Question

X Ltd . issued a prospectus inviting applications for 50,000 Equity Shares of ₹ 10 each, payable ₹ 5 as per application (including ₹ 2 as premium), ₹ 4 as per allotment and the balance towards first and final call.
Applications were received for 65,000 shares. Application money received on 5,000 shares was refunded with letter of regret and allotments were made on pro rata basis to the applicants of 60,000 shares. Money overpaid on applications including premium was adjusted on account of sums due on allotment.
Mr Sharma to whom 700 shares were allotted failed to pay the allotment money and his shares were forfeited by the Directors on his subsequently failure to pay the call money.
All the forfeited shares were subsequently sold to Mr.Jain credited as fully paid-up for ₹ 9 per share .
You are required to set out the journal entries and the relevant entries in the Cash Book.

Answer 1

Issued shares 50,000 of Rs 10 each at a premium of Rs 2

Applied share 65,000

Allotment made as				Payable as:
Applied		Alloted		Application	Rs 5	(3 + 2)
60,000		50,000		Allotment	Rs 4
5,000		NIL		First and Final Call	Rs 3
65,000		50,000			Rs 12	(10 + 2) per share

Cash Book
Dr.							Cr.
Date	Particulars	L.F.	Bank Rs	Date	Particulars	L.F.	Bank Rs
	Equity Share Application		3,25,000		Equity Share Application		25,000
	Equity Share Allotment		1,47,900
	Equity Share First and Final Call		1,47,900		Balance c/d		6,02,100
	Equity Share Capital		6,300
			6,27,100				6,27,100

Books of X Limited Journal
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Equity Share Application A/c	Dr.		3,00,000
	To Equity Share Capital A/c				1,50,000
	To Securities Premium				1,00,000
	To Equity Share Allotment A/c				50,000
	(Share application money of 50,000 shares transferred to share capital at Rs 3 each and to premium Rs 2 each and Rs 50,000 adjusted on allotment)
	Equity Share Allotment A/c	Dr.		2,00,000
	To Equity Share Capital A/c				2,00,000
	(Allotment due on 50,000 shares at Rs 4 each)
	Equity Share First and Final Call A/c	Dr.		1,50,000
	To Equity Share Capital A/c				1,50,000
	(First and final call due on 50,000 shares at Rs 3 each)
	Equity Share Capital A/c	Dr.		7,000
	To Share Forfeiture A/c				2,800
	To Equity Share Allotment A/c				2,100
	To Equity Share First and Final A/c				2,100
	(700 shares of Rs 10 each forfeited for the non-payment of amount due)
	Share Forfeiture A/c	Dr.		700
	To Equity Share Capital A/c				700
	(Loss on issue Re 1 on 700 shares charged from the Share Forfeiture Account)
	Share Forfeiture A/c	Dr.		2,100
	To Capital Reserve A/c				2,100
	(Balance in Share Forfeiture after re-issue transferred to Capital Reserve)

Working Notes-

Mr. Sharma’s Share

Number of shares applied by Mr Sharma

Money received on Application 840 shares × Rs 5	=	4,200
Less: Money transferred to Share Capital 700 shares × Rs 3	=	2,100
Less: Securities Premium 700 shares × Rs 2	=	1,400
Excess money on Application		700

Allotment due 700 shares × Rs 4	=	2,800
Less: Excess money on Application		700
Calls-in Arrears on Allotment		2,100

Share Allotment

Share Allotment due 50,000 × Rs 4	=	2,00,0000
Less: Excess money on Application	=	50,000
Less: Calls-in-Arrears	=	2,100
Money received on Application		1,47,900

Share First and Final Call

Share First and Final Call due 50,000 Shares × Rs 3	=	1,50,000
Less: Calls in Arrears on 700 shares × Rs 3	=	2,100
Money received on First and Final Call		1,47,900

Capital Reserve

Money received on Application from Mr Sharma		=	Rs 4,200
Less: Securities Premium 700 × Rs 2		=	Rs 1,400
Share Forfeiture	Cr.		2,800
Share Forfeiture 700 × Re 1	Dr.		700
Capital Reserve			2,100