PRACTICAL PROBLEMS

(Over Subscription and retain for allotment):

Geeta Ltd. invited applications for Rs 50,000 Equity shares of 10 each payable as under-

Rs 3 On Application Rs 2 On Allotment

Rs 3 On First Call Rs 2 On Final Call

Public applied for Rs 60,000 shares. All the applications were accepted by the company. Money on excess application was used for allotment purpose. Assuming that all the allotment, first call and final call duly received.
Pass journal entries in the books of the company.
Rise in the books of the company.

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Solution

Shares Applied

Shares Allotted

60,000

50,000

Books of Geeta Ltd.

Journal Entry

Date

Particulars

L.F.

Debit Amount

Rs

Credit Amount

Rs

Bank A/c

Dr.

1,80,000

To Equity Share Application A/c

1,80,000

(Share application received on 60,000 shares of Rs 3 each)

Equity Share Application A/c

Dr.

1,80,000

To Equity Share Capital A/c

1,50,000

To Equity Share Allotment A/c

30,000

(Share allotment transferred to Share Capital and excess application adjusted on allotment)

Equity Share Allotment A/c

Dr.

1,00,000

To Equity Share Capital A/c

1,00,000

(Share allotment due on 50,000 shares of Rs 2 each)

Bank A/c

Dr.

70,000

To Equity Share Allotment A/c

70,000

(Share allotment received)

Equity Share First Call A/c

Dr.

1,50,000

To Equity Share Capital A/c

1,50,000

(Share first call due on 50,000 shares of Rs 3 each)

Bank A/c

Dr.

1,50,000

To Equity Share First Call A/c

1,50,000

(Share first call received)

Equity Share Final Call A/c

Dr.

1,00,000

To Equity Share Capital A/c

1,00,000

(Share final call due on 50,000 shares of Rs 2 each)

Bank A/c

Dr.

1,00,000

To Equity Share Final Call A/c

1,00,000

(Share final call received)

Working Notes:

Money received on Application 60,000×3

=

1,80,000

Application money transferred to Share Capital 50,000×3

=

1,50,000

Excess money on application

=

30,000

Allotment due on 50,000 Shares × Rs 2

=

1,00,000

Less: Adjustment of excess money on application

=

30,000

Share Allotment Received

=

70,000

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Rs 3 On Application	Rs 2 On Allotment
Rs 3 On First Call	Rs 2 On Final Call

Books of Geeta Ltd.
Journal Entry
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs

	Bank A/c	Dr.		1,80,000
	To Equity Share Application A/c				1,80,000
	(Share application received on 60,000 shares of Rs 3 each)

	Equity Share Application A/c	Dr.		1,80,000
	To Equity Share Capital A/c				1,50,000
	To Equity Share Allotment A/c				30,000
	(Share allotment transferred to Share Capital and excess application adjusted on allotment)

	Equity Share Allotment A/c	Dr.		1,00,000
	To Equity Share Capital A/c				1,00,000
	(Share allotment due on 50,000 shares of Rs 2 each)

	Bank A/c	Dr.		70,000
	To Equity Share Allotment A/c				70,000
	(Share allotment received)

	Equity Share First Call A/c	Dr.		1,50,000
	To Equity Share Capital A/c				1,50,000
	(Share first call due on 50,000 shares of Rs 3 each)

	Bank A/c	Dr.		1,50,000
	To Equity Share First Call A/c				1,50,000
	(Share first call received)

	Equity Share Final Call A/c	Dr.		1,00,000
	To Equity Share Capital A/c				1,00,000
	(Share final call due on 50,000 shares of Rs 2 each)

	Bank A/c	Dr.		1,00,000
	To Equity Share Final Call A/c				1,00,000
	(Share final call received)

Money received on Application 60,000×3	=	1,80,000
Application money transferred to Share Capital 50,000×3	=	1,50,000
Excess money on application	=	30,000

Allotment due on 50,000 Shares × Rs 2	=	1,00,000
Less: Adjustment of excess money on application	=	30,000
Share Allotment Received	=	70,000

Shares Applied	Shares Allotted
60,000	50,000