Question

The Orient Company Limited offered for public subscription 20,000 equity shares of Rs 10 each at a premium of 10% payable at Rs 2 on application; Rs 4 on allotment including premium; Rs 3 on First Call and Rs 2 on Second and Final call. Applications for 26,000 shares were received. Applications for 4,000 shares were rejected. Pro-rata allotment was made to the remaining applicants. Both the calls were made and all the money were received except the final call on 500 shares which were forfeited. 300 of the forfeited shares were later on issued as fully paid at Rs 9 per share. Give journal entries and prepare the balance sheet.

Answer 1

Books of Orient Company Limited Journal
Date	Particulars				L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c			Dr.		52,000
		To Share Application A/c					52,000
	(Share Application Money received for 26,000 shares @ Rs 2 per share)
	Share Application A/c			Dr.		52,000
		To Share Capital A/c					40,000
		To Share Allotment A/c					4,000
		To Bank A/c					8,000
	(Application money @ Rs 2 per share of 20,000 shares transferred to Share Capital Account and money of 4,000 shares returned, remaining to Share Allotment)
	Share Allotment A/c			Dr.		80,000
		To Share Capital A/c					60,000
		To Securities Premium A/c					20,000
	(Share Allotment money due on 20,000 shares @ Rs 4 per share including Re 1 Securities Premium)
	Bank A/c			Dr.		76,000
		To Share Allotment A/c					76,000
	(Share Allotment Money received for all the shares after adjustment of money transferred from Share Application)
	Share First Call A/c			Dr.		60,000
		To Share Capital A/c					60,000
	(Share First Call money due on 20,000 share @ Rs 2 per share)
	Bank A/c			Dr.		60,000
		To Share First Call A/c					60,000
	(Share First Call received for 20,000 shares @ Rs 2 per share)
	Share Second and Final Call A/c			Dr.		40,000
		To Share Capital A/c					40,000
	(Share Second and Final Call money due on 20,000 shares @ Rs 2 per share)
	Bank A/c			Dr.		39,000
		To Share Second and Final Call A/c					39,000
	(Share Second and Final Call money received for 19,500 shares @ Rs 2 per share and 500 shares failed to pay)
	Share Capital A/c			Dr.		5,000
		To Share Second and Final Call A/c					1,000
		To Share Forfeiture A/c					4,000
	(500 shares of Rs 10 per share fully called-up forfeited for non-payment of Second and Final Call Rs 2 per share)
	Bank A/c			Dr.		2700
	Share Forfeiture A/c			Dr.		300
		To Share Capital A/c					3,000
	(300 shares @ Rs 10 each reissued for Rs 9 per share fully paid-up)
	Share Forfeiture A/c			Dr.		2,100
		To Capital Reserve A/c					2,100
	(Balance of 300 shares in Share Forfeiture Account transferred to Capital Reserve Account, after adjustment)

Orient Company Limited
Balance Sheet
Particulars	Note No.	Amount (Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital	1	1,99,600
b. Reserves and Surplus	2	22,100
2. Non-Current Liabilities
3. Current Liabilities
Total		2,21,700
II. Assets
1. Non-Current Assets
2. Current Assets
Cash and Cash Equivalents	3	2,21,700
Total		2,21,700

NOTES TO ACCOUNTS

Note No.	Particulars		Amount (Rs)
1	Share Capital
	Authorised Equity Share Capital
	…….. Equity Shares of Rs 10 each		-
	Issued Equity Share Capital
	20,000 Equity Shares of Rs 10 each		2,00,000
	Subscribed, Called-up and Paid-up Equity Share Capital
	19,800 Equity Shares of Rs 10 each	1,98,000
	Add: Shares Forfeiture	1,600	1,99,600
2	Reserves and Surplus
	Securities Premium	20,000
	Capital Reserve	2,100	22,100
3	Cash and Cash Equivalents
	Cash at Bank		2,21,700

Working Notes:

Share Forfeiture Account credited	Rs 8 per share
Less: Share Forfeiture Account debited	Rs 1 per share
Amount transferred to Capital Reserve Account, after adjustment	Rs 7 per share

Amount transferred to Capital Reserve Account, after adjustment for 300 shares = 300 Shares @ Rs 7 per share = Rs 2,100