Question

Prince Limited issued a prospectus inviting applications for 2,00,000 equity shares of Rs 10 each at a premium of Rs 3 per share payable as follows :

With Application	Rs 2
On Allotment (including premium)	Rs 5
On First Call	Rs 3
On Second Call	Rs 3

Applications were received for 30,000 shares and allotment was made on pro-rata basis. Money overpaid on applications was adjusted to the amount due on allotment.

Mr. ‘Mohit’ whom 400 shares were allotted, failed to pay the allotment money and the first call, and her shares were forfeited after the first call. Mr. ‘Joly’, whom 600 shares were allotted, failed to pay for the two calls and hence, his shares were forfeited.

Of the shares forfeited, 800 shares were reissued to Supriya as fully paid for Rs 9 per share, the whole of Mr. Mohit’s shares being included.

Record journal entries in the books of the Company and prepare the Balance Sheet.

Answer 1

Books of Prince Limited Journal
Date	Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c		Dr.		6,00,000
		To Share Application A/c				6,00,000
	(Share Application money received on 3,00,000 shares @ Rs 2 per share)
	Share Application A/c		Dr.		6,00,000
		To Share Capital A/c				4,00,000
		To Share Allotment A/c				2,00,000
	(Application money on 2,00,000 shares transferred to Share Capital Account and the balance adjusted on allotment)
	Share Allotment A/c		Dr.		10,00,000
		To Share Capital A/c				4,00,000
		To Securities Premium A/c				6,00,000
	(Allotment money due on 2,00,000 shares @ Rs 5 per share including premium of Rs 3 per share)
	Bank A/c (6,00,000 – 2,00,000 – 1,600)		Dr.		7,98,400
		To Share Allotment A/c				7,98,400
	(Allotment money received)
	Share First Call A/c		Dr.		6,00,000
		To Share Capital A/c				6,00,000
	(Share First Call due on 2,00,000 shares @ Rs 3 per share)
	Bank A/c (6,00,000 – 1,200 – 1,800)		Dr.		5,97,000
		To Share First Call A/c				5,97,000
	(First call money received)
	Share Capital A/c		Dr.		2,800
	Share Premium A/c		Dr.		1,200
		To Share Forfeiture A/c				1,200
		To Share Allotment A/c				1,600
		To Share First Call A/c				1,200
	(400 shares forfeited after first call)
	Share Second Call A/c		Dr.		5,98,800
		To Share Capital A/c				5,98,800
	(Final Call money due on 1,99,600 shares @ 3 per share)
	Bank A/c (5,98,800 – 1,800)		Dr.		5,97,000
		To Share Second Call A/c				5,97,000
	(Second Call money received except on 600 shares)
	Share Capital A/c		Dr.		6,000
		To Share Forfeiture A/c				2,400
		To Share First Call A/c				1,800
		To Share Second Call A/c				1,800
	(600 shares forfeited)
	Bank A/c		Dr.		7,200
	Share Forfeiture A/c		Dr.		800
		To Share Capital A/c				8,000
	(800 Shares reissued @ Rs 9 each)
	Share Forfeiture A/c		Dr.		2,000
		To Capital Reserve				2,000

As per the Revised Schedule VI, the Balance Sheet of Prince Limited is as follows:

Prince Limited
Balance Sheet
Particulars	Note No.	Amount (Rs)
I. Equity and Liabilities
1. Shareholders’ Fund
a. Share Capital	1	19,98,000
b. Reserves and Surplus	2	6,01,600
2. Non-Current Liabilities
3. Current Liabilities
Total		25,99,600
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents	3	25,99,600
Total		25,99,600

NOTES TO ACCOUNTS

Note No.	Particulars		Amount (Rs)
1	Share Capital
	Authorised Share Capital
	…….. shares of Rs 10 each		-
	Issued Share Capital
	2,00,000 shares of Rs 10 each		20,00,000
	Subscribed, Called-up and Paid-up Share Capital
	1,99,800 shares of Rs 10 each		19,98,000
2	Reserves and Surplus
	Securities Premium	5,98,800
	Capital Reserve	2,800	6,01,600
3	Cash and Cash Equivalents
	Cash at Bank		25,99,600

Working Notes:

Money received on Application		(600×2)	1,200
	Less: Utilised on application	(400×2)	(800)
Excess amount received			400

Amount due on Allotment		(400×5)	2,000
	Less: Excess amount received		(400)
Amount due on allotment			1,600

2. Amount to be transferred to Capital Reserve

Amount forfeited on Mohit’s 400 shares		1,200
Amount forfeited on Joly’s 600 shares	2,400
Amount forfeited on Joly’s 400 shares		1,600
		2,800
Less: Discount allowed on 800 shares reissued		(800)
Amount to be transferred to Capital Reserve		2,000