Question

XYZ Ltd . issued a prospectus inviting applications for 2,000 shares of ₹ 10 each at a premium of ₹ 4 per share , payable as:

On application	$—$	₹ 6 (including ₹ 1 premium)
On allotment	$—$	₹ 2 (including ₹ 1 premium)
On first call	$—$	₹ 3 (including ₹ 1 premium)
On second and final call	$—$	₹ 3 (including ₹ 1 premium)

Applications were received for 3,000 shares and pro rata allotment was made on the applications for 2,400 shares. It was decided to utilise excess application money towards the amount due on allotment .

X, to whom 40 shares were allotted, failed to pay the allotment money and on his subsequent failure to pay the first call , his shares were forfeited.

Y, who applied for 72 shares failed to pay the two calls and on his such failure , his shares were forfeited.

Of the shares forfeited , 80 shares were sold to Z credited as fully paid-up for ₹ 9 per share , the whole of Y's shares being included . Prepare Journal , Cash Book and the Balance Sheet .

Answer 1

Applied shares 3,000

Allotment made as:				Payable as:
Applied		Allotted		Application	Rs 6	(5 + 1)
2,400		2,000		Allotment	Rs 2	(1 + 1)
600		NIL		First Call	Rs 3	(2 + 1)
				Final Call	Rs 3	(2 + 1)
3,000		2,000			Rs 14	(10 + 4) per share

Cash Book
Dr.					Cr.
Date	Particulars	Bank Rs	Date	Particulars	Bank Rs
	Share Application	18,000		Share Application	3,600
	(3,000 shares × Rs 6)			(600 shares × Rs 6)
	Share Allotment (see note-2)	1,568
	Share First Call (see note-4)	5,700
	Share Final Call (see note-5)	5,700
	Share Capital	720		Balance c/d	28,088
	(80 shares × Rs 9)
		31,688			31,688

Journal Entries
Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Share Application A/c	Dr.		14,400
	To Share Capital A/c				10,000
	To Securities Premium A/c				2,000
	To Share Allotment A/c				2,400
	(Share application money of 2,000 shares transferred to Share Capital and Securities Premium at Rs 5 and Re 1 each respectively and Rs 2,400 adjusted on allotment)
	Share Allotment A/c	Dr.		4,000
	To Share Capital A/c				2,000
	To Securities Premium A/c				2,000
	(Allotment due on 2,000 shares at Rs 2 each including Re 1 premium)
	Share First Call A/c	Dr.		6,000
	To Share Capital A/c				4,000
	To Securities Premium A/c				2,000
	(First call due on 2,000 shares at Rs 3 each including Re 1 premium)
	Share Capital A/c (40 shares × Rs 8)	Dr.		320
	Securities Premium A/c	Dr.		72
	To Share Forfeiture A/c				240
	To Share Allotment A/c				32
	To Share First Call A/c				120
	(40 shares of Rs 10 each Rs 8 called with premium forfeited for non-payment of amount due)
	Share Final Call A/c	Dr.		5,880
	To Share Capital A/c				3,920
	To Securities Premium A/c				1,960
	(Final call due on 1,960 shares at Rs 3 each including Re 1 premium)
	Share Capital A/c	Dr.		600
	Securities Premium A/c	Dr.		120
	To Share Forfeiture A/c				360
	To Share First Call A/c				360
	(60 shares forfeited for non-payment of amount due)
	Bank A/c	Dr.		720
	Share Forfeiture A/c	Dr.		80
	To Shares Capital A/c				800
	(80 shares of Rs 10 each re-issued at Rs 9 per share fully paid-up)
	Share Forfeiture A/c	Dr.		400
	To Capital Reserve				400
	(Balance of 80 reissued shares in Share Forfeiture Account transferred to Capital Reserve)

As per the Schedule III of Companies Act, 2013, the Company's Balance Sheet is presented as follows.

XYZ Ltd.
Balance Sheet
Particulars	Note No.	Amount (Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital	1	19,920
b. Reserves and Surplus	2	8,168
2. Non-Current Liabilities
3. Current Liabilities
Total		28,088
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents	3	28,088
Total		28,088

NOTES TO ACCOUNTS

Note No.	Particulars		Amount (Rs)
1	Share Capital
	Authorised Share Capital
	……. shares of Rs 10 each		-
	Issued Share Capital
	2,000 shares of Rs 10 each		20,000
	Subscribed, Called-up and Paid-up Share Capital
	1,980 shares of Rs 10 each	19,800
	Add: Shares Forfeited (20 shares × Rs 6)	120	19,920
2	Reserves and Surplus
	Securities Premium	7,768
	Capital Reserve	400	8,168
3	Cash and Cash Equivalents
	Cash at Bank		28,088

Working Notes:

1. X’s Shares

Number of share applied by X

Money received on application (48 shares × Rs 6)	=	288
Less: Money transferred to Shares Capital (40 shares × Rs 5)	=	200
Less: Securities Premium (40 shares × Re 1)	=	40
Excess money on application from X	=	48
Utilisation of excess application money received from X
Share Capital due on Allotment (40 shares × Re 1)	=	40
Less: Excess money on Application from X	=	48
Excess money after adjustment of Share Capital on Allotment	=	8
Securities Premium due on Allotment (40 shares × Re 1)	=	40
Less: Excess money after adjustment of Share Capital on Allotment	=	8
Calls-in-Arrears of Securities Premium on Allotment	=	32

2. Share Allotment

Money due on allotment (2,000 shares × Rs 2)	=	4,000
Less: Excess money on Application	=	2,400
	=	1,600
Less: Calls-in-Arrears on X‘s shares (securities premium)	=	32
Money received on allotment	=	Rs 1,568

3. Y’s Shares

Number of shares allotted

4. Share First Call

Money due on Share First Call (2,000 shares × Rs 3)	=	6,000
Less: Calls-in-Arrears on X‘s shares (40 shares × Rs 3)	=	120
Less: Calls-in-Arrears on Y’s shares (60 shares × Rs 3)	=	180
Money received on Share First Call	=	5,700

5. Share Final Call

Money due on share Final Call (1,960 shares × Rs 3)	=	5,880
Less: Calls-in-Arrears on Y’s shares (60 shares × Rs 3)	=	180
Money received on Share Final Call	=	5,700

Capital Reserve

X’s shares

Money received from X for 40 shares	=	288
Less: Securities Premium adjusted on Application	=	40
Less: Securities Premium adjusted on Allotment	=	8
Balance in the Share Forfeiture before re-issue of shares Cr.		240

Share Forfeiture Credit	=	Rs	6	per share
Share forfeiture Debit	=	Rs	1	per share
		Rs	5	per share

Capital Reserve on re-issue of 20 shares = Rs 5 × 20 shares = Rs 100

Y’s Shares

Share Forfeiture on 60 Shares of Y

Share Forfeiture Credit	Rs 6	per share
Less: Share Forfeiture Debit	Rs 1	per share
	Rs 5	per share

Capital Reserve on re-issue of 60 shares of Y = Rs 5 × 60 shares = Rs 300

Total Capital Reserve on 80 shares = Capital Reserve on re-issue of 20 shares of X + Capital Reserve on re-issue of 60 shares of Y = 100 + 300 = Rs 400