,000

 

 

To Equity Share Capital A/c

 

 

3,60,000

 

To Securities Premium

 

 

2,40,000

 

(Share Allotment due on 1,20,000 shares @ ₹ 5 per share including ₹ 2 Securities Premium)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

4,80,000

 

 

To Share Allotment A/c

 

 

4,80,000

 

(Share allotment for 1,20,000 shares @ ₹ 5 per share received)

 

 

 

 

 

 

 

 

 

Share First Call A/c

Dr.

 

2,40,000

 

 

To Equity Share Capital A/c

 

 

2,40,000

 

(Share First Call due on 1,20,000 shares @ ₹ 2 per share)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

2,30,400

 

 

To Share First Call A/c

 

 

2,30,400

 

(Share First Call received on 1,15,200 shares @ ₹ 2 per share and 4,800 shares failed to pay)

 

 

 

 

 

 

 

 

 

Share Final Call A/c

Dr.

 

2,40,000

 

 

To Equity Share Capital A/c

 

 

2,40,000

 

(Share Final call due on 1,20,000 shares @ ₹ 2 per share)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

2,30,400

 

 

To Share Final Call A/c

 

 

2,30,400

 

(Share Final Call received on 1,15,200 shares @ ₹ 2 per share and 4,800 shares failed to pay)

 

 

 

 

 

 

 

 

 

Equity Share Capital A/c (4,800×10)

Dr.

 

48,000

 

 

To  Share First Call A/c (4,800×2)

 

 

 

9,600

 

To  Share Final Call A/c (4,800×2)

 

 

 

9,600

 

To  Share Forfeiture A/c (4,800×6)

 

 

 

28,800

 

(4,800 shares forfeited for the non-payment of First Call and Final Call)

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

33,600

 

 

Share Forfeiture A/c

Dr.

 

14,400

 

 

To  Equity Share Capital

 

 

 

48,000

 

(4,800 shares reissued @ ₹ 7 per share, fully paid-up)

 

 

 

 

 

 

 

 

 

 

Share Forfeiture A/c

Dr.

 

14,400

 

 

To Capital Reserve A/c

 

 

 

14,400

 

(Share forfeiture balance of 4,800 shares  transferred to Capital Reserve Account)

 

 

 

 

 

 

 

 

 

 

 

Himalaya Company Limited

Balance Sheet

Particulars

Note No.

Amount 

(₹)

I. Equity and Liabilities

 

 

1. Shareholders’ Funds

 

 

a. Share Capital

1

12,00,000

b. Reserves and Surplus

2

2,54,400

2. Non-Current Liabilities

 

 

3. Current Liabilities

 

 

Total

 

14,54,400

 

 

 

II. Assets

 

 

1. Non-Current Assets

 

 

2. Current Assets

 

 

a. Cash and Cash Equivalents

3

14,54,400

Total

 

14,54,400

 

 

 

NOTES TO ACCOUNTS

Note No.

Particulars

Amount

(₹)

1

Share Capital

 

 

Authorised Share Capital

 

 

…….. shares of ₹ 10 each

 

Issued Share Capital

 

 

1,20,000 shares of ₹ 10 each

12,00,000

 

Subscribed, Called-up and Paid-up Share Capital

 

 

1,20,000 shares of ₹ 10 each

12,00,000

 

 

 

2

Reserves and Surplus

 

 

Securities Premium

2,40,000

 

 

Capital Reserve

14,400

2,54,400

 

 

 

3

Cash and Cash Equivalents

 

 

Cash at Bank

14,54,400

 

 

 

 

16. Prince Limited issued a prospectus inviting applications for 20,000 equity shares of ₹. 10 each at a premium of ₹. 3 per share payable as follows:

 

With Application

₹. 2

On Allotment (including premium)

₹. 5

On First Call

₹. 3

On Second Call

₹. 3

 

Applications were received for 30,000 shares and allotment was made on pro-rata basis. Money overpaid on applications was adjusted to the amount due on allotment.

 

Mr. Mohit whom 400 shares were allotted, failed to pay the allotment money and the first call, and his shares were forfeited after the first call. Mr. Joly, whom 600 shares were allotted, failed to pay for the two calls and hence, his shares were forfeited.

 

Of the shares forfeited, 800 shares were reissued to Supriya as fully paid for ₹. 9 per share, the whole of Mr. Mohit’s shares being included.

 

Record journal entries in the books of the Company and prepare the Balance Sheet.

Books of Prince Limited

Journal

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

 

Bank A/c

Dr.

 

60,000

 

 

 

To Share Application A/c

 

 

60,000

 

(Share Application money received on 30,000 shares @₹ 2 per share)

 

 

 

 

 

 

 

 

 

 

Share Application A/c

Dr.

 

60,000

 

 

 

To Share Capital A/c

 

 

 

40,000

 

 

To Share Allotment A/c

 

 

20,000

 

(Application money on 20,000 shares transferred to Share Capital Account and the balance adjusted on allotment)

 

 

 

 

 

 

 

 

 

 

Share Allotment A/c

Dr.

 

1,00,000

 

 

 

To Share Capital A/c

 

 

40,000

 

 

To Securities Premium A/c

 

 

60,000

 

(Allotment money due on 20,000 shares @ ₹5 per share including premium of ₹ 3 per share)

 

 

 

 

 

 

 

 

 

 

Bank A/c (1,00,000 – 20,000 – 1,600)

Dr.

 

78,400

 

 

 

To Share Allotment A/c

 

 

78,400

 

(Allotment money received)

 

 

 

 

 

 

 

 

 

 

Share First Call A/c

Dr.

 

60,000

 

 

 

To Share Capital A/c

 

 

 

60,000

 

(Share First Call due on 20,000 shares @ ₹3 per share)

 

 

 

 

 

 

 

 

 

 

Bank A/c (60,000 – 1,200 – 1,800)

Dr.

 

57,000

 

 

 

To Share First Call A/c

 

 

57,000

 

(First call money received)

 

 

 

 

 

 

 

 

 

 

Share Capital A/c

Dr.

 

2,800

 

 

Securities Premium A/c

Dr.

 

1,200

 

 

 

To Share Forfeiture A/c

 

 

1,200

 

 

To Share Allotment A/c

 

 

1,600

 

 

To Share First Call A/c

 

 

1,200

 

(400 shares forfeited after first call)

 

 

 

 

 

 

 

 

 

 

 

Share Second Call A/c

Dr.

 

58,800

 

 

 

To Share Capital A/c

 

 

58,800

 

(Final Call money due on 19,600 shares @ ₹3 per share)

 

 

 

 

 

 

 

 

 

 

 

Bank A/c (58,800 – 1,800)

Dr.

 

57,000

 

 

 

To Share Second Call A/c

 

 

57,000

 

(Second Call money received except on 600 shares)

 

 

 

 

 

 

 

 

 

 

 

Share Capital A/c

Dr.

 

6,000

 

 

 

To Share Forfeiture A/c

 

 

2,400

 

 

To Share First Call A/c

 

 

1,800

 

 

To Share Second Call A/c

 

 

1,800

 

(600 shares forfeited)

 

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

7,200

 

 

Share Forfeiture A/c

Dr.

 

800

 

 

 

To Share Capital A/c

 

 

8,000

 

(800 Shares reissued @ ₹ 9 each)

 

 

 

 

 

 

 

 

 

 

Share Forfeiture A/c

Dr.

 

2,000

 

 

 

To Capital Reserve

 

 

2,000

 

 

 

 

 

 


As per the Revised Schedule VI, the Balance Sheet of Prince Limited is as follows:

 

Prince Limited

Balance Sheet

Particulars

Note No.

Amount 

(₹)

I. Equity and Liabilities

 

 

1. Shareholders’ Fund

 

 

a. Share Capital

1

1,98,000

b. Reserves and Surplus

2

61,600

2. Non-Current Liabilities

 

 

3. Current Liabilities

 

 

Total

 

2,59,600

 

 

 

II. Assets

 

 

1. Non-Current Assets

 

 

2. Current Assets

 

 

a. Cash and Cash Equivalents

3

2,59,600

Total

 

2,59,600

 

 

 

NOTES TO ACCOUNTS

Note No.

Particulars

Amount  

(₹)

1

Share Capital

 

 

Authorised Share Capital

 

 

…….. shares of ₹10 each

 

Issued Share Capital

 

 

20,000 shares of ₹10 each

2,00,000

 

Subscribed, Called-up and Paid-up Share Capital

 

 

19,800 shares of ₹10 each

1,98,000

 

 

 

2

Reserves and Surplus

 

 

Securities Premium

58,800

 

 

Capital Reserve

2,800

61,600

 

 

 

3

Cash and Cash Equivalents

 

 

Cash at Bank

2,59,600

 

 

 

Working Notes:

18

Money received on Application

(600×2)

1,200

 

Less: Utilised on application

(400×2)

(800)

Excess amount received

 

400

 

 

 

 

 

Amount due on Allotment

(400×5)

2,000

 

Less: Excess amount received

 

(400)

Amount due on allotment

 

1,600

 

 

 

 

2. Amount to be transferred to Capital Reserve

Amount forfeited on Mohit’s 400 shares

1,200

Amount forfeited on Joly’s 600 shares

2,400

 

Amount forfeited on Joly’s 400 shares 
19

1,600

 

2,800

Less: Discount allowed on 800 shares reissued

(800)

Amount to be transferred to Capital Reserve

2,000

 

 

17. Life machine tools Limited, issued 50,000 equity shares of ₹ 10 each at ₹ 12 per share, payable at to ₹ 5 on application (including premium), ₹ 4 on allotment and the balance on the first and final call.

Applications for 70,000 shares had been received. Of the cash received, ₹ 40,000 was returned and ₹ 60,000 was applied to the amount due on allotment, the balance of which was paid. All shareholders paid the call due, with the exception of one share holder of 500 shares. These shares were forfeited and reissued as fully paid at ₹ 8 per share. Journalise the transactions.

Books of Life machine tools Limited

 

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

 

Bank A/c

Dr.

 

3,50,000

 

 

 

To Share Application A/c

 

 

3,50,000

 

(Application money received on application for 70,000 shares @ ₹ 5 per share including premium ₹ 2)

 

 

 

 

 

 

 

 

 

 

Share Application A/c

Dr.

 

3,50,000

 

 

 

To Share Capital A/c

 

 

 

1,50,000

 

 

To Securities Premium A/c

 

 

 

1,00,000

 

 

To Share Allotment A/c

 

 

 

60,000

 

 

To Bank A/c

 

 

 

40,000

 

(Share Application money for 50,000 shares transferred to Share

Capital Account and Securities Premium,  ₹ 60,000

adjusted to Allotment and ₹ 40,000 returned)

 

 

 

 

 

 

 

 

 

Share Allotment A/c

Dr.

 

2,00,000

 

 

 

To Share Capital A/c

 

 

 

2,00,000

 

(Share Allotment money due on 50,000 shares @ ₹ 4 per share)

 

 

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

1,40,000

 

 

 

To Share Allotment A/c

 

 

 

1,40,000

 

(Share Allotment money received on share allotment)

 

 

 

 

 

 

 

 

 

 

 

 

 

Share First and Final A/c

Dr.

 

1,50,000

 

 

 

To Share Capital A/c

 

 

 

1,50,000

 

(Share First and Final Call money due on 50,000 shares @ ₹ 3 per share)

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

1,48,500

 

 

 

To Share First and Final A/c

 

 

1,48,500

 

(Share First and Final Call money received from 49,500 shares @ ₹ 3 per share and 500 shares failed to pay)

 

 

 

 

 

 

 

 

 

Share Capital A/c (500×10)

Dr.

 

5,000

 

 

 

To Share First and Final Call A/c (500×3)

 

 

 

1,500

 

 

To Share Forfeiture A/c (500×7)

 

 

 

3,500

 

(500 shares @ ₹ per share fully paid up forfeited for the non-

payment of Share First and Final Call ₹ 3 per share)

 

 

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

4,000

 

 

Share Forfeiture A/c

Dr.

 

1,000

 

 

 

To Share Capital A/c

 

 

 

5,000

 

(500 Shares reissued @ 8 per share fully paid up)

 

 

 

 

 

 

 

 

 

 

 

 

 

Share Forfeiture A/c

Dr.

 

2,500

 

 

 

To Capital Reserve A/c

 

 

2,500

 

(Balance of 500 shares in Forfeiture Account after

adjustment, transferred to Capital Reserve Account)

 

 

 

 

 

 

 

 

 

 

 

18.The Orient Company Limited offered for public subscription 20,000 equity shares of ₹ 10 each at a premium of 10% payable at ₹ 2 on application; ₹ 4 on allotment including premium; ₹ 3 on First Call and ₹ 2 on Second and Final call. Applications for 26,000 shares were received. Applications for 4,000 shares were rejected. Pro-rata allotment was made to the remaining applicants. Both the calls were made and all the money were received except the final call on 500 shares which were forfeited. 300 of the forfeited shares were later on issued as fully paid at ₹ 9 per share. Give journal entries and prepare the balance sheet.

Books of Orient Company Limited

Journal

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

 

Bank A/c

Dr.

 

52,000

 

 

 

To Share Application A/c

 

 

52,000

 

(Share Application Money received for 26,000 shares

@ ₹ 2 per share)

 

 

 

 

 

 

 

 

 

 

 

 

Share Application A/c

Dr.

 

52,000

 

 

 

To Share Capital A/c

 

 

40,000

 

 

To Share Allotment A/c

 

 

4,000

 

 

To Bank A/c

 

 

8,000

 

(Application money  @ ₹ 2 per share of 20,000 shares

transferred to Share Capital Account and money of 4,000 shares returned, remaining to Share Allotment)

 

 

 

 

 

 

 

 

 

Share Allotment A/c

Dr.

 

80,000

 

 

 

To Share Capital A/c

 

 

60,000

 

 

To Securities Premium A/c

 

 

20,000

 

(Share Allotment money due on 20,000 shares @ ₹ 4 per share including Re 1 Securities Premium)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

76,000

 

 

 

To Share Allotment A/c

 

 

76,000

 

(Share Allotment Money received for all the shares after

adjustment of money transferred from Share Application)

 

 

 

 

 

 

 

 

 

Share First Call A/c

Dr.

 

60,000

 

 

 

To Share Capital A/c

 

 

60,000

 

(Share First Call money due on 20,000 share @ ₹ 2 per share)

 

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

60,000

 

 

 

To Share First Call A/c

 

 

60,000

 

(Share First Call received for 20,000 shares @ ₹ 2 per share)

 

 

 

 

 

 

 

 

 

Share Second and Final Call A/c

Dr.

 

40,000

 

 

 

To Share Capital A/c

 

 

40,000

 

(Share Second and Final  Call money due on 20,000 shares @ ₹ 2 per share)

 

 

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

39,000

 

 

 

To Share Second and Final Call A/c

 

 

39,000

 

(Share Second and Final Call money received for 19,500 shares @ ₹ 2 per share and 500 shares failed to pay)

 

 

 

 

 

 

 

 

 

 

 

 

 

Share Capital A/c

Dr.

 

5,000

 

 

 

To Share Second and Final Call A/c

 

 

1,000

 

 

To Share Forfeiture A/c

 

 

4,000

 

(500 shares  of ₹ 10 per share fully called-up forfeited for

non-payment of Second and Final Call ₹ 2 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

2700

 

 

Share Forfeiture A/c

Dr.

 

300

 

 

 

To Share Capital A/c

 

 

3,000

 

(300 shares @ ₹ 10 each reissued for ₹ 9 per share fully paid-up)

 

 

 

 

 

 

 

 

 

 

 

 

Share Forfeiture A/c

Dr.

 

2,100

 

 

 

To Capital Reserve A/c

 

 

2,100

 

(Balance of 300 shares in Share Forfeiture Account transferred

to Capital Reserve Account, after adjustment)

 

 

 

 

 

 

 

 

 

 

 

Orient Company Limited

Balance Sheet

Particulars

Note No.

Amount

(₹)

I. Equity and Liabilities

 

 

1. Shareholders’ Funds

 

 

a. Share Capital

1

1,99,600

b. Reserves and Surplus

2

22,100

2. Non-Current Liabilities

 

 

3. Current Liabilities

 

 

Total

 

2,21,700

 

 

 

II. Assets

 

 

1. Non-Current Assets

 

 

2. Current Assets

 

 

  1. Cash and Cash Equivalents

3

2,21,700

Total

 

2,21,700

 

 

 

NOTES TO ACCOUNTS

Note No.

Particulars

Amount

(₹)

1

Share Capital

 

 

Authorised Equity Share Capital

 

 

…….. Equity Shares of ₹ 10 each

 

Issued Equity Share Capital

 

 

20,000 Equity Shares of ₹ 10 each

2,00,000

 

Subscribed, Called-up and Paid-up Equity Share Capital

 

 

19,800 Equity Shares of ₹ 10 each

1,98,000

 

 

Add: Shares Forfeiture

1,600

1,99,600

 

 

 

2

Reserves and Surplus

 

 

Securities Premium

20,000

 

 

Capital Reserve

2,100

22,100

 

 

 

3

Cash and Cash Equivalents

 

 

Cash at Bank

2,21,700

 

 

 

Working Notes:

Share Forfeiture Account  credited

₹ 8 per share

Less: Share Forfeiture Account debited

₹ 1 per share

Amount  transferred to Capital Reserve Account, after adjustment

₹ 7 per share

Amount transferred to Capital Reserve Account, after adjustment for 300 shares = 300 Shares @ ₹ 7 per share = ₹ 2,100

19. Alfa Limited invited applications for 4, 00,000 of its equity shares of ₹ 10 each on the following terms:

 

Payable on application

₹ 5 per share

Payable on allotment

₹ 3 per share

Payable on first and final call

₹ 2 per share

 

Applications for 5, 00,000 shares were received. It was decided:

 

(a) to refuse allotment to the applicants for 20,000 shares;

(b) to allot in full to applicants for 80,000 shares;

(c) to allot the balance of the available shares’ pro-rata among the other applicants; and

(d) to utilise excess application money in part as payment of allotment money.

One applicant, whom shares had been allotted on pro-rata basis, did not pay the amount due on allotment and on the call, and his 400 shares were forfeited. The shares were reissued @ ₹ 9 per share. Show the journal and prepare Cash book to record the above.

 

 

In the books of Alfa Limited

 

Journal

 

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

 

Share Application A/c

Dr.

 

24,00,000

 

 

 

To Share Capital A/c

 

 

20,00,000

 

 

To Share Allotment A/c

 

 

4,00,000

 

(Share Application money adjusted)

 

 

 

 

 

 

 

 

 

 

Share Allotment A/c

Dr.

 

12,00,000

 

 

 

To Share Capital A/c

 

 

12,00,000

 

(Share Allotment money due)

 

 

 

 

 

 

 

 

 

 

Share First and Final Call A/c

Dr.

 

8,00,000

 

 

 

To Share Capital A/c

 

 

8,00,000

 

(Share First and Final Call due)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Working Note:

 

 
20

2. Call in arrears by applicant on allotment

 

Money received on Application

(500×5)

=

2,500

Less: Amount adjusted on Application

(400×5)

=

2,000

Amount adjusted on Allotment

 

 

500

 

3.

 

Money due on Allotment

(400×3)

1,200

 

Less: Money adjusted

 

500

 

Balance due on Allotment

 

700

 

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

 

Share Capital A/c

Dr.

 

4,000

 

 

 

To Share Allotment A/c

 

 

700

 

 

To Share First & Final Call A/c

 

 

800

 

 

To Share Forfeiture A/c

 

 

2,500

 

(400 shares forfeited)

 

 

 

 

 

 

 

 

 

 

Share Forfeiture A/c

Dr.

 

400

 

 

 

To Share Capital A/c

 

 

400

 

(Share reissued and loss on issue charged from Share Forfeiture

Account)

 

 

 

 

 

 

 

 

 

Share Forfeiture A/c

Dr.

 

2,100

 

 

 

To Capital Reserve A/c

 

 

2,100

 

(Share Forfeiture Account transferred to Capital Reserve Account)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Book (Bank Column)

Dr.

 

 

 

 

 

 

Cr.

 

Date

Particulars

J.F.

Amount

Date

Particulars

J.F.

Amount

 

Share Application

 

25,00,000

 

Share Application

 

1,00,000

 

Share Allotment

 

7,99,300

 

Balance c/d

 

40,02,100

 

Share First and Final Call

 

7,99,200

 

 

 

 

 

Share Capital

 

3,600

 

 

 

 

 

 

 

41,02,100

 

 

 

41,02,100

 

 

 

 

 

 

 

 

 

 

20. Ashoka Limited Company which had issued equity shares of ₹.20 each at a premium of ₹. 4 per share, forfeited 1,000 shares for non-payment of final call of ₹.2 per share. 400 of the forfeited shares were reissued at ₹.14 per share out of the remaining shares of 200 shares reissued at ₹.20 per share. Give journal entries for the forfeiture and reissue of shares and show the amount transferred to capital reserve and the balance in Share Forfeiture Account.

Books of Ashoka Limited

Journal

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

 

Share Capital A/c

Dr.

 

20,000

 

 

 

To Final Call A/c

 

 

2,000

 

 

To Share Forfeiture A/c

 

 

18,000

 

(1,000 Shares of 20 per share forfeited for nonpayment of Share Final

Call money @ ₹2 per share)

 

 

 

 

 

 

 

 

 

Bank A/c (400×14)

Dr.

 

5,600

 

 

Share Forfeiture A/c (400×6)

Dr.

 

2,400

 

 

 

To Share Capital A/c

 

 

 

8,000

 

(400 shares @ ₹20 per share reissued for ₹14 per share fully

paid-up)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

4,000

 

 

 

To Share Capital A/c

 

 

 

4,000

 

(200 shares @ ₹20 per share reissued for ₹20 per share fully

paid-up)

 

 

 

 

 

 

 

 

 

 

Share Forfeiture A/c

Dr.

 

8,400

 

 

 

To Capital Reserve

 

 

 

8,400

 

(Balance of 600 shares in Share Forfeiture Account transferred to

Capital Reserve Account, after reissue)

 

 

 

 

 

 

 

 

 

Balance in Share Forfeiture Account (18,000 – 10,800) = ₹ 7,200

 

Working Notes:

 

For 400 Shares

 

Share Forfeiture Account credited 

₹18 per share

Less: Share Forfeiture Account debited

₹6 per share

Amount  transferred to Capital Reserve Account, after adjustment

₹12 per share


Amount of 400 shares transferred to Capital Reserve Account, after reissue 

= 400 Shares @ ₹ 12 per share

= ₹ 4,800

For 200 Shares

Share Forfeiture Account credited

₹18 per share

Less: Share Forfeiture Account debited

Nil

Amount  transferred to Capital Reserve Account, after adjustment

₹18 per share

 

Amount of 200 shares transferred to Capital Reserve Account, after reissue

= 200 Shares @ ₹ 18 per share

= ₹3,600

 

Total amount transferred to Capital Reserve Account for 600 shares

= Capital Reserve for 400 shares + Capital Reserve for 200 shares

 

= 4,800 + 3,600

 

= ₹8,400

21. Amit holds 100 shares of ₹ 10 each on which he has paid Re.1 per share as application money. Bimal holds 200 shares of ₹ 10 each on which he has paid Re.1 and ₹ 2 per share as application and allotment money, respectively. Chetan holds 300 shares of ₹ 10 each and has paid Re.1 on application, ₹ 2 on allotment and ₹ 3 for the first call. They all fail to pay their arrears and the second call of ₹ 2 per share and the directors, therefore, forfeited their shares. The shares are reissued subsequently for ₹ 11 per share as fully paid. Journalise the transactions.

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

 

Share Capital A/c (600×8)

Dr.

 

4,800

 

 

 

To Share Allotment (100×2)

 

 

 

200

 

 

To Share First Call A/c (300×3)

 

 

 

900

 

 

To Share Second Call A/c (600×2)

 

 

 

1,200

 

 

To Share Forfeiture A/c

 

 

 

2,500

 

(600 shares @ ₹ 10 per share ₹ 8 called-up forfeited after

making Second Call)

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

6,600

 

 

 

To Share Capital A/c

 

 

 

6,000

 

 

To Securities Premium A/c

 

 

 

600

 

(600 shares @ ₹ 10 each for ₹ 11 per share fully paid-up

reissued)

 

 

 

 

 

 

 

 

 

 

 

 

Share Forfeiture A/c

Dr.

 

2,500

 

 

 

To Capital Reserve A/c

 

 

 

2,500

 

(Balance of Share Forfeiture Account transferred to Capital

Reserve Account after reissue)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Working Notes:

 

Share Forfeiture Account credited

 

Amit

 

(100×1)

=

100

 

Bimal

 

(200×3)

=

600

 

Chetan

 

(300×6)

=

1,800

 

 

 

 

 

2,500

 

 

 

22. Ajanta Company Limited having a normal capital of ₹ 3,00,000, divided into shares of ₹ 10 each offered for public subscription of 20,000 shares payable at ₹ 2 on application; ₹ 3 on allotment and the balance in two calls of ₹ 2.50 each. Applications were received by the company for 24,000 shares. Applications for 20,000 shares were accepted in full and the shares allotted. Applications for the remaining shares were rejected and the application money was refunded.

All moneys due were received with the exception of the final call on 600 shares which were forfeited after legal formalities were fulfilled. 400 shares of the forfeited shares were reissued at ₹ 9 per share.

Record necessary journal entries and prepare the balance Sheet showing the amount transferred to capital reserve and the balance in Share forfeiture account.

Books of Ajanta Company Limited

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

 

Bank A/c

Dr.

 

48,000

 

 

 

To Share Application A/c

 

 

48,000

 

(Share Application money received for  24,000 shares @ ₹ 2 per share)

 

 

 

 

 

 

 

 

 

Share Application A/c

Dr.

 

48,000

 

 

 

To Share Capital A/c

 

 

40,000

 

 

To Bank A/c

 

 

8,000

 

(Share Application @ ₹ 2 per share for 20,000 shares  transferred to Share Capital and remaining for 4,000 shares rejected)

 

 

 

 

 

 

 

 

 

Share Allotment A/c

Dr.

 

60,000

 

 

 

To Share Capital A/c

 

 

60,000

 

(Share Allotment money due @ ₹ 3 per share on 20,000 shares )

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

60,000

 

 

 

To Share Allotment A/c

 

 

 

60,000

 

(Share Allotment money received for 20,000 shares  @ ₹ 3

per share)

 

 

 

 

 

 

 

 

 

Share First Call A/c

Dr.

 

50,000

 

 

 

To  Share Capital A/c

 

 

50,000

 

(Share First Call money due on 20,000 Shares @ ₹ 2.5 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

50,000

 

 

 

To Share First Call A/c

 

 

50,000

 

(Share First Call money received for 20,000 shares @ ₹ 2.5 per share)

 

 

 

 

 

 

 

 

 

 

 

Share Final Call A/c

Dr.

 

 

 

 

 

To Share Capital A/c

 

 

 

 

 

(Share Final Call money due on 20,000 Shares @ ₹ 2.5 per share)

 

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

48,500

 

 

Calls in Arrears A/c

Dr.

 

1,500

 

 

 

To Share Final Call A/c

 

 

50,000

 

(Share Final Call money received for 19,400 shares @ ₹ 2.5 per share except 600 shares)

 

 

 

 

 

 

 

 

 

 

Share Capital A/c

Dr.

 

6,000

 

 

 

To Calls in Arrears A/c

 

 

 

1,500

 

 

To Share Forfeiture A/c

 

 

 

4,500

 

(600 Shares forfeited @ ₹ 10 each for the non-payment of Share

Final Call @  ₹ 2.5 per share)

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

3,600

 

 

Share Forfeiture A/c

Dr.

 

400

 

 

 

To Share Capital A/c

 

 

 

4,000

 

(400 shares @ ₹ 10 each for ₹ 9 per share reissued)

 

 

 

 

 

 

 

 

 

 

 

Share Forfeiture Account

Dr.

 

2,600

 

 

 

To Capital Reserve A/c

 

 

 

2,600

 

(After reissue balance of 400 shares in Forfeiture Account transferred to Capital Reserve Account)

 

 

 

 

 

 

 

 

 

 

Ajanta Company Limited

Balance Sheet

Particulars

Note No.

Amount

(₹)

I. Equity and Liabilities

 

 

1. Shareholders’ Funds

 

 

a. Share Capital

1

1,99,500

    b. Reserves and Surplus

2

2,600

2. Non-Current Liabilities

 

 

3. Current Liabilities

 

 

Total

 

2,02,100

 

 

 

II. Assets

 

 

1.Non-Current Assets

 

 

2.Current Assets

 

 

a. Cash and Cash Equivalents

3

2,02,100

Total

 

2,02,100

 

 

 

NOTES TO ACCOUNTS

Note No.

Particulars

Amount

(₹)

1

Share Capital

 

 

Authorised Share Capital

 

 

30,000 shares of ₹ 10 each

3,00,000

 

Issued Share Capital

 

 

20,000 shares of ₹ 10 each

2,00,000

 

Subscribed, Called-up and Paid-up Share Capital

 

 

19,800 shares of ₹ 10 each

1,98,000

 

 

Add: Shares Forfeiture

1,500

1,99,500

 

 

 

2

Reserves and Surplus

 

 

Capital Reserve

2,600

 

 

 

3

Cash and Cash Equivalents

 

 

Cash at Bank

2,02,100

 

 

 

Working Note:

Share Forfeiture Account credited 

₹ 7.5 per share

Less: Share Forfeiture Account debited

₹1 per share

Amount  transferred to Capital Reserve Account, after adjustment

₹ 6.5 per share

Amount of 400 shares transferred to Capital Reserve Account, after reissue = 400 Shares @ ₹ 6.5 per share = ₹ 2,600

23. Journalise the following transactions in the books Bhushan Oil Ltd.:

(a) 200 shares of ₹. 100 each issued at a premium of ₹. 10 were forfeited for the non-payment of allotment money of ₹. 60 per share. The first and final call of ₹. 20 per share on these shares were not made. The forfeited shares were reissued at ₹. 70 per share as fully paid-up.

(b) 150 shares of ₹. 10 each issued at a premium of ₹. 4 per share payable with allotment were forfeited for non-payment of allotment money of ₹. 8 per share including premium. The first and final calls of ₹. 4 per share were not made. The forfeited shares were reissued at ₹. 15 per share fully paid-up.

(c) 400 shares of ₹. 50 each issued at par were forfeited for non-payment of final call of ₹. 10 per share. These shares were reissued at ₹. 45 per share fully paid-up.

Case (a)

Books of Bhushan Oil Ltd.

 

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

 

Share Capital A/c (200 × 80)

Dr.

 

16,000

 

 

Securities Premium A/c (200 × 10)

Dr.

 

2,000

 

 

 

To Share Allotment A/c (200 × 60)

 

 

 

12,000

 

 

To Share Forfeiture A/c (200 × 30)

 

 

6,000

 

(200 shares forfeited @ ₹100 each  issued at a premium of

 ₹10 for the nonpayment of allotment money  ₹60 per share)

 

 

 

 

 

 

 

 

 

 

 

 

Bank A/c (200 × 70) 

Dr.

 

14,000

 

 

Share Forfeiture A/c (200 × 30)

Dr.

 

6,000

 

 

 

To Share Capital A/c (200 × 100)

 

 

20,000

 

(200 shares reissued @ ₹70 per share fully paid-up)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case (b)

 

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

 

Share Capital A/c

Dr.

 

900

 

 

Securities Premium A/c

Dr.

 

600

 

 

 

To Share Allotment A/c

 

 

1,200

 

 

To  Share Forfeiture A/c

 

 

300

 

(150 shares @ ₹10 each forfeited for nonpayment of allotment

money ₹ 8 per share including premium ₹4)

 

 

 

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

2,250

 

 

 

To Share Capital A/c

 

 

1,500

 

 

To Securities Premium A/c

 

 

750

 

(150 shares @ ₹10 each reissued For  ₹15 per share fully

paid-up)

 

 

 

 

 

 

 

 

 

Share Forfeiture A/c

Dr.

 

300

 

 

 

To Capital Reserve A/c

 

 

300

 

(Balance of Share Forfeiture Account transferred to Capital

Reserve Account)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case (c)

 

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

 

Share Capital A/c

Dr.

 

20,000

 

 

 

To Share Final Call A/c

 

 

4,000

 

 

To Share Forfeiture A/c

 

 

16,000

 

(400 shares @ ₹ 50 per share forfeited for nonpayment of Final

Call ₹ 10 per share)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

18,000

 

 

Share forfeiture A/c

Dr.

 

2,000

 

 

 

To Share Capital A/c

 

 

 

20,000

 

(400 shares @ ₹50 each reissued for  ₹45 fully paid-up)

 

 

 

 

 

 

 

 

 

 

Share Forfeiture A/c

Dr.

 

14,000

 

 

 

To Capital Reserve A/c

 

 

14,000

 

(Balance in Share Forfeiture Account  transferred to Capital

Reserve Account)

 

 

 

 

 

 

 

 

 

 

24. Amisha Ltd inviting application for 40,000 shares of ₹ 100 each at a premium of ₹ 20 per share payable; on application ₹ 40 ; on allotment ₹ 40 (Including premium): on first call ₹ 25 and Second and final call ₹ 15.

Application were received for 50,000 shares and allotment was made on pro-rata basis. Excess money on application was adjusted on sums due on allotment.

Rohit to whom 600 shares were allotted failed to pay the allotment money and his shares were forfeited after allotment. Ashmita, who applied for 1,000 shares failed to pay the

Two calls and his shares were forfeited after the second call. Of the shares forfeited, 1,200 shares were sold to Kapil for ₹ 85 per share as fully paid, the whole of Rohit’s shares being included.

Record necessary journal entries.

Books of Amisha Ltd.

 

Date

Particulars

L.F.

Debit

Amount

Credit

Amount

 

Bank A/c

Dr.

 

20,00,000

 

 

 

To Share Application A/c

 

 

20,00,000

 

(Share Application money received on 50,000 shares @ 40 per share)

 

 

 

 

Share Application A/c

Dr.

 

20,00,000

 

 

 

To Share Capital A/c

 

 

16,00,000

 

 

To Share Allotment A/c

 

 

4,00,000

 

(Share Application money adjusted)

 

 

 

 

 

Share Allotment A/c

Dr.

 

16,00,000

 

 

 

To Share Capital A/c

 

 

8,00,000

 

 

To Share Premium A/c

 

 

8,00,000

 

(Share Allotment money due including premium)

 

 

 

 

 

Bank A/c

Dr.

 

11,82,000

 

 

 

To Share Allotment A/c

 

 

11,82,000

 

(Share Allotment money received except 600 shares)

 

 

 

 

 

Share Capital A/c

Dr.

 

36,000

 

 

Share premium A/c

Dr.

 

12,000

 

 

 

To Share Allotment A/c

 

 

18,000

 

 

To Share Forfeiture A/c

 

 

30,000

 

(600 shares forfeited after allotment)

 

 

 

 

 

Share First Call A/c

Dr.

 

9,85,000

 

 

 

To Share Capital

 

 

9,85,000

 

(First Call money in due on 39,400 shares)

 

 

 

 

 

Bank A/c

Dr.

 

9,65,000

 

 

 

To Share First Call A/c

 

 

9,65,000

 

(First Call money received except 800 shares)

 

 

 

 

 

Share Second and Final Call A/c

Dr.

 

5,91,000

 

 

 

To Share Capital A/c

 

 

5,91,000

 

(Second and Final Call money due on 39,400 shares)

 

 

 

 

 

Bank A/c

Dr.

 

5,79,000

 

 

 

To Share Second and Final Call A/c

 

 

5,79,000

 

(Second and Final Call money received except 800 shares)

 

 

 

 

 

Share Capital A/c

Dr.

 

80,000

 

 

 

To Share First Call A/c

 

 

20,000

 

 

To Share Second & Final Call A/c

 

 

12,000

 

 

To Share Forfeiture A/c

 

 

48,000

 

(800 share forfeited)

 

 

 

 

 

Bank A/c

Dr.

 

1,02,000

 

 

Share Forfeiture A/c

Dr.

 

18,000

 

 

 

To Share Capital A/c

 

 

 

1,20,000

 

(Forfeited shares reissued 1,200 @ 85 per share)

 

 

 

 

 

Share Forfeiture A/c

Dr.

 

48,000

 

 

 

To Capital Reserve A/c

 

 

 

48,000

 

(Profit on 1,200 reissued shares are transfer to capital reserve

account)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Book (Bank Column)

Dr.

 

 

 

 

 

 

Cr.

Date

Particulars

J.F.

Amount

Date

Particulars

J.F.

Amount

 

Share Application

 

20,00,000

 

Balance c/d

 

48,28,000

 

Share Allotment

 

11,82,000

 

 

 

 

 

Share First Call

 

9,65,000

 

 

 

 

 

Share Final Call

 

5,79,000

 

 

 

 

 

Share Capital

 

1,02,000

 

 

 

 

 

 

 

48,28,000

 

 

 

48,28,000

 

 

 

 

 

 

 

 

 

Working Notes:

21

2. Call in arrears by Rohit on allotment

 

Money received on Application

(750×40)

=

30,000

Less: Amount adjusted on Application

(600×40)

=

24,000

Amount adjusted on Allotment

 

 

6,000

 

3

Money due on Allotment

(600×40)

24,000

Money adjusted

 

6,000

Balance due on Allotment

 

18,000

 

22

5. Profit on the forfeiture of 600 share of Rohit = ₹ 30,000

Profit on the forfeiture of 600 share of Ashmita = ₹ 36,000 
23

 

Profit on forfeiture of 1200 shares (30,000 + 36,000)

=

66,000

Less: Loss on reissue of shares

=

18,000

Transfer to Capital Reserve

=

48,000

 

 

 

 

 

 

 

 

 6. Balance in Share Forfeiture Account (48,000 – 36,000) = ₹ 12,000

Concepts covered in this chapter –

  • Features of a company
  • Types of companies
  • Share capital of a company
  • Nature and classes of shares
  • Issue of shares
  • Accounting treatment
  • Forfeiture of the shares

Conclusion

NCERT solutions for class 12 Accountancy chapter 1 provides a wide degree of illustrative examples; which assists the students to comprehend and learn quickly. The above mentioned are the illustrations for class 12 CBSE syllabus. For more solutions and study materials of NCERT solutions for class 12 Accountancy visit BYJU’S or download the app for more information.

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