Question

Give Journal entries to record the following transactions of forfeiture and re-issue of shares and open share forfeited account:

L Ltd. forfeited 470 Equity Shares of Rs 10 each issued at a premium of Rs 5 per share for non-payment of allotment money of Rs 8 per share (including share premium Rs 5 per share) and the first and final call of Rs 5 per share. Out of these, 60 Equity Shares were subsequently re-issued at Rs 14 per share.

Answer 1

In the Books of L Ltd.

JOURNAL

$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F}& \text{Dr (Rs)}& \text{Cr. (Rs)}\\ & \text{Share Capital A/c}(470\times \text{Rs 10})& \text{Dr.}& & 4,700& \\ & \text{Securities Premium Reserve A/c}(470\times \text{Rs 5})& \text{Dr.}& & 2,350& \\ & \text{To Equity Share Allotment}(470\times \text{Rs 8})& & & & 3,760\\ & \text{To Equity Share First and Final Call A/c}(470\times \text{Rs 5})& & & & 2,350\\ & \text{To Forfeited Shares A/c}(470\times \text{Rs 2})& & & & 940\\ & \text{(470 shares forfeited due to non payment of allotment and call money)}& & & & \\ & \text{Bank A/c}(60\times \text{Rs 14})& \text{Dr.}& & 840& \\ & \text{To Equity Share Capital A/c}(60\times \text{Rs 10})& & & & 600\\ & \text{To Securities Premium Reserve A/c}(60\times \text{Rs 4})& & & & 240\\ & \text{(60 shares re-issued @ 14 per share)}& & & & \\ & {\text{Forfeited Shares}}^{\left(1\right)}& \text{Dr.}& & 120& \\ & \text{To Capital Reserve A/c}& & & & 120\\ & \text{(Profit on re-issue transferred to Capital Reserve A/c)}& & & & \end{array}$

$\text{Dr.}\text{FORFEITED SHARES ACCOUNT}\text{Cr.}\begin{array}{cccc}\text{Particulars}& \text{Rs.}& \text{Particulars}& \text{Rs.}\\ \text{Capital Reserve A/c}& 120& \text{Equity Share Capital A/c}& 940\\ \text{Balance c/d}& 820& & \\ & \overline{\underset{–}{\underset{–}{940}}}& & \overline{\underset{–}{\underset{–}{940}}}\end{array}$

Working Note (1)

Profit on 470 Shares = Rs 940

$\therefore$ Profit on 60 Shares = $\text{Rs}940\times \frac{60}{470}=Rs120$