Question

XYZ Ltd. invited applications for issuing 50,000 Equity Shares of ₹10 each . The amount was payable as:

On application	$—$	₹ 3 per share,
On allotment	$—$	₹ 4 per share,
On first and final call	$—$	₹ 3 per share.

Applications were received for 75,000 shares and pro rata allotment was made as:
Applicants for 40,000 shares were allotted 30,000 shares on pro rata basis.
Applicants for 35,000 shares were allotted 30,000 shares on pro rata basis.
Ramu, to whom 1,200 shares were allotted out of the group applying for 40,000 shares, failed to pay the allotment money. His shares were forfeited immediately after allotment .
Shamu, who had applied for 700 shares out of the group applying for 35,000 shares , failed to pay the first and final call . His shares were also forfeited. Out of the forfeited shares, 1,000 shares were reissued @ Applicants for 40,000 shares were allotted 30,000 shares on pro rata basis. 8 per share as fully paid-up. The reissued shares included all the forfeited shares of Shamu.
Pass necessary Journal entries to record the above transactions.

Answer 1

Issued 1,000 equity shares of Rs 10 each

Applied 1,800 shares

Allotment made as:			Amount payable per shares as:
Applied		Allotted		Application	Rs 3
40,000		30,000		Allotment	Rs 4
35,000		20,000		First Call	Rs 3
1,800		1,000			Rs 10

Books of XYZ Limited Journal Entries
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c	Dr.		2,25,000
	To Equity Share Application A/c				2,25,000
	(Share application money received for 75,000 shares at Rs 3 each)
	Equity Share Application A/c	Dr.		2,25,000
	To Equity Share Capital A/c				1,50,000
	To Equity Share Allotment A/c				75,000
	(Application money of 50,000 shares transferred to share capital and the remaining amount adjusted on allotment)
	Equity Share Allotment A/c	Dr.		2,00,000
	To Equity Share Capital A/c				2,00,000
	(Share allotment due on 50,000 shares at Rs 4 each)
	Bank A/c	Dr.		1,21,400
	To Equity Share Allotment A/c				1,21,400
	(Share allotment received on 48,800 shares after adjusting the excess money on application)
	Equity Share Capital A/c (1,200 × Rs 7)	Dr.		8,400
	To Share Forfeiture A/c				4,800
	To Equity Share Allotment A/c				3,600
	(1,200 shares of Rs 10 each Rs 7 called-up forfeited for the non-payment of allotment)
	Equity Share First and Final Call A/c	Dr.		1,46,400
	To Equity Share Capital A/c				1,46,400
	(First and final call due on 48,800 shares at Rs 3 each)
	Bank A/c	Dr.		1,45,200
	To Equity Share First and Final Call A/c				1,45,200
	(Share first and call received 48,800 shares at Rs 3 each)
	Equity Share Capital A/c	Dr.		4,000
	To Share Forfeiture A/c (400 × Rs 7)				2,800
	To Equity Shares First and Final Call A/c				1,200
	(400 shares forfeited for the non-payment of first and final call)
	Bank A/c	Dr.		8,000
	Share Forfeiture A/c	Dr.		2,000
	To Equity Share Capital A/c				10,000
	(1,000 shares of Rs 10 each re-issued at Rs 8 per share fully paid-up)
	Share Forfeiture A/c	Dr.		3,200
	To Capital Reserve A/c				3,200
	(Balance of 1,000 re-issued shares in Share Forfeiture Account transferred to Capital Reserve Account)

Working Notes-

Rumu’s Share

Number of shares applied = = 1,600 shares

Money received on Application 1,600 shares × Rs 3	=	Rs 4,800
Money adjusted on Application 1,200 Shares × Rs 3	=	Rs 3,600
Excess on Application		Rs 1,200

Allotment due on 1,200 shares × Rs 4	=	4,800
Less: Excess money on Application	=	1,200
Calls-in-Arrears on Allotment		3,600

Share Allotment

Share Allotment due 50,000 shares × Rs 4	=	2,00,000
Less: Excess money on application	=	75,000
		1,25,000
Less: Calls-in-Arrears on Allotment	=	3,600
Money received on Allotment	=	1,21,400

Shamu’s Shares

Number of shares allotted to Shamu

First and Final Call

First and Final Call due; 48,800 shares × Rs 3	=	1,46,400
Less: Calls-in-Arrears by Shamu; 400 shares × Rs 3	=	1,200
Money received on of First and Final Call		1,45,200

Capital Reserve

Shares re-issued out the shares forfeited from Ramu = 1,000 shares − Shamu’s shares

= 1,000 − 400

= 600 shares

on re-isssue Ramu’s shares:

Capital Reverse on re-issue of 600 shares forfeited from Ramu
Share Forfeiture Cr.	=	Rs	4
Share Forfeiture Dr.	=	Rs	2
Share Forfeiture after re-issued		Rs	2	per share

Capital Reserve after re-issue of 600 shares = Share Forfeiture after re-issue (per share) × 600 shares

= Rs 2 × 600

= Rs 1,200

on re-isssue Shamu’s shares:

Share Forfeiture	Cr.	Rs 7
Share Forfeiture	Dr.	Rs 2
Share Forfeiture after re-issue		Rs 5	per share

Capital Reserve after re-issue of 400 shares = Share Forfeiture after re-issue (per share) × 600 shares

= Rs 5 × 400

= Rs 2,000

Total amount of Capital Reserve = Capital Reserve of 600 shares + Capital Reserve of 400 shares

Total amount of Capital Reserve	= Capital Reserve of 600 shares + Capital Reserve of 400 shares
	= Rs 1,200 + Rs 2,000
	= Rs 3,200