Question

A company issued for public subscription 40,000 Equity Shares of ₹ 10 each at a premium of ₹ 2 per share payable as:

On application	$—$	₹ 2 per share,
On allotment	$—$	₹ 2 per share,
On second and final call	$—$	₹ 3 per share.

Applications were received for 60,000 shares . Allotment was made on pro rata basis to the applicants for 48,000 shares, the remaining applications being refused . Money overpaid on application was utilised towards sums due on allotment . Ram to whom 1,600 shares were allotted failed to pay the allotment money and Shyam to whom 2,000 shares were allotted failed to pay the two calls. These shares were subsequently forfeited after the second and final call was made . All the forfeited shares were reissued as fully paid-up @ ₹ 8 per share.
Give necessary Journal entries for the above transactions.

Answer 1

Issued capital 40,000 shares of Rs 10 each at premium of Rs 2

Applied Rs 60,000 shares

Allotment made as:				Payable as:
Applied		Allotted		Application	Rs 2
48,000		40,000		Allotment	Rs 5	(3+2)
12,000		NIL		First Call	Rs 2
60,000		40,000		Second and Final Call	Rs 3
					Rs12	(10+2) per share

Journal Entries
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		1,20,000
	To Equity Share Application A/c				1,20,000
	(Application money received for 60,000 shares at Rs 2 each)
	Equity Share Application A/c	Dr.		1,20,000
	To Equity Share Capital A/c				80,000
	To Equity Share Allotment A/c				16,000
	To Bank A/c				24,000
	(Share application of 40,000 shares transferred to share capital, Rs 16,000 adjusted on allotment and remaining Rs 24,000 refunded)
	Equity Share Allotment A/c	Dr.		2,00,000
	To Equity Share Capital A/c				1,20,000
	To Securities Premium A/c				80,000
	(Share allotment due on 40,000 shares at Rs 5 each including Rs 2 premium)
	Bank A/c	Dr.		1,76,640
	To Equity Share Allotment A/c				1,76,640
	(Share allotment received on all shares except on 1,600 Shares held by Ram)
	Equity Share First Call A/c	Dr.		80,000
	To Equity Share Capital A/c				80,000
	(First call due on 40,000 shares at Rs 2 each)
	Bank A/c	Dr.		72,800
	To Equity Share First Call A/c				72,800
	(First call received on 36,400 shares and holders of 3,600 failed to pay it)
	Equity Share Second and Final Call A/c	Dr.		1,20,000
	To Equity Share Capital A/c				1,20,000
	(Second and final call due on 40,000 shares at Rs 3 each)
	Bank A/c	Dr.		1,09,200
	To Equity Share second and Final Call A/c				1,09,200
	(Second and final call received on 36,400 shares and holders of 3,600 shares failed to pay it)
	Equity Share Capital A/c	Dr.		16,000
	Securities Premium A/c	Dr.		3,200
	To Share Forfeiture A/c				3,840
	To Equity Share Allotment A/c				7,360
	To Equity Share first Call A/c				3,200
	To Equity Share Second and Final Call A/c				4,800
	(1600 shares held by Ram forfeited for non-payment amount due including premium)
	Equity Share Capital A/c	Dr.		20,000
	To Equity Share Forfeiture A/c				10,000
	To Equity Share First Call A/c				4,000
	To Equity Share Second and Final Call A/c				6,000
	(2,000 shares held by Shyam forfeited for non-payment of amount due)
	Bank A/c	Dr.		28,800
	Share Forfeiture A/c	Dr.		7,200
	To Equity Share Capital A/c				36,000
	(3,600 shares of Rs 10 each re-issued at Rs 8 per share fully paid-up)
	Share Forfeiture A/c	Dr.		6,640
	To Capital Reserve A/c				6,640
	(Balance in Share Forfeiture transferred to Capital Reserve)

Working Notes:

Ram’s shares

Number of shares applied by Ram

Money received on Application (1,920 shares × Rs 2)	=	Rs 3,840
Less: Application money transferred to Share Capital (1,600 shares × Rs 2)	=	Rs 3,200
Excess money on Application	=	Rs 640

Share Allotment due (1,600 shares × Rs 5)	Rs	8,000
Less: Excess money on Application	Rs	640
Calls-in-Arrears on Allotment	Rs	7,360

Share Allotment

Share Allotment due (40,000 shares × Rs 5)	2,00,000
Less: Excess money on Application	16,000
	1,84,000
Less: Calls-in-Arrears by Ram	7,360
Money received on Allotment	1,76,640

Share First Call

Share First Call due (40,000 shares × Rs 2)	80,000
Less: Calls-in-Arrears by Ram and Shyam (3,600 shares ×Rs 2)	7,200
Money received on First Call	72,800

Share Final Call

Share Final Call due 40,000 Shares × Rs 3	1,20,000
Less: Calls-in-Arrears by Ram and Shyam (3,600 shares × Rs 3)	10,800
Money received on Second and Final Call	1,09,200

Capital Reserve

Share Forfeiture on Ram’s shares (money received on application)	3,840
Share Forfeiture on Shyam’s shares (2,000 shares × Rs 5)	10,000
	13,840	Cr.
Less: Share Forfeiture	7,200	Dr.
Capital Reserve	6,640