Question

Pass journal entries for the forfeiture and re-issue in the following cases:

(i) A Ltd. forfeited 400 shares of Anil of Rs 10 each fully called up for non-payment of final call of Rs 2 per share and re-issued to Sunil as fully paid for Rs 10 per share.

(ii) B Ltd. forfeited 500 shares of Rs 10 each fully called up for non-payment of first call of Rs 2 per share and final call of Rs 2 per share. All of these shares were re-issued as fully paid for Rs 8 per share.

(iii) C Ltd.forfeited 600 shares of Rs 10 each fully called up for non-payment of allotment money of Rs 3 per share,first call of Rs 2 share and final call Rs 2 per share. 400 of these shares were re-issued as fully paid up at the maximum rate of discount allowed by law.

(iv) D Ltd. forfeited 800 shares of Rs 10 each fully called up, on which the holder had paid only the application money of Rs 3 per share. Out of these, 500 shares were re-issued at Rs 11 per share, fully paid up.

Answer 1

JOURNAL

$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F}& \text{Dr (Rs)}& \text{Cr. (Rs)}\\ \text{Case (i)}& \text{Share Capital A/c}& \text{Dr.}& & 4,000& \\ & \text{To Share Final Call A/c}& & & & 800\\ & \text{To Share Forfeiture A/c}& & & & 3,200\\ & \text{Bank A/c}& \text{Dr.}& & 4,000& \\ & \text{To Share Capital A/c}& & & & 4,000\\ & \text{(Re-issue of 400 shares at Rs 10 per share)}& & & & \\ & \text{Share Forfeiture A/c}& \text{Dr.}& & 3,200& \\ & \text{To Capital Reserve A/c}& & & & 3,200\\ & \text{(Profit on forfeiture transferred to Capital Reserve A/c )}& & & & \\ \text{Case (ii)}& \text{Share Capital A/c}& \text{Dr.}& & 5,000& \\ & \text{To Share First Call A/c}& & & & 1,000\\ & \text{To Share Final Call A/c}& & & & 1,000\\ & \text{To Share Forfeiture A/c}& & & & 3,000\\ & \text{(Forfeiture of 500 shares)}& & & & \\ & \text{Bank A/c}& \text{Dr.}& & 4,000& \\ & \text{Share Forfeiture A/c}& & & 1,000& \\ & \text{To Share Capital A/c}& & & & 5,000\\ & \text{(Re-issue of 500 shares at Rs 8 per share)}& & & & \\ & \text{Share Forfeiture A/c}& \text{Dr.}& & 2,000& \\ & \text{To Capital Reserve A/c}& & & & 2,000\\ & \text{(Balance left in Share Forfeiture A/c, i.e. Rs 3,000 -}& & & & \\ & \text{Rs 1,000 = Rs 2,000 transferred to Capital Reserve A/c)}& & & & \\ \text{Case (iii)}& \text{Share Capital A/c}& \text{Dr.}& & 6,000& \\ & \text{To Share Allotment A/c}& & & & 1,800\\ & \text{To Share First Call A/c}& & & & 1,200\\ & \text{To Share Final Call A/c}& & & & 1,200\\ & \text{To Share Forfeiture A/c}& & & & 1,800\\ & \text{(Forfeiture of 600 shares)}& & & & \\ & \text{Bank A/c}& \text{Dr.}& & 2,800& \\ & \text{Share Forfeiture A/c}& \text{Dr.}& & 1,200& \\ & \text{To Share Capital A/c}& & & & 4,000\\ & \text{(Re-issue of 400 shares at Rs 7 per share)}& & & & \\ \text{Case (iv)}& \text{Share Capital A/c}& \text{Dr.}& & 8,000& \\ & \text{To Calls in Arrears A/c}& & & & 5,600\\ & \text{To Share Forfeiture A/c}& & & & 2,400\\ & \text{(Forfeiture of 800 shares)}& & & & \\ & \text{Bank A/c}& \text{Dr.}& & 5,500& \\ & \text{To Share Capital A/c}& & & & 5,000\\ & \text{To Securities Premium Reserve A/c}& & & & 500\\ & \text{(Re-issue of 500 shares at Rs 11 per share)}& & & & \\ & \text{Share Forfeiture A/c}& \text{Dr.}& & 1,500& \\ & \text{To Capital Reserve A/c}& & & & 1,500\\ & \text{(Profit on 500 re-issued shares transferred to Capital}& & & & \\ & \text{Reserve A/c)}& & & & \end{array}$

Notes:

(1) Only application money of Rs 3 per share has been received. As such, the maximum discount allowed by law is Rs 3 per share. Hence, the shares will be reissued at Rs 7 per share. No amount will be transferred to Capital Reserve, because there is no gain on reissue of shares.

(2) Profit on 800 shares = Rs 2,400

Hence,Profit on 500 re-issued shares = $\frac{2,400}{800}\times 500=1,500$