Question

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

$\begin{array}{cc}& \\ & \text{(Rs)}\\ \text{With Application}& \text{3 per share}\\ \text{On Allotment (including premium)}& \text{5 per share}\\ \text{On First Call}& \text{2 per share}\\ \text{On Second and Final call}& \text{2 per share}\end{array}$

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 Rs.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.

Answer 1

$\text{Journal Entries}$
$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{LF}& \text{Amt. (Dr)}& \text{Amt.(Cr)}\\ \text{(i)}& \text{Bank A/c}(1,60,000\times 3)& \text{Dr}& & 4,80,000& \\ & \text{To Share Application A/c}& & & & 4,80,000\\ & \text{(Share application money received for}& & & & \\ & \text{1,60,000 shares @ Rs.3 per share)}& & & & \\ & \underset{–}{}& & & & \\ \text{(ii)}& \text{Share Application A/c}& \text{Dr}& & 4,80,000& \\ & \text{To Equity Share Capital A/c}(1,20,000\times 3)& & & & 3,60,000\\ & \text{To Share Allotment A/c}(40,000\times 3)& & & & 1,20,000\\ & \text{(Share application for 1,20,000 shares @ Rs.3}& & & & \\ & \text{per share transferred to share capital account and}& & & & \\ & \text{remaining amount adjusted to allotment)}& & & & \\ & \underset{–}{}& & & & \\ \text{(iii)}& \text{Bank A/c (Working Note i)}& \text{Dr}& & 4,80,000& \\ & \text{To Share Allotment A/c}& & & & 4,80,000\\ & \text{(Share allotment for 1,20,000 shares @ Rs.5}& & & & \\ & \text{per share received)}& & & & \\ & \underset{–}{}& & & & \\ \text{(iv)}& \text{Share Allotment A/c}& \text{Dr}& & 6,00,000& \\ & \text{To Equity Share Capital A/c}(1,20,000\times 3)& & & & 3,60,000\\ & \text{To Securities Premium A/c}(1,20,000\times 2)& & & & 2,40,000\\ & \text{(Share allotment due on 1,20,000 shares @ Rs.5}& & & & \\ & \text{per share including Rs.2 securities premium)}& & & & \\ & \underset{–}{}& & & & \\ \text{(v)}& \text{Bank A/c}(1,15,200\times 2)& \text{Dr}& & 2,30,400& \\ & \text{To Share First Call A/c}& & & & 2,30,400\\ & \text{(Share first call received on 1,15,200 shares}& & & & \\ & \text{@ Rs.2 per share and 4,800 shares failed to pay)}& & & & \\ & \underset{–}{}& & & & \\ \text{(vi)}& \text{Share First Call A/c}& \text{Dr}& & 2,40,000& \\ & \text{To Equity Share Capital A/c}(1,20,000\times 2)& & & & 2,40,000\\ & \text{(Share first call due on 1,20,000 share @ Rs. 2}& & & & \\ & \text{per share)}& & & & \\ & \underset{–}{}& & & & \\ \text{(vii)}& \text{Bank A/c}(1,15,200\times 2)& \text{Dr}& & 2,30,400& \\ & \text{To Share Second and Final Call A/c}(1,20,000\times 2)& & & & 2,30,400\\ & \text{(Share final call received on 1,15,200}& & & & \\ & \text{shares @ Rs.2 per share and 4,800 shares}& & & & \\ & \text{failed to pay)}& & & & \\ & \underset{–}{}& & & & \\ \text{(viii)}& \text{Share Second and Final Call A/c}& \text{Dr}& & 2,40,000& \\ & \text{To Equity Share Capital A/c}(1,20,000\times 2)& & & & 2,40,000\\ & \text{(Share second and final call due on 1,20,000 shares @ Rs.2}& & & & \\ & \text{per share)}& & & & \\ & \underset{–}{}& & & & \\ \text{(ix)}& \text{Equity Share Capital A/c}(4,800\times 10)& \text{Dr}& & 48,000& \\ & \text{To Share First Call A/c}(4,800\times 2)& & & & 9,600\\ & \text{To Share Second and Final Call A/c}(4,800\times 2)& & & & 9,600\\ & \text{To Share Forfeiture A/c}(4,800\times 6)& & & & 28,800\\ & \text{(Working Note ii)}& & & & \\ & \text{(4,800 share forfeited for the non-payment}& & & & \\ & \text{of first call and final call)}& & & & \\ & \underset{–}{}& & & & \\ \text{(x)}& \text{Bank A/c}(4,800\times 7)& \text{Dr}& & 33,600& \\ & \text{Share Forfeiture A/c}(4,800\times 3)& \text{Dr}& & 14,400& \\ & \text{To Equity Share Capital A/c}& & & & 48,000\\ & \text{(4,800 share reissued @ Rs.7 per share, fully}& & & & \\ & \text{paid-up)}& & & & \\ & \underset{–}{}& & & & \\ \text{(xi)}& \text{Share Forfeiture A/c}Dr& & & 14,400& \\ & \text{To Capital Reserve A/c (Working Note iii)}& & & & 14,400\\ & \text{(Share forfeiture balance of 4,800 shares}& & & & \\ & \text{transferred to capital reserve account)}& & & & \end{array}$



Working Note :
(i) On Allotment Money Due
$\begin{array}{cc}& \\ & \text{(Rs)}\\ 1,20,000\times 5& =6,00,000\\ \text{(-) Money advanced on application}& =(1,20,000)\\ \text{Money received on allotment}& =\overline{\underset{–}{4,80,000}}\end{array}$

(ii) Amount of share Forfeiture includes Rs.3 of Application and Rs.3 of

Allotment on 4800 shares i.e, 4,8000 $\times$ 6 = Rs.28,800

Amount of premium received is never taken to forfeiture account.

$\begin{array}{cc}& \\ \text{(iii) Capital Reserve}& \\ & \text{(Rs)}\\ \text{Amount transferred to share forfeiture}& 28,800\\ \text{(-) Amount adjusted on reissue of share forfeited}& \\ \text{transferred to capital reserve}& 14,400\\ & \overline{\underset{–}{14,400}}\end{array}$