Question

Ajanta Company Limited having a normal capital of Rs. 3,00,000 divided into shares of Rs.10 each offered for public subscriptions of 20,000 shares payable at Rs.2 on application; Rs.3 on allotment and the balance in two calls of Rs.2.50 each. Application were received by the company for 24,000 shares. Application 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 money due were received with the exception for the final call on 600 shares which were forfeited after legal formalities were fulfilled. 400 shares of the forfeited share were reissued at Rs.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.

Answer 1

$\text{Journal Entries}$
$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F}& \text{Amt. (Dr)}& \text{Amt.(Cr)}\\ \text{(i)}& \text{Bank A/c}& \text{Dr}& & 48,000& \\ & \text{To Share Application A/c}& & & & 48,000\\ & \text{(Share application money received for}& & & & \\ & \text{24,000 shares @ Rs.2 per share)}& & & & \\ & \underset{–}{}& & & & \\ \text{(ii)}& \text{Share Application A/c}& \text{Dr}& & 48,000& \\ & \text{To Share Capital A/c}(20,000\times 2)& & & & 40,000\\ & \text{To Bank A/c}(4,000\times 2)& & & & 8,000\\ & \text{(Share application @ Rs.2 per share for}& & & & \\ & \text{20,000 shares transferred to share capital and}& & & & \\ & \text{remaining for 4,000 shares rejected)}& & & & \\ & \underset{–}{}& & & & \\ \text{(iii)}& \text{Bank A/c}& \text{Dr}& & 60,000& \\ & \text{To Share Allotment A/c}& & & & 60,000\\ & \text{(Share allotment money received for}& & & & \\ & \text{20,000 shares @ Rs.3 per share)}& & & & \\ & \underset{–}{}& & & & \\ \text{(iv)}& \text{Share Allotment A/c}& \text{Dr}& & 60,000& \\ & \text{To Share Capital A/c}& & & & 60,000\\ & \text{(Share allotment money transferred to}& & & & \\ & \text{share capital account)}& & & & \\ & \underset{–}{}& & & & \\ \text{(v)}& \text{Bank A/c}& \text{Dr}& & 50,000& \\ & \text{To Share First Call A/c}& & & & 50,000\\ & \text{(Share first call money received for 20,000}& & & & \\ & \text{shares @ Rs.2.5 per share)}& & & & \\ & \underset{–}{}& & & & \\ \text{(vi)}& \text{Share First Call A/c}& \text{Dr}& & 50,000& \\ & \text{To Share Capital A/c}& & & & 50,000\\ & \text{(Share first call moneytransferred to}& & & & \\ & \text{share capital account)}& & & & \\ & \underset{–}{}& & & & \\ \text{(viii)}& \text{Bank A/c}(19,400\times 2.50)& \text{Dr}& & 48,500& \\ & \text{Calls-in-Arrears A/c}(600\times 2.50)& \text{Dr}& & 1,500& \\ & \text{To Share Final Call A/c}& & & & 50,000\\ & \text{(Share final call money received for 19,400}& & & & \\ & \text{shares @ Rs.2.5 per share share except 600 shares)}& & & & \\ & \underset{–}{}& & & & \\ \text{(vii)}& \text{Share Final Call A/c}& \text{Dr}& & 50,000& \\ & \text{To Share Capital A/c}& & & & 50,000\\ & \text{(Share final call money transferred to}& & & & \\ & \text{share capital account)}& & & & \\ & \underset{–}{}& & & & \\ \text{(ix)}& \text{Share Capital A/c}& \text{Dr}& & 6,000& \\ & \text{To Calls-in-Arrears A/c}& & & & 1,500\\ & \text{To Share Forfeiture A/c}& & & & 4,500\\ & \text{(600 shares forfeited @ Rs.10 each for the}& & & & \\ & \text{non-payment of Share Final Call @ Rs.2.5 per share)}& & & & \\ & \underset{–}{}& & & & \\ \text{(x)}& \text{Bank A/c}& \text{Dr}& & 3,600& \\ & \text{Share Forfeiture A/c}& \text{Dr}& & 400& \\ & \text{To Share Capital A/c}& & & & 4,000\\ & \text{(400 shares @ Rs.10 each for Rs.9 per share}& & & & \\ & \text{reissued)}& & & & \\ & \underset{–}{}& & & & \\ \text{(xi)}& \text{Share Forfeiture A/c}& \text{Dr}& & 2,600& \\ & \text{To Capital Reserve A/c (Working Note)}& & & & 2,600\\ & \text{(After reissue balance of 400 shares in forfeiture}& & & & \\ & \text{account transferred to capital reserve account)}& & & & \end{array}$


Working Note :

Calculation of Capital Reserve
$\begin{array}{cc}& \\ \text{Amount transferred to share forfeiture account on forfeiture of 400 shares}& 3,000\\ (400\times 7.50)& \\ \text{(-) Amount adjusted on reissue of 400 Shares}(400\times 1)& \left(400\right)\\ \text{Amount transferred to capital reserve}& \overline{\underset{–}{2,600}}\end{array}$