A Ltd issued 20,000 Equity Shares of ₹ 10 each at a premium of ₹ 5 per share, payable as ₹ 7 (including premium) on application , ₹ 5 on allotment and the balance after three months of allotment.
A shareholder to whom 200 shares were allotted failed to pay the allotment and call money and his shares were forfeited. 160 of the forfeited shares were reissued for ₹ 1,600.
Give necessary entries in company's journal and the Balance Sheet.

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Solution

Issued and Applied 20,000 equity shares of Rs 10 each at a premium of Rs 5

Application

Rs

7

(2+5)

Allotment

Rs

5

First and Final Call

Rs

3

15

(10+5) per share

Journal Entries

Date

Particulars

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

Bank A/c

Dr.

140,000

To Equity Share Application A/c

140,000

(Share application money received for 20,000 shares at Rs 7 each)

Equity Share Application A/c

Dr.

1,40,000

To Equity Share Capital A/c

40,000

To Securities Premium A/c

1,00,000

(Share application money of 20,000 shares transferred Share Capital at Rs25 per share and Securities Premium at Rs 5 per share)

Equity Share Allotment A/c

Dr.

1,00,000

To Equity Share Capital A/c

1,00,000

(Share allotment due on 20,000 shares at Rs 5 each)

Bank A/c

Dr.

99,000

Calls-in-Arrears A/c

Dr.

1,000

To Equity Share Allotment A/c

1,00,000

(Share allotment received on 19,800 shares and a holder of 200 shares failed to pay it)

Equity Share First and Final call A/c

Dr.

60,000

To Equity Share Capital A/c

60,000

(First and final call due on 20,000 shares at Rs 3 each)

Bank A/c

Dr.

59,400

Calls-in-Arrears A/c

Dr.

600

To Equity Share First and Final Call A/c

60,000

(First and final call received on 19,800 shares and a holder of 200 shares failed to pay it)

Equity Share Capital A/c

Dr.

2,000

To Share Forfeiture A/c (Rs 2 × 200 Shares)

400

To Calls-in-Arrears A/c

16,00

(200 shares of Rs 10 each forfeited for the non-payment amount due Rs 8 per share)

Bank A/c

Dr.

1,600

To Equity Share Capital A/c

1,600

(160 shares of Rs 10 each re-issued for the sum of Rs 1,600)

Share Forfeiture A/c

Dr.

320

To Capital Reserve A/c

320

(Balance in Share Forfeiture of 160 re-issued shares transferred to Capital Reserve)

As per the Schedule III of Companies Act, 2013, the Company's Balance Sheet is presented as follows.

A Ltd.

Balance Sheet

Particulars

Note No.

Amount

(Rs)

I. Equity and Liabilities

1. Shareholders’ Funds

a. Share Capital

1

1,99,680

b. Reserves and Surplus

2

1,00,320

2. Non-Current Liabilities

3. Current Liabilities

Total

3,00,000

II. Assets

1. Non-Current Assets

2. Current Assets

a. Cash and Cash Equivalents

3

3,00,000

Total

3,00,000

NOTES TO ACCOUNTS

Note No.

Particulars

Amount

(Rs)

1

Share Capital

Authorised Share Capital

…… Equity Shares of Rs 10 each

-

Issued Share Capital

20,000 Equity Shares of Rs 10 each

2,00,000

Subscribed, Called-up and Paid-up Share Capital

19,960 Equity Shares of Rs 10 each

1,99,600

Add: Shares Forfeited (40 shares × Rs 2)

80

1,99,680

2

Reserves and Surplus

Securities Premium

1,00,000

Capital Reserve

320

1,00,320

3

Cash and Cash Equivalents

Cash at Bank

3,00,000

Working Notes: 1. Share Forfeiture of Re-issued Shares

Share Forfeiture (at the time of forfeiture after deducting premium)

Cr.

2

(7 – 5)

Less: Share Forfeiture (at the time of re-issue)

Dr.

NIL

Balance in Share Forfeiture after re-issue

Cr.

2

per share

Capital Reserve = Balance in Share Forfeiture after reissue (per share) × Number of Shares Re-issued = Rs 2 × 160 = Rs 320

2. Calculation of balance remaining in Share Forfeiture Account (to be shown in the Balance Sheet)

Share Forfeiture (at the time of forfeiture of 200 shares)

=

400

Debit

Less: Share Forfeiture (at the time re-issue of 160 shares)

=

(320)

Credit

Balance in Share Forfeiture Account (for 40 shares which are not re-issued)

=

Rs 80

Debit

Suggest Corrections

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Application	Rs	7	(2+5)
Allotment	Rs	5
First and Final Call	Rs	3
		15	(10+5) per share

Journal Entries
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Bank A/c	Dr.		140,000
	To Equity Share Application A/c				140,000
	(Share application money received for 20,000 shares at Rs 7 each)

	Equity Share Application A/c	Dr.		1,40,000
	To Equity Share Capital A/c				40,000
	To Securities Premium A/c				1,00,000
	(Share application money of 20,000 shares transferred Share Capital at Rs25 per share and Securities Premium at Rs 5 per share)

	Equity Share Allotment A/c	Dr.		1,00,000
	To Equity Share Capital A/c				1,00,000
	(Share allotment due on 20,000 shares at Rs 5 each)

	Bank A/c	Dr.		99,000
	Calls-in-Arrears A/c	Dr.		1,000
	To Equity Share Allotment A/c				1,00,000
	(Share allotment received on 19,800 shares and a holder of 200 shares failed to pay it)

	Equity Share First and Final call A/c	Dr.		60,000
	To Equity Share Capital A/c				60,000
	(First and final call due on 20,000 shares at Rs 3 each)

	Bank A/c	Dr.		59,400
	Calls-in-Arrears A/c	Dr.		600
	To Equity Share First and Final Call A/c				60,000
	(First and final call received on 19,800 shares and a holder of 200 shares failed to pay it)

	Equity Share Capital A/c	Dr.		2,000
	To Share Forfeiture A/c (Rs 2 × 200 Shares)				400
	To Calls-in-Arrears A/c				16,00
	(200 shares of Rs 10 each forfeited for the non-payment amount due Rs 8 per share)

	Bank A/c	Dr.		1,600
	To Equity Share Capital A/c				1,600
	(160 shares of Rs 10 each re-issued for the sum of Rs 1,600)

	Share Forfeiture A/c	Dr.		320
	To Capital Reserve A/c				320
	(Balance in Share Forfeiture of 160 re-issued shares transferred to Capital Reserve)

A Ltd.
Balance Sheet
Particulars	Note No.	Amount (Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital	1	1,99,680
b. Reserves and Surplus	2	1,00,320
2. Non-Current Liabilities
3. Current Liabilities
Total		3,00,000

II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents	3	3,00,000
Total		3,00,000

Share Forfeiture (at the time of forfeiture after deducting premium)	Cr.	2	(7 – 5)
Less: Share Forfeiture (at the time of re-issue)	Dr.	NIL
Balance in Share Forfeiture after re-issue	Cr.	2	per share

Share Forfeiture (at the time of forfeiture of 200 shares)	=	400	Debit
Less: Share Forfeiture (at the time re-issue of 160 shares)	=	(320)	Credit
Balance in Share Forfeiture Account (for 40 shares which are not re-issued)	=	Rs 80	Debit