NCERT Solutions for Class 12 Accountancy Part 2 Chapter 1 Accounting for Share Capital

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Short Answer Type Questions

1. What is public company?

Ans. As per section 2(71) of the companies Act, 2013

A public company is a company which:

(i) is not a private company’

(ii) her a minimum paid up capital as may be prescribed, and

(iii) is a private company, being a subsidiary of a company which is not a private company.

A public company must have atleast 7 members and there is no restriction on the maximum number of members.

It should have atleast 3 directors but not more than 15 directors.

2. What is a private company?

Ans. As per section 2(68) of the companies Act, 2013 a private company is one which has a minimum paid up share capital as may be prescribed and which by its articles of association.

(i) Restricts the right to transfer its shares, if any

(ii) Except in the case one person company, limits the numbers of its members to 200.

(iii) Prohibits any invitation to public to servicable for any securities of the company.

3. When can shares be Forfeited?

Ans. When a shareholder fails to pay the allotment money or any subsequent calls, then the company informs
the shareholder by giving him/her a proper notice.If even after the notice, the shareholder fails to pay the
due money, then the company can forfeit the shares allotted to him/her.

4. What is meant by Calls in Arrears?

Ans. When a shareholder fails to pay all or any of the instalments in due time, then, company expects the
shareholder to pay the outstanding amount in the later stages (or calls). Such amount of money that is not
paid when the in stalment is due, is caused calls is arrears.

5. What do you mean by a listed company?

Ans. Listed companies are those companies whose shares are listed on a recognised stock exchange for public
trading. When a company’s security is listed in a recognised stock exchange the price fluctuation can easily be observed by the investor and he/she can easily determine the increase/decrease in value of their investment in a concerned listed company.

6. What are the uses of securities premium?

Ans. As per section 52(2) of the companies Act, 2013 restricts the use of the amount received as premium on securities for the following purpose:

(i) Issuing fully paid bonus shares to the members;

(ii) Writing off preliminary expenses of the company.

(iii) Writing off the expenses of all the commission paid or discount allowed on any issue of securities of the compny;

(iv) Providing for the premium payable on the redemption of any redeemable preference shares or any debentures of the company;

(v) Buy back of its own shares

7. What is meant by Calls in Advance?

Ans. Calls-in-Advance refers to a situation when a shareholder pays the whole amount or a part of the amount of shares before it become due, i.e. before the company calls for it.
So, the amount of money that is being paid in advance at the earlier stages is termed as Calls-in-Advance.

8. Write a brief note on ‘Minimum Subscription’

Ans. As per section 39(1) of the companies Act 2013 provides that a company cannot allot any securities of the company to public unless the amount stated in the prospectus as the minimum amount has been subscribed.

The companies Act 2013 has not prescrived the minimum subscription. However, according to SEBI guidelines minimum subscription has been fixed at 90% of the issued amount as per section 39(3), company has to get minimum subscription within 30 days from the date of the issue of prospectus. If the company fails to receive the minimum subscription within the said period the company cannot proceed with the allotment of shares and entire application money received had to be refunded.

Long Answer Type Questions

1. What is meant by the word ‘Company’? Describe its characteristics.

Ans. As per section 2(20) of the companies Act, 2013,
‘‘Company means a company incorporated under this Act ar any previous company law.’’
A company (an a joint stock company)is an association of persons formed and registered under the companies Act. It is set up by the process of law. It normally has a share capital divided into units called shares the owners of which are called shareholders. It is a legal person not having a physical existence and has a separate legal existence.
The characteristics or features of a company are as follows:

(i) Incorporated association: A company is an artificial person created by the process of law, i.e., the companies Act.

(ii) Separate legal entity: A company is an artificial person having a legal entity separate from its shareholders .

(iii) Perpetual existence: A company has a perpetual existence, i.e., a company is not affected by the retirement, death, lunacy or insolvency of its members.

(iv) Limited liability: The liability of the shareholders of a company is limited to the unpaid value of his shares/ to the value of the shares subscribed by them/amount Guaranteed to be paid at the time of winding up in the case of companies limited by guarantee.

(v) Transferability of shares: Shares of a company are freely transferable, except in case of private companies.

(vi) Common seal: All documents prepared by the directors must leave the seal of the company. the common seal acts as the official signature of the company.

2. Explain in brief the main categories in which the share capital of a company is divided.

Ans. Share capital of a company can be divided into the following categories:

(i) Authorised Capital: It refers to that amount which is laid down in clause of the memorandum of association of the company. This is the maximum amount with which company is registered and to raise from the public by the issue of shares. It is also, called as registered or nominal or authorised capital of company.

(ii) Issued Capital: It is that part of authorised capital which is offerred to the public for subscription.

(iii) Subscribed Capital: It is the portion of issued capital which has been subscribed by the public i.e., applied for and allotted by the company. Thus, face value of allotted shares is known as subscribed capital.

(iv) Called-up Capital: The portion of the subscribed capital which the shareholders are called upon to pay is termed as called up capital of the company. The balance of subscribed capital which has not been called up represents uncalled capital.

(v) Paid-up Capital: The amount of called-up capital which has been actually paid by the shareholders is called as paid-up capital and the amounts yet due from the shareholders are called as calls-in-arrears.

(vi) Reserve Capital: Sometimes a company by means of special resolution decides that certain portion of its uncalled capital shall not be called-up during its existence and it would be available as an additional security to its creditors in the event of its liquidation. Such a portion of uncalled capital is termed as reserve capital.

3. What do you mean by the term ‘share? Discuss the type of shares, which can be issued under the Companies Act, 2013 as amended to date.

Ans. The capital of a company is divided into a number of equal parts. Each part is called a share. Each share has its nominal (face) value for example., In a company authorised capital is ₹ 50,00,000 divided into 5,00,000 units of ₹10 each. such unit is called a share and value of each unit is ₹ 10 is called its nominal or face value. The holder of these shares are called shareholders or members of the company.

According to Companies Act, 2013there are two types of shares:

(i) Preference Share: Preference Share is one which carries the following two rights:

(a) They have preference rights in dividend distribution.

(b) On the winding up of the company, they have right to return of capital before the capital returned on equity shares.

However, not with standing the above two conditions, a holder of the preference share may have a right to share fully or to a limited extent in the surplus of the company as specified in the Memorandum or Articles of association of the company. Preference shareholders have no voting rights in the company.

(ii) Equity Share: Under Indian Companies Act 2013, ‘an equity share is share which is not preference share’. Thus, this share does not carry any preferential right in payment of divided, equity share is one which is entitled to dividend and repayment of capital after the claim of preference shares is satisfied. Equity share holders are the owner having the voting rights. They sink and swim with the company.

4. Discuss the process for the allotment of shares of a company in case of over subscription.

Ans. When shares are issued to the public for subscription through the prospectus by well managed and financially strong companies, it may happen that the total number of applications received for shares exceeds the number of shares offered by the company to the public, such situation is called the situation of over-subscription. A company can opt for any of the three alternatives to allot shares in case of over-subscription of shares.

(i) Excess Applications are rejected and money received on excess applications is referenced to the applicants.

Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
	Share Application A/c Dr. To Bank A/c (Being excess share application money refunded)

(ii) If the Applicant are made Partially Allotment (or Pro-rata Basis) In case of over-subscription, when a company allots shares to all the applicants, it is called as pro-rata allotment.

In such a case, the main problem is what to do with the excess amount received on application. Practically, it will be quite irrational to refund the excess money first and then ask the allottee applicants to pay the allotment money.

In practice, generally excess application money receive on these shares is adjusted towards the amount due on allotment or call. For this purpose the entry is made as follows:

Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
	Share Application A/c Dr. To Share Allotment A/c (Being excess share application money transferred to share allotment account)

Pro-rata and Refund of Money: In case of over-subscription, the director can adopt a combination of the above two alternatives i.e., they can accept full allotment to some applications, a pro-rata allotment to others and no allotment to the rest.

Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
	Share Application A/c Dr. To Share Capital A/c To Share Allotment A/c To Bank A/c (Being application money transferred to share capital account and excess share application money transferred to share allotment account and rest money is refund)

5. What is a ‘Preference Share’? Describe the different types of preference shares.

Ans. Preference share is one which carries the following two rights:

(i) Rreferential right in the payment of dividend at fixed rate.

(ii) On the winding up of the company, they have right to return of capital before of the capital returned on equity shares.
However, not with standing the above two conditions, a holder of the preference share may have a right to share fully or to a limited extent in the surplus of the company as specified in the Memorandum or Articles of the Company.

Preference shares can be of various types which are as follows:

(i) Cumulative Preference Shares: Cumulative preference shares carry the right to receive arrears of dividend before dividend is paid to the equity shareholders.

(ii) Non-Cumulative Preference: Shares If unpaid dividend lapses, the share is said to be non-cumulative preference share. It means when a preference shareholder receives dividend only in case of profit and is not entitled any right to recover the arrears of dividend, then the type of preference shares held by the shareholder is known as non-cumulative preference shares.

(iii) Redeemable Preference Shares: When shares are repaid after some specified time in accordance with the terms of issue they are called redeemable preference shares.

(iv) Non-Redeemable Preference Shares: These are the preference shares, which do not carry with them the arrangement regarding redemption. According to Section 80 (54), no company limited by shares shall issue irredeemable preference shares or preference shares redeemable after the expiry of 20 years from the date of issue.

(v) Participating Preference Shares: When a preference shareholder enjoys the right to participate in the surplus profit (in addition to the fixed rate of dividend) that is left after the payment of dividend to the equity shareholders, the type of shares held by the shareholder is known as participating preference shares.

(vi) Non-Participating Preference Shares: When a preference shareholder receives only a fixed rate of dividend every year and do not enjoy the additional participation in the surplus profit, then the type of shares held by the shareholder is known as non-participating preference shares.

(vii) Convertible Preference Shares: These shares give the right to the holder to get them converted into equity shares at their option according to the terms and conditions of their issue.

(viii) Non-Convertible Preference Shares: When the holder of a preference share has not been conferred the right to get his holding converted into equity share, it is called non-convertible preference shares. Preference shares are non-convertible unless otherwise stated.

6. Describe the provisions of law relating to ‘Calls-in- Arrears’ and ‘Calls in Advance’.

Ans. Calls in Arreaus

It often happens that some shareholders fail to pay the amount of allotment or call when it because due. This is known as calls in arrears.

The company is authorised to charge interest on calls in arrears at a specified rate mentioned in its articles from the due late to the date of actual payment. But if the articles are silent, table F of schedule I of the companies Act, 2013 shall be applicable, according to which interest shall be charged at a rate not exceeding 10% p.a. However, the director have the right to the payment of such interest wholly or in part.

Calls paid in advance

A shareholders may sometimes pay a part, or whole, of the amount not yet called upon his shares in under to save himself form the trouble of paying different calls at different times.

Thus, the amount of future calls is received in advance by the company. According to section 50 of the companies Act, 2013 such amount of calls in advance can be accepted by the company only when it is so authorised by its articles of association.

Interest on calls in advance

The amount received as calls in advance is an debt of the company. It is liable to pay interest on calls in advance from the date of receipt till the date when the call is due for payment. Generally, the articles of the company specify the rate at which interest is payable. However, if the articles do not contain such rate, table F of schedule I of the companies Act, 2013 shall be applicable which leaves the matter to the board of directors subject to a maximum rate of 12% pa. It is to be noted that interest on calls in advance is a charge against the profits of the company.

Thus, if rate of interest on calls in arrears and rate of interest on calls in advance is not given, then it is taken @ 10% and 12% respectively.

7. Explain the terms ‘Over-subscription’ and ‘Under-subscription’. How are they dealt with in accounting records?

(i) Excess applications are rejected and money received on excess applications is refused to the Applicants.

Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
	Share Application A/c Dr. To Share Allotment A/c (Being excess share application money refunded)

(ii) If the Applicant are made Partially Allotment (or Pro-rata Basis): In case of over-subscription, when a company allots shares to all the applicants, it is called as pro-rata allotment. In such a case the main problem is what to do with the excess amount received on application.

Practically, it will be quite irrational to refund the excess money first and then ask the allotted applicants to pay the allotment money.

In practice, generally excess application money receive on these shares is adjusted towards the amount due on allotment or call. For this purpose the entry is made as follows:

Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
	Share Application A/c Dr. To Share Allotment A/c (Being excess share application money transferred to share allotment account)

(iii) Pro-rata and Refund of Money: In case of over-subscription, the director can adopt a combination of the above two alternatives i.e., they ,can accept full allotment to some applications, a pro-rata allotment to others and no allotment to the rest.

Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
	Share Application A/c Dr. To Share Capital A/c To Share Allotment A/c To Bank A/c (Being application money transferred to share capital account and excess share application money transferred to share allotment account and rest money is refund)

Under-Subscription: In case when share are issued by the company and the number of shares applied by the public is lesser than the number of shares issued this is called the situation of under-subscription.

As per the Compnise Act, the minimum subscription is 90% of the shares issued by the company. This implies that the company can allot shares to the applicants provided if applications for 90% of the issued shares are received. Otherwise, the company should refund the entire application amount received.

In this regard, necessary journal entry is passed only after receiving and refunding of the application. In this case, normal entries are made as the adjustment is not needed for any excess.

8. Describe the purposes for which a company can use the amount of ‘Securities Premium.

Ans. Under section 52(2) of the companies Act 2013, the amount of securities premium reserve may be used only for the following purposes if

(i) In writing off the Preliminary expenses of the company.

(ii) For writing off the expenses, commission or discount allowed on issue of shares or debentures of the company;

(iii) For issuing fully paid bonus shares to the shareholders of the company.

(iv) For providing for the premium payable on redemption of redeemable preference shares or debentures of the company.

(v) For buy back of its own shares and others securities as per secton 68.

9. State clearly the conditions under which a company can issue shares at a discount.

Ans. As per the provisions of the companies Act 2013, share cannot be issued at discount. Therefore, this question seems to be irrelevant.

10. Explain the term ‘Forfeiture of Shares’ and give the accounting treatment on forfeiture.

Ans. If any shareholder fails to pay the allotment money and or any call money on his shares as called upon by the directors, his shares may be forfeited by the directors, if they are so authorised by the Articles of Association. This is known as forfeiture of shares.

As per the provisions of table F of schedule of the companies Act, 2013, the procedure of forfeiting shares is mentioned below.

(i) A notice is sent to default shareholder stating him/her to pay calls-in-arrears along with the interest accrued on the outstanding calls money within a period of 14 days of the receipt of notice, otherwise, the shares will be forfeited.

(ii) If the shareholder does
not pay the amount, then the company has the right to forfeit his/her share by passing a resolution.

(iii) A notice of that resolution is send to the default shareholder and a public notice of the same is published in a daily newspaper.

(iv) The name of the shareholder is removed from the register of members (i.e., shareholders).

Accounting Treatment for Forfeiture of Shares:

(i) Forfeiture of Shares that were Issued at par

Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
	Share Capital A/c Dr. To Calls in Arrears A/c To Share Forfeiture A/c (Amount Received) (Being shares forfeited on non-payment of allotment or call money)		(Amount Called-up)

(ii) Forfeiture of Shares that were Issued at Premium

(a) Sometimes forfeited shares would have been issued at premium in that case if amount of premium is received than premium received is not shown.

Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
	Share Capital A/c Dr. Securities Premium Reserves A/c Dr. To Calls in Arrears A/c To Share Forfeiture A/c (Amount Received) (Being shares forfeited on non-payment of allotment or call money)		(Amount Called-up)

(b) Sometimes forfeited shares would have been issued at premium in that case if amount of premium is not received than premium not received is shown.

Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
	Share Capital A/c Dr. To Securities Premium Reserves A/c Dr. To Calls in Arrears To Share Forfeiture A/c (Amount Received) (Being shares forfeited on non-payment of allotment or call money)		(Total Amount Called-up)	(Premium Amount Called-up)

Numerical Type Questions

1. Anish Limited issued ₹ 30,000 equity shares of ₹100 each payable at ₹30 on application, ₹50 on allotment and ₹20 on Ist and final call. All money was duly received. Record these transactions in the journal of the company.

Ans.

Journal Entries
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
(i)	Bank A/c (30,000 × 30) Dr. To Equity Share Application A/c (Being application money received on application for 30,000 equity shares @ ₹ 30 per share)		9,00,000	9,00,000
(ii)	Equity Share Application A/c Dr. To Equity Share Capital A/c (30,000 × 30) (Being share application money transferred to share capital account)		9,00,000	9,00,000
(iii)	Equity Share Allotment A/c Dr. To Equity Share Capital A/c (30,000 × 50) (Being allotment money due on 30,000 @ ₹ 50 per share)		15,00,000	15,00,000
(iv)	Bank A/c (30,000 × 50) Dr. To Equity Share Allotment A/c (Being share allotment money received for 30,000 shares @ ₹ 50 per share)		15,00,000	15,00,000
(v)	Equity Shares First and Final A/c Dr. To Equity Share Capital A/c (30,000 × 20) (Being share first and final call due on 30,000 shares @ ₹ 20 per share)		6,00,000	6,00,000
(vi)	Bank A/c (30,000 × 20) Dr. To Equity Shares First and Final Call A/c (Being share first and final call money received for 30,000 shares @ ₹ 20 per share)		6,00,000	6,00,000

2. The Adarsh Control Device Ltd was registered with the authorised capital of ₹3,00,000 divided into 30,000 shares of ₹10 each, which were offered to the public. Amount payable as ₹3 per share on application, ₹4 per share on allotment and ₹3 per share on first and final call. These share were fully subscribed and all money was dully received. Prepare journal and Cash Book.The

Ans.

Journal Entries
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
(i)	Equity Share Application A/c Dr. To Equity Share Capital A/c (30,000 × 3) (Being application money for 30,000 shares @ ₹ 3 per share transferred to share capital A/c)		90,000	90,000
(ii)	Equity Share Allotment A/c Dr. To Equity Share Capital A/c (30,000 × 4) (Being allotment money due on 30,000 shares @ ₹ 4 per share)		1,20,000	1,20,000
(iii)	Equity Share First and Final Call A/c Dr. To Equity Share Capital A/c (30,000 × 3) (Being first and final call money due on 30,000 shares @ ₹ 3 per share)		90,000	90,000

Notes:

All the entries related to bank (i.e., money received in different situations) will not be passed as the question has asked for separate cash Book.

Dr.	Cash Book (Bank Column)						Cr.
Date	Particulars	J.F.	Amount(₹)(Dr.)	Date	Particulars	J.F.	Amount(₹)(Cr.)
	To Equity Share Application		90,000
	To Equity Share Allotment		1,20,000
	To Equity Share First and Final Call		90,000		By Balance c/d		3,00,000
	To Equity Share First and Final Call			3,00,000			3,00,000

3. Software solution India Ltd invited application for 20,000 equity share of ₹ 100 each, payable ₹ 40 on application, ₹ 30 on allotment and ₹ 30 on first and final call. The company received applications for 32,000 shares.

Application for 2,000 shares were rejected and money returned to Applicants. Applications for 10,000 shares were accepted in full and applicants for 20,000 share allotted half of the number of share applied and excess application money adjusted into allotment. All money due on allotment and call was received. Prepare journal and cash book.

Ans.

Journal Entries
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
(i)	Equity Share Application A/c Dr. To Equity Share Capital A/c (20,000 × 40) To Equity Share Allotment A/c (10,000 × 30) (Being application money for transferred to equity share capital for 20,000 shares @ ₹ 40 and ₹ 3,00,000 is adjusted towards allotment)		11,00,000	8,00,000 3,00,000
(ii)	Equity Share Allotment A/c Dr. To Equity Share Capital A/c (20,000 × 30) (Being equity shares allotment money due on 20,000 @ ₹ 30 per share)		6,00,000	6,00,000
(iii)	Equity Share First and Final Call A/c Dr. To Equity Share Capital A/c (20,000 × 30) (Being equity share on first and final call due on 20,000 @ ₹ 30 per share)		6,00,000	6,00,000

Dr.	Cash Book (Bank Column)						Cr.
Date	Particulars	J.F.	Amount(₹)(Dr.)	Date	Particulars	J.F.	Amount(₹)(Cr.)
	To Equity Share Application A/c		12,80,000		By Equity Share Application A/c		1,80,000
	To Equity Share Allotment A/c		3,00,000		(80,000 + 1,00,000)
	To Equity Share First and Final Call A/c		6,00,000		By Balance c/d		20,00,000
			21,80,000				21,80,000

Notes:

Entries related to money received against application, allotment and call are directly taken in cash book.

Working Note:

Applications received for 32,000 shares @ 40 each 12,80,000
Application for 2,000 shares rejected and amount (2,000 × 40) refunded (80,000)
12,00,000

10,000 shares alloted in full and amount transferred to share capital (10,000 × 40) (4,00,000)
8,00,000
20 shares alloted 10 shares hence amount for 10,000 shares adjusted to share capital (4,00,000)
(10,000 × 40) and excess 10,000 shares @ ₹30 taken as allotment advance remaining (3,00,000)
₹ 10 refunded for excess 10,000 shares (1,00,000)
Total redund (80,000 + 1,00,000) = 1,80,000
Total amount due on allotment (20,000 share @ 30) 6,00,000
(–) Amount received on application (3,00,000)
Amount to be received on allotment 3,00,000

Adjustment Table
Categories	Shares Application	Stores Allotment	Application Money Received	Application Money due	Excess	Excess Adjusted in
Categories	Shares Application	Stores Allotment	Application Money Received	Application Money due	Excess	Allotment	Calls	Return
(i)	2,000	—	80,000	—	80,000	—	—	80,000
(ii)	10,000	10,000	4,00,000	4,00,000	—	—	—
(iii)	20,000	10,000	8,00,000	4,00,000	4,00,000	3,00,000	—	1,00,000
	32,000	20,000	12,80,000	8,00,000	4,80,000	3,00,000		1,80,000

4. Rupak Ltd. issued 10,000 shares of ₹ 100 each payable ₹ 20 per share on application, ₹ 30 per share on allotment and balance in two calls of ₹ 25 per share. The application and allotment money were duly received. On first call all members paid their dues except one member holding 200 shares, while another member holding 500 shares paid for the balance due in full. Final call was not made. Give journal entries and prepare cash book.

Ans.

Journal Entries
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
(i)	Share Application A/c Dr To Share Capital A/c (10,000 × 20) (Being application money for ₹ 10,000 shares transferred to share capital account		2,00,000	2,00,000
(ii)	Share Allotment A/c Dr. To Share Capital A/c (10,000 × 30) (Being allotment money due on 10,000 shares @ ₹ 30 per share)		3,00,000	3,00,000
(iii)	Share First Call A/c Dr. To Share Capital A/c (10,000 × 25) (Being first call money due)		2,50,000	2,50,000
(iv)	Calls in Arears A/c (200 × 25) Dr. To Share First Call A/c (Being ₹ 25 not received on 200 shares)		5,000	5,000

Dr.	Cash Book (Bank Column)						Cr.
Date	Particulars	J.F.	Amount(₹)(Dr.)	Date	Particulars	J.F.	Amount(₹)(Cr.)
	To Share Application A/c		2,00,000
	To Share Allotment A/c		3,00,000
	To Share First Call A/c		2,45,000		By Balance c/d		7,57,500
	To Call in Advance A/c		12,500
			7,57,500				7,57,500

Working Note:

Money due on first call for 10,000 shares @ ₹ 25 each 2,50,000
(–) Calls-in arrears for 200 shares @ ₹ 25 per share (5,000)
Money received on first call 2,45,000
(+) Calls received in advance on 500 shares @ ₹ 25 per share 12,500
Total money received on first call 2,57,500

5. Mohit Glass Ltd. issued 20,000 shares of ₹ 100 each at ₹ 110 per share, payable ₹ 30 on application, ₹ 40 on allotment (including Premium), ₹ 20 on first call and ₹ 20 on final call. The applications were received for 24,000 shares and allotted 20,000 shares and rejected 4,000 shares and amount returned thereon. The money was duly received. Give journal entries.

Ans.

Journal Entries
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
(i)	Bank A/c (24,000 × 30) Dr. To Share Application A/c (Being application money received on application for 24,000 shares @ ₹ 30 per share)		7,20,000	7,20,000
(ii)	Share Application A/c Dr. To Share Capital A/c (20,000 × 30) To Bank A/c (4,000 × 30) (Being share application of 20,000 shares @ ₹ 30 transferred to share capital account and the balance returned)		7,20,000	6,00,000 1,20,000
(iii)	Share Allotment A/c Dr. To Share Capital A/c (20,000 × 30) To Securities Premium Reserve A/c (20,000 × 10) (Being allotment money due on 20,000 shares @ ₹ 40 per share including ₹ 10 for premium)		8,00,000	6,00,000 2,00,000
(iv)	Bank A/c (20,000 × 40) Dr. To Share Allotment A/c (Being allotment money received on 20,000 shares @ ₹ 40 per share)		8,00,000	8,00,000
(v)	Share First Call A/c Dr. To Share Capital A/c (20,000 × 20) (Being share first call money due on 20,000 shares @ ₹ 20 per share)		4,00,000	4,00,000
(vi)	Bank A/c (20,000 × 20) Dr. To Share First call A/c (Being share first call money received on 20,000 shares @ ₹ 20 per share)		4,00,000	4,00,000
(vii)	Share Final Call A/c Dr. To Share Capital A/c (20,000 × 20) (Being share first call money received on 20,000 shares @ ₹ 20 per share)		4,00,000	4,00,000
(viii)	Bank A/c (20,000 × 20) Dr. To Share Final Call A/c (Being share final call money received on 20,000 shares @ ₹ 20 per share)		4,00,000	4,00,000

6. A limited company offered for subscription of 1,00,000 equity shares of ₹ 10 each at a premium of ₹ 2 per share. 2,00,000, 10% Preference shares of ₹ 10 each at par.

The amount on share was payable as under:

The amount on share was payable as under

	Equity Shares	Preference Shares
On Applicaton	3 per share	3 per share
On Allotment	5 per share	4 per share
	(including a premium)
On First Call	4 per share	3 per share

All the shares were fully subscribed, called-up and paid.

Record these transactions in the journal and cash book of the company.

Ans.

Journal Entries
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
(i)	Equity Share Application A/c Dr. 10% Preference Share Application A/c Dr. To Equity Share Capital A/c (10,000 × 20) To 10% Preference Share Capital A/c (2,00,000 × 3) (Being application money transferred to equity share capital)		3,00,000 6,00,000	3,00,000 6,00,000
(ii)	Equity Share Allotment A/c Dr. 10% Preference Share Allotment A/c Dr. To Equity Share Capital A/c (1,00,000 × 3) To Securities Premium Reserve A/c (1,00,000 × 2) To 10% Preference Share Allotment A/c (2,00,000 × 4) (Being amount due on allotment)		5,00,000 8,00,000	3,00,000 2,00,000 8,00,000
(iii)	Equity Share First and Final Call A/c Dr. 10% Preference Share First and Final Call A/c Dr. To Equity Share Capital A/c (1,00,000 × 4) To 10% Preference Share Capital A/c (2,00,000 × 3) (Being amount on first and final call due)		4,00,000 6,00,000	4,00,000 6,00,000

Dr.	Cash Book (Bank Column)						Cr.
Date	Particulars	J.F.	Amount(₹)(Dr.)	Date	Particulars	J.F.	Amount(₹)(Cr.)
	To Equity Share Application A/c		3,00,000
	To 10% Preference Share Allotment A/c		6,00,000
	To Equity Share Allotment A/c		5,00,000				7,57,500
	To 10% Preference Share Allotment A/c		8,00,000
	To Equity Share First and Final Call A/c		4,00,000		By Balance c/d		32,00,000
	To 10% Preference Share First and Final Call A/c		6,00,000
			32,00,000				32,00,000

Note: Entries related to money received are directly taken in cash book. The entries for equity shares and preference shares can be made separately also.

7. Eastern Company Limited, with an authorised capital of ₹ 10,00,000 is divided into equity shares of ₹ 10 each, issued 50,000 shares at a premium of ₹ 3 per share payable as follows:

	(₹)
On Applicaton	3 per share
On Allotment (including premium)	5 per share
On First Call (due three months after allotment) and 3 per share the
balance as and when reqired.	3 per share

Applications were received for 60,000 shares and the directors allotted the shares as follows:

(a) Applicants for 40,000 shares received in full.

(b) Applicants for 15,000 shares received an allotment of 8,000 shares.

(c) Applicants for 5,000 shares received on allotment of 2,000 shares excess money being returned.

All amounts due on allotment were received. The first call was duly made and the money was received with the exception of the call due on 100 shares.

Give journal and cash book entries to record these transactions of the company. Also prepare the Balance Sheet of the company.

Ans.

Journal Entries
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
(i)	Share Application A/c Dr. To Share Capital A/c (50,000 × 3) To Share Allotment A/c (Working Note) To Bank A/c (Being share application money for 50,000 shares transferred to share capital account and the excess money transferred to share allotment account)		1,80,000	1,50,000 21,000 9,000
(ii)	Share Allotment A/c (50,000 × 5) Dr. To Share Capital A/c (50,000 × 2) To Securities Premium Reserve A/c (50,000 × 3) (Being allotment money due on 50,000 shares @ ₹ 5 per share including ₹ 3 security premium)		2,50,000	1,00,000 1,50,000
(iii)	Share First Call A/c Dr. To Share Capital A/c (Being first call due on 50,000 share @ ₹ 3 per share)		1,50,000	1,50,000
(iv)	Calls in arrear A/c (100 × 3) Dr. To Share First Call A/c (Being call-in-arrears on 100 share @ ₹ 3 per share)		300	300

Dr.	Cash Book (Bank Column)						Cr.
Date	Particulars	J.F.	Amount(₹)(Dr.)	Date	Particulars	J.F.	Amount(₹)(Cr.)
	To Share Application (60,000 × 3)A/c		1,80,000		By Share Application A/c		9,000
	To Share Allotment (Working Note) A/c		2,29,000		By Balance c/d		5,49,700
	To Share First Call (49,900 × 3) A/c		1,49,700
			5,58,700			5,58,700

Balance Sheet
Particulars	Note	Details (₹)	Amount(₹)
I. Equity and Liabilities Shareholders Funds
(a) Share Capita		1	3,99,700
(b) Reserve and Surplus		2	1,50,000
	Total		5,49,700
II. Assets
Current Assets
Cash at Bank		3	5,49,700
	Total		5,49,700

Particulars	Amount(₹)
1. Share Capital Authorised Capital Issue and Subscribed Capital Called up and Paid-up 50,000 shares of 10 each 8 Called-up 4,00,000 (–) Share First Call (Calls-in-Arrears) (300)	3,99,700
2. Reserve and Surplus Securities Premium Reserve	1,50,000
3. Cash and Bank Balance Cash at Bank
	5,49,700

Note: In category C, 500 and 200 shares should be read as 5,000 and 2,000

Working Note:

(i) Amount Transferred to Share Capital on Application

Category A 40,000 × 3 = 1,20,000
Category B 8,000 × 3 = 24,000
Category C 2,000 × 3 = 6,000
₹ 1,50,000

(ii) Amount Transferred to Share Allotment on Application Category B excess shares 7,000 × 3 = 21,000

(iii) Amount Received on Allotment

	Due	Advance	Received
Category A	40,000×5	-	2,00,000
	₹2,00,000
Category B	8,000×5	21,000	19,000
	₹40,000
Category C	2,000×5		10,000
	₹10,000		2,29,000

8. Sumit Machine Ltd issued 50,000 shares of ₹100 each at Premium of 5%. The shares were payable ₹25 on application, ₹50 on allotment and ₹30 on first and final call. The issue were fully subscribed and money was duly received except the final call on 400 shares. The discount was adjusted on allotment. Give journal entries and prepare balance sheet.

Ans.

	Journal Entries
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
(i)	Bank A/c (50,000 × 25) Dr.		12,50,000
	To Share Application A/c (Application money received)			12,50,000
(ii)	Share Application A/c Dr.		12,50,000
	To Share Capital A/c (Application money transferred to capital A/c)			12,50,000
(iii)	Share Allotment A/c		25,00,000
	To Share Capital A/c			22,50,000
	To Securities Premium Reserve A/c (Allotment money due)			2,50,000
(iv)	Bank A/c Dr.		25,00,000
	To Share Allotment A/c (Allotment money received)			25,00,000
(v)	Share First and Final Call A/c Dr.		15,00,000
	To Share Capital A/c (Call money due)			15,00,000
(vi)	Bank A/c Dr.		14,88,000
	Calls in arrears A/c Dr.		12,000
	To Share First and Final call A/c (Call money received)			15,00,000

Balance Sheet
Particulars	Note	Amount(₹)
I. Equity and Liabilities (i) Shareholders Funds
(a) Share Capital	1	49,88,000
(b) Reserve and Surplus	2	2,50,000
Total		52,38,000
II. Assets (ii) Current Assets
(a) Cash and Cash Equivalents	3	52,38,000
Total		52,38,000

Notes to accounts
Particulars	Amount(₹)
I. Share Capital Authorised Capital ______Shares of _____each Issued Capital 50,000 Shares @ ₹100 each	50,00,000
Subscribed and Paid up 50,000 Shares of ₹100 each 50,00,000 Less: Calls in arrears (12,000)	49,88,000
II. Reserves and Surplus Securities Premium Reserve	2,50,000
III. Cash and Cash equivalents Cash at Bank	52,38,000

9. Kumar Ltd. purchased assets of ₹6,30,000 from Bhanu Oil Ltd. Kumar Ltd. issued equity share of ₹100 each fully paid in consideration. What journal entries will be made, if the share are issued, (a) at par, at premium of 20%.

Ans.

	Journal Entries
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
(i)	Sundry Assets A/c Dr.		6,30,000
	To Bhanu Oil Ltd. A/c (Being assets purchased from Bhanu Oil Ltd.)			6,30,000
(ii)	Bhanu Oil Ltd. A/c Dr.		6,30,000
	To Share Capital A/c (6,300 × 100) (Being 6,300 shares issued at par to Bhanu Ltd.)			6,30,000

Working Note: Case (i) Number of Shares to be issued

$$=\frac{Amount\space payable}{Face\space value\space per\space share}$$

$$=\frac{6,30,000}{100}=6,300\space shares$$

Case (ii)

$$=\frac{6,30,000}{120}=5,250\space shares$$

Journal Entries
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
(i)	Sundry Assets A/c Dr.		6,30,000
	To Bhanu Oil Ltd. A/c			6,30,000
(ii)	Bhanu Oil Ltd. A/c Dr.		6,30,000
	To Share Capital A/c (6,300 × 100)			5,25,000
	To Securities Premium Reserve A/c (Being 5,250 shares are issued at 20% premium to Bhanu Ltd in consideration of assets purchased)			1,05,000

10. Bansal Heavy machine Ltd purchased machine worth ₹3,80,000 from Handa Trader. Payment was made as ₹50,000 cash and remaining amount by issue of equity share of the face value of ₹100 each fully paid at an issue price of ₹110 each. Give journal entries to record the above transaction.

Ans.

	Journal Entries
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
	Machinery A/c Dr.		3,80,000
	To Cash A/c			50,000
	To Handa Traders A/c (Being machine purchased from Handa Traders paid ₹50,000 in cash immediately)			3,30,000
	Handa Traders A/c Dr.		3,30,000
	To Share Capital A/c (3,000 × 100)			3,00,000
	To Securities Premium Reserve A/c (Being 3,000 share issued at ₹110, face value of ₹100 each to Handa Traders in consideration of amount due to him for machinery purchased)			3,00,00

Working Note: Number of equity shares to be issued

$$=\frac{Amount\space payable}{Face\space value\space (per\space share)}=\frac{3,30,000}{110}=3,000\space shares$$

11. Naman Ltd issued 20,000 shares of ₹100 each, payable ₹25 on application, ₹30 on allotment , ₹25 on first call and The balance on final call. All money duly received except Anubha, who holding 200 shares did not pay allotment and calls money and Kumkum, who holding 100 shares did not pay both the calls. The directors forfeited the shares of Anubha and kumkum. Give journal entries.

Ans.

	Journal Entries
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
(i)	Bank A/c Dr.		5,00,000
	To Share Application A/c (Being shares application money received for 20,000 shares @ ₹25 each)			5,00,000
(ii)	Share Application A/c Dr.		5,00,000
	To Share Capital A/c (Being share application money of 20,000 shares @ `25 each transferred to share capital account)			5,00,000
(iii)	Share Allotment A/c Dr.		6,00,000
	To Share Capital A/c (Being share allotment money due on 20,000 shares @ `30 per share)			6,00,000
(iv)	Bank A/c (19,800 × 30) Dr.		5,94,000
	Calls-in-Arrears A/c		6,000
	To Share Allotment A/c (Being allotment money received on 19,800 shares @ ₹30 per share and 200 shares failed to pay the allotment)		6,00,000
(v)	Share First Call A/c Dr.		5,00,000
	To Share Capital A/c (Being share first call money due on 20,000 shares @ `25 per share)			5,00,000
(vi)	Bank A/c (19,700 × 25) Dr.		4,92,500
	Calls-in-Arrears A/c (300 × 25)		7,500
	To Share First call A/c (Being share first call money for 19,700 shares @ ₹25 each received except 300 shares)			5,00,000
(vii)	Share Final Call A/c Dr.		4,00,000
	To Share Capital A/c			4,00,000
	(Being share final call money due on 20,000 shares @ ₹20 per share)
(viii)	Bank A/c (19,700 × 20) Dr.		3,94,000
	Calls-in-Arrears A/c (300 × 20)		6,000
	(Being share final call money received for 19,700 shares @ `20 per share except 300 shares)
(ix)	Share Capital A/c (200 × 100) + (100 × 100) Dr.		30,000
	To Share Forfeiture A/c (Working Note)			10,500
	To Calls-in-Arrears A/c (Working Note) (6,000 + 7,000 + 6,000) (Being 300 shares forfeited on account failed to pay the money due)			19,500

Working Note:

Share forfeiture amount

Received application money on (200 + 100)

Shares @ 25 each = 7,500
Received allotment money on 100 shares @ 30 each = 3,000

₹10,500

Calls-in-Arrears
On Allotment = 6,000
On First Call = 7,500
On Final Call = 6,000
₹19,500

12. Kishna Ltd issued 15,000 shares of ₹100 each at a premium of ₹10 per share, payable as follows:
(₹)
On Application 30
On Allotment 50 (including premium)
On First and Final Call 30

All the shares subscribed and the company received all the money due, With the exception of the allotment and call money on 150 shares. These shares were forfeited and reissued to Neha as fully paid share at on issue price of ₹120 each.

Give journal entries in the books of the company.

Ans.

	Journal Entries
Date	Particulars	L.F.	Amount(₹)(Dr.)	Amount(₹)(Cr.)
(i)	Bank A/c Dr.		4,50,000
	To Share Application A/c (Being share application money received for 15,000 shares @ ₹30 per share)			4,50,000
(ii)	Share Application A/c Dr.		4,50,000
	To Share Capital A/c (15,000 × 30) (Being shares application money of 15,000 shares transferred to share capital account)			4,50,000
(iii)	Share Allotment A/c Dr.		7,50,000
	To Share Capital A/c (15,000 × 40)			6,00,000
	To Securities Premium Reserve A/c (15,000 × 10) (Being share allotment money on 15,000 shares @ ₹50 per share including ₹10 securities premium due)			1,50,000
(iv)	Bank A/c (14,850 × 50) Dr.		7,42,500
	Calls-in-Arrears A/c (150 × 50) Dr.		7,500
	To Share First Call A/c (Being shares allotment received on 14,850 shares and 150 shares failed to pay the money due)			7,50,000
(v)	Share First and Final Call A/c Dr.		4,50,000
	To Share Capital A/c (Being share first and final call for 15,000 shares @ ₹30 per share due)			4,50,000
(vi)	Bank A/c (14,850 × 30) Dr.		4,45,500
	Calls-in-Arrears A/c (150 × 30) Dr.		4,500
	To Share First and Final call A/c (Being share first and final call received for 14,850 shares @ ₹30 per share and 150 shares failed to pay amount due)			4,50,000
(vii)	Share Capital A/c (150 × 100) Dr.		15,000
	Securities Premium Reserve A/c (150 × 10) Dr		1,500
	To Calls-in-Arrears A/c (150 × 80)			12,000
	To Share Forfeiture A/c (150 × 30) (Being 150 share forfeited for non-payment of share allotment and share first and final call)			4,500
(viii)	Bank A/c Dr.		18,000
	To Share Capital A/c (150 × 100)			15,000
	To Securities Premium A/c (150 × 20) (Being 150 shares of ₹100 each reissued @ ₹120 to Neha)			3,000
(ix)	Share Forfeiture A/c Dr.		4,500
	To Capital Reserve A/c (Being balance of share forfeiture account transferred to capital reserve account)			4,500

13. Arushi Computers Ltd issued 10,000 equity shares of ₹100 each at 10% premium. The net amount payable as follows:

	(₹)
On Application	20
On Allotment	50 (₹40 + Premium ₹10)
On First call	30 + 10
On Final call	10

A shareholder holding 200 shares did not pay final call. His shares were forfeited. Out of these 150 shares were reissued to Ms.Sonia at ₹75 per shares. Give journal entries in the books of the company.

Ans.

Journal Entries

Date	Particulars		L.F.	Amount (₹)	Amount (₹)
(i)	Bank A/c (10,000 × 20)	Dr.		2,00,000
	To Share Application A/c				2,00,000
	(Being share application money received for 10,000 shares @ ₹20 per share)
(ii)	Share Application A/c	Dr.		2,00,000
	To Share Capital A/c (10,000 × 20)				2,00,000
	(Being shares application money of 10,000 shares transferred to share capital account)
(iii)	Share Allotment A/c (10,000 × 50)	Dr.		5,00,000
	To Share Capital A/c (10,000 × 40)				4,00,000
	To Securities Premium Reserve A/c				1,00,000
	(Being allotment money due on 10,000 shares @ ₹50 per share including premium of ₹10)
(iv)	Bank A/c	Dr.		5,00,000
	To Share Allotment A/c				5,00,000
	(Being shares allotment money received for 10,000 shares @ 50 per share)
(v)	Share First Call A/c	Dr.		3,00,000
	To Share Capital A/c (10,000 × 30)				3,00,000
	(Being share first call money due on 10,000 shares @ ₹30 per share due)
(vi)	Bank A/c (10,000 × 30)	Dr.		3,00,000
	To Share First Call A/c				3,00,000
	(Being final call money received for 10,000 shares @ ₹30 per share)
(vii)	Share Final Call A/c	Dr.		1,00,000
	To Share Capital A/c (10,000 × 10)				1,00,000
	(Being final call money due on 10,000 shares @ ₹10 per share)
(viii)	Bank A/c (9,800 × 10)	Dr.		98,000
	Call-in-Arrears A/c (200 × 10)	Dr.		2,000
	To Share Final Call A/c				1,00,000
	(Being final call money received for 9,800 shares @ ₹10 per share and 200 shares failed to pay)
(ix)	Share Capital A/c (200 × 100)	Dr.		20,000
	To Call-in-Arrears A/c (200 × 10)				2,000
	To Share Forfeiture A/c (200 × 90)				18,000
	(Being 200 shares forfeited for non-payment of final call @ ₹10 per share)
(x)	Bank A/c (150 × 75)	Dr.		11,250
	Share Forfeiture A/c (150 × 25)	Dr.		3,750
	To Share Capital A/c (150 × 100)				15,000
	(Being 150 forfeited shares resisued at ₹100 per share for ₹75)
(xi)	Share Forfeiture A/c	Dr.		9,750
	To Capital Reserve A/c (Working Note)				9,750
	(Being balance of 150 reissue share after adjustment transferred to capital reserve account)

Working Note:

Calculation of capital reserve

Amount transferred to share forfeiture on 150 shares

= 150 × 90 = 13,500

Less: Amount used on reissue of 150 shares (150 × 25) = 3,750

Amount transferred to capital reserve = 9,750

14. Raunak Cotton Ltd. issued a prospectus inviting applications for 6,000 equity shares of ₹100 each at a premium of ₹20 per shares, payable as follows:

	(₹)
On Application	20
On Allotment	50 (including premium)
On First and Final Call	30 + 20

Applications were received for 10,000 shares and allotment was made Pro-rata to the applicants of 8,000 shares, the remaining applications being refused. Money received in excess on the application was adjusted toward the amount due on allotment.Rohit, to whom 300 shares were allotted failed to pay allotment and calls money, his shares were forfeited Itika, who applied for 600 shares, failed to pay the two calls and her share were also forfeited. All these shares were sold to Kartika as fully paid for `80 per share. Give journal entries in the books of the company.

Ans.

Journal Entries

Date	Particulars		L.F.	Amount (₹)	Amount (₹)
(i)	Bank A/c (10,000 × 20)	Dr.		2,00,000
	To Share Application A/c				2,00,000
	(Being share application money received on 10,000 shares)
(ii)	Share Application A/c	Dr.		2,00,000
	To Share Capital A/c (6,000 × 20)				1,20,000
	To Share Allotment A/c (2,000 × 20)				40,000
	To Bank A/c (2,000 × 20)				40,000
	(Being shares application money adjusted)
(iii)	Share Allotment A/c	Dr.		3,00,000
	To Share Capital A/c (6,000 × 30)				1,80,000
	To Securities Premium Reserve A/c (6,000 × 20)				1,20,000
	(Being share allotment money due)
(iv)	Bank A/c	Dr.		2,47,000
	Calls-in-Arrears A/c (Working Note)	Dr.		13,000
	To Share Allotment A/c				2,60,000
	(Being shares allotment money received except 300 shares)
(v)	Share First Call A/c	Dr.		1,80,000
	To Share Capital A/c (6,000 × 30)				1,80,000
	(Being share first call money due)
(vi)	Bank A/c	Dr.		1,57,500
	Call-in-Arrears A/c (300 × 30) × (450 × 30)	Dr.		22,500
	To Share First Call A/c				1,80,000
	(Being share first call money received except on 750 share)(300 + 450 shares)
(vii)	Share Final Call A/c	Dr.		1,20,000
	To Share Capital A/c (6,000 × 20)				1,20,000
	(Being share final call money is due)
(viii)	Bank A/c (5,250 × 20)	Dr.		1,05,000
	Call-in-Arrears A/c (750 × 20)	Dr.		15,000
	To Share Final Call A/c				15,000
	(Being share final call money received except 750 shares)
(ix)	Share Capital A/c (300 × 100)	Dr.		30,000
	Securities Premium Reserve A/c			6,000
	To Call in Arrears A/c (13,000 + 15,000)				28,000
	To Share Forfeiture A/c				8,000
	(Being forfeited of Rohit shares)
(x)	Share Capital A/c	Dr.		45,000
	To Calls in Arrears A/c				22,500
	To Share forfeiture A/c				22,500
	(Being forfeiture shares)
(xi)	Bank A/c (750 × 80)	Dr.		60,000
	Share Forfeiture A/c (750 × 20)	Dr.		15,000
	To Share Capital A/c				75,000
	(Being forfeited shares reissued @ 80 per share)
(xii)	Share Forfeiture A/c	Dr.		15,500
	To Capital Reserve A/c (working Note)				15,500
	(Being share forfeiture account transferred capital reserve)

Working Note:

Calculation of shares applied by Rohit

$$=\frac{\text{Total number of shares applied}}{\text{Total number of shares alloteed}}×\text{Shares allotted to applicant}\\=\frac{8,000}{6,000}×300=400\space\text{shares applied}$$

Calculation of shares allotted to ltika

$$=\frac{\text{Total number of shares alloted}}{\text{Total number of shares applieed}}×\text{Shares applied by applicant}\\=\frac{6,000}{8,000}×600=450\space\text{shares alloted}$$

Treatment of Amount Received from Rohit and his Arrears	Amt. (₹)
Amount received on application (400 × 20)	8,000
(–) Adjusted to share capital (300 × 20)	6,000
Advance for allotment	2,000
Amount due on Allotment (300 × 50)	15,000
(–) Advance received	2,000
Arrear on Allotment	13,000
Amount due on First Call (300 × 30)
Full amounts becomes Arrear on First Call	9,000
Amount due on Final Call (300 × 20) full amount becomes Arrear
on Final Call	6,000
Treatment of Amount as Arrear from ltika
Amount due on First Call (450 × 30)
Full amount becomes Arrear on First Call	13,500
Amount due on Final Call (450 × 20)
Full amount becomes Arrear on Final Call	9,000
Capital Reserve
Amount transferred to forfeiture for 750 Share	30,500
(–) Amount adjusted on reissue of 750 Shares	(15,000)
Amount transferred on Capital Reserve	15,500
Amount Transferred to Forfeiture Account	(₹)
Rohit	8,000
Itika (12,000 + 10,500)	22,500
	30,500
Note: Amount received as premium is not taken

15. Himalaya Company Limited issued for public subscription of 1,20,000 equity shares of ₹10 each at a premium of ₹2 per share payable as under:

With Application	3 per share
On Allotment (including premium)	5 per share
On First Call	2 per share
On Second and Final Call	2 per share

Applications were received for 1,60,000 shares. Allotment was made on pro-rata basis. Excess money on application was adjusted against the amount due on allotment.

Rohan, whom 4,800 shares were allotted, failed to pay for the two calls. These shares were subsequently forfeited after the second call was made. All the shares forfeited were reissued to Teena as fully paid at ₹7 per share.

Record journal entries and share the transactions relating to share capital in company’s balance sheet.

Ans.

Journal Entries

Date	Particulars		L.F.	Amount (₹)	Amount (₹)
(i)	Bank A/c (16,0000 × 3)	Dr.		4,80,000
	To Share Application A/c				4,80,000
	(Being share application money received for 1,60,000 shares @ ₹3 per share)
(ii)	Share Application A/c	Dr.		4,80,000
	To Equity Share Capital A/c (1,20,000 × 3)				3,60,000
	To Share Allotment A/c (40,000 × 3)				1,20,000
	(Being shares application for 1,20,000 shares @₹3 per share transferred to share capital account and remaining amount adjusted to allotment)
(iii)	Share Allotment A/c	Dr.		6,00,000
	To Equity Share Capital A/c (1,20,000 × 3)				3,60,000
	To Securities Premium Reserve A/c (1,20,000 × 2)				2,40,000
	(Being share allotment money due on 1,20,000 shares @ ₹5 per share including ₹2 securities premium)
(iv)	Bank A/c (Working Note)	Dr.		4,80,000
	To Share Allotment A/c				4,80,000
	(Being shares allotment for 1,20,000 shares @ ₹5 per share received)
(v)	Share First Call A/c	Dr.		2,40,000
	To Equity Share Capital A/c (1,20,000 × 2)				2,40,000
	(Being share first call due on 1,20,000 shares @ ₹2 per share)
(vi)	Bank A/c	Dr.		2,30,400
	Calls-in-Arrear A/c (4,800 × 2)	Dr.		9,600
	To Share First Call A/c				2,40,000
	(Being share first call received on 1,15,200 shares @ ₹2 per share and 4,800 shares failed to pay)
(vii)	Share Final Call A/c	Dr.		2,40,000
	To Equity Share Capital A/c (1,20,000 × 2)				2,40,000
	(Being share final call due on 1,20,000 shares @ ₹2 per share)
(viii)	Bank A/c	Dr.		2,30,400
	Call-in-Arrears A/c	Dr.		9,600
	To Share Final Call A/c				2,40,000
	(Being share final call received on 1,15,200 shares @ ₹2 per share and 4,800 shares failed to pay)
(ix)	Equity Share Capital A/c (4,800 × 10)	Dr.		48,000
	To Call-in-Arrears A/c				19,200
	To Share Forfeiture A/c (4,800 × 6) (Working Note ii)				28,800
	(Being 4,800 shares forfeited for non-payment of first call and final call)
(x)	Bank A/c (4,800 × 7)	Dr.		33,600
	Share Forfeiture A/c (4,800 × 3)	Dr.		14,400
	To Equity Share Capital A/c				48,000
	(Being 4,800 share resisued @ ₹7 per share fully paid-up)
(xi)	Share Forfeiture A/c	Dr.		14,400
	To Capital Reserve A/c (Working Note)				14,400
	(Being share forfeiture balance of 4,800 shares transferred to capital reserve account)

Balance Sheet

Particulars		Note	Amount (₹)
I. Equity and Liabilities
(i) Shareholders Funds
(a) Share Capital		1	12,00,000
(b) Reserve and Surplus		2	2,54,400
	Total		14,54,400
II. Assets
(ii) Current Assets
(a) Cash and Cash Equivalents		3	14,54,400
	Total		14,54,400

Notes to accounts

Particulars	Amount (₹)
I. Share Capital
Authorised Capital
______Shares of ₹_____each	—
Issued Capital	—
1,20,000 Shares @ ₹10 each
Subscribed Capital
(a) Subscribed and fully paid up
1,20,000 shares of ₹10 each	12,00,000
II. Reserves and Surplus
Securities Premium Reserve	2,40,000
Capital Reserve	14,400
III. Cash and Cash equivalents
Cash at Bank	14,54,400

Working Note: (i) On Allotment Money Due

		(₹)
1,20,000 × 5	=	6,00,000
(–) Money advanced on application	=	(1,20,000)
Money received on allotment	=	4,80,000

(ii) Amount of Share Forfeiture includes ₹3 of Application and ₹3 of

Allotment on 4,800 shares i.e., 4,800 × 6 = ₹28,800

Amount of premium received is never taken to forteiture account

(iii) Capital Reserve	(₹)
Amount transferred to share forfeiture	28,800
(–) Amount adjusted on reissue of share forfeited transferred to capital reserve	14,400
	14,400

16. Prince Limited issued a prospectus inviting applications for 20,000 equity shares of ₹10 each at a premium of ₹3 per share payable as follows:

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

Applications were received for 30,000 shares and allotment was made on prorata 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 ₹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.

Ans.

Journal Entries

Date	Particulars		L.F.	Amount (₹)	Amount (₹)
(i)	Bank A/c (30,000 × 2)	Dr.		60,000
	To Share Application A/c				60,000
	(Being share application money received for 3,00,000 shares @ ₹2 per share)
(ii)	Share Application A/c	Dr.		60,000
	To Share Capital A/c (20,000 × 2)				40,000
	To Share Allotment A/c (10,000 × 2)				20,000
	(Being shares application for 20,000 shares @₹2 per share transferred to share capital and the balance adjusted on allotment)
(iii)	Share Allotment A/c	Dr.		1,00,000
	To Share Capital A/c (20,000 × 2)				40,000
	To Securities Premium Reserve A/c (20,000 × 3)				60,000
	(Being allotment money due on 20,000 shares @ ₹5 per share including ₹3 securities premium)
(iv)	Bank A/c (Working Note)	Dr.		78,400
	Calls-in-Arrears A/c	Dr.		1,600
	To Share Allotment A/c				80,000
	(Being allotment money received)
(v)	Share First Call A/c	Dr.		60,000
	To Share Capital A/c (20,000 × 3)				60,000
	(Being share first call due on 20,000 shares @ ₹3 per share)
(vi)	Bank A/c	Dr.		57,000
	Calls-in-Arrears A/c (400 × 3) + (600 × 3)	Dr.		3,000
	To Share First Call A/c				60,000
	(Being first call money received except 1,000 (400 + 600) shares of Mohit and Joly respectively)
(vii)	Share Capital A/c (7 × 400)	Dr.		2,800
	Share Premium A/c (3 × 400)	Dr.		1,200
	To Calls-in-Arrears A/c				2,800
	To Share Forfeiture A/c (Working Note ii)				1,200
	(Being 400 share forfeited after first call)
(viii)	Share Final Call A/c	Dr.		58,800
	To Share Capital A/c (19,600 × 3)				58,800
	(Being final call money due on 19,600 shares @ ₹3 per share)
(ix)	Bank A/c	Dr.		57,000
	Calls-in-Arears A/c (600 × 3)	Dr.		1,800
	To Share Second and Final call A/c				58,800
	(Being second and final call money received except 600 shares)
(x)	Share Capital A/c (600 × 10)	Dr.		6,000
	To Calls-in-Arears A/c	Dr.			3,600
	To Share Forfeiture A/c (600 × 4)				2,400
	(Being 600 share forfeited)
(xi)	Bank A/c (800 × 9)	Dr.		7,200
	Share Forfeiture A/c (800 × 1)	Dr.		800
	To Share Capital A/c				8,000
	(Being share reissued)
(xii)	Share Forfeiture A/c	Dr.		2,000
	To Capital Reserve A/c (Working Note iii)				2,000
	(Being balance of share forfeiture account transfered to capital reserve account)

Balance Sheet

Particulars		Note	Amount (₹)
I. Equity and Liabilities
(i) Shareholders Funds
(a) Share Capital		1	1,98,800
(b) Reserve and Surplus		2	60,800
	Total		2,59,600
II. Assets
(ii) Current Assets
(a) Cash and Cash Equivalents		3	2,59,600
	Total		2,59,600

Notes to accounts

Particulars		Amount (₹)
I. Share Capital
Authorised Capital
______Shares of ₹10 each		—
Issued Capital
20,000 Shares @ ₹10 each		2,00,000
Subscribed Capital		2,00,000
(a) Subscribed and fully paid up
19,800 shares of ₹10 each		1,98,000
Add: Forfeited Amount		800
	Total	1,98,800
II. Reserves and Surplus
Securities Premium Reserve		58,800
Capital Reserve		2,000
III. Cash and Cash equivalents
Cash at Bank		2,59,600

Working Note:

(i) Mohits Arrear on Allotment

$$\text{Shares applied by Mohit =}\frac{3,00,000}{2,00,000}×400\\=600\space\text{shares}$$

Amount received on application 600 × 2	= ₹1,200
(–) Amount transferred to capital on application 400 × 2	= (800)
Advance of allotment received on application	= 400
Mohit’s money due on allotment 400 × 5	= 2,000
(–) Amount advance on application for allotment	= 400
Mohit’s arrear on allotment	= 1,600
Total amount due on allotment	= 1,00,000
(–) Received on application as advance	(20,000)
	80,000
(–) Mohit arrear	(1,600)
Money received on allotment	78,400

(ii) Amount Transferred to Share Forfeiture Account on Forfeiture of Mohit’s Shares

Money received on 600 shares @₹2 per application

(iii) Calculation of Capital Reserve

Money transferred to share forfeiture on 400 share of Mohit	= 1,200
Money transferred to shares forfeiture on 400 shares of Jolly $$\bigg(\frac{2,400}{600}×400\bigg)$$	=1,600
Total	2,800
Less: Money used in reissue	(800)
Money transferred to capital reserve	2,000

17. Life machine tools Limited, issued 50,000 equity shares of ₹10 each at ₹12 per share, payable at to ₹5 on application (including premium), ₹4 on allotment and the balance on the first and final call.

Applications for 70,000 shares had been received. Of the cash received, ₹40,000 was returned and ₹60,000 was applied to the amount due on allotment. All shareholders paid the call due, with the exception of one share holder of 500 shares. These shares were forfeited and reissued as fully paid at ₹8 per share. Journalise the transactions.

Ans.

Journal Entries

Date	Particulars		L.F.	Amount (₹)	Amount (₹)
(i)	Bank A/c (70,000 × 5)	Dr.		3,50,000
	To Equity Share Application A/c				3,50,000
	(Being application money received on application for 70,000 shares @ ₹5 per share including premium ₹2)
(ii)	Equity Share Application A/c	Dr.		3,50,000
	To Equity Share Capital A/c (50,000 × 3)				1,50,000
	To Securities Premium Reserve A/c (50,000 × 2)				1,00,000
	To Share Allotment A/c				60,000
	To Bank A/c				40,000
	(Being shares application for 50,000 shares transferred to share capital account and securities premium, ₹60,000 adjusted to allotment and @ ₹40,000 returned)
(iii)	Equity Share Allotment A/c	Dr.		2,00,000
	To Equity Share Capital A/c (50,000 × 4)				2,00,000
	(Being share allotment money due on 50,000 shares @₹4 per share)
(iv)	Bank A/c (2,00,000 – 60,000)	Dr.		1,40,000
	To Equity Share Allotment A/c				1,40,000
	(Being share allotment money received on shares allotment)
(v)	Equity Share First and Final Call A/c	Dr.		1,50,000
	To Equity Share Capital A/c (50,000 × 3)				1,50,000
	(Being share first call and final call money due on 50,000 shares @ ₹3 per share)
(vi)	Bank A/c (49,500 × 3)	Dr.		1,48,500
	Calls-in-Arrear A/c (500 × 3)	Dr.		1,500
	To Equity Share First and Final Call A/c				1,50,000
	(Being share first and final call money received from 49,500 shares @ ₹3 per shares and 500 shares failed to pay)
(vii)	Equity Share Capital A/c (500 × 10)	Dr.		5,000
	To Calls-in-Arrears A/c (500 × 3)				1,500
	To Share Forfeiture A/c (500 × 7)				3,500
	(Being 500 share @ ₹10 per share fully paid up forfeited for the non-payment of share first and final call ₹3 per share)
(viii)	Bank A/c (500 × 8)	Dr.		4,000
	Share Forfeiture A/c (500 × 2)			1,000
	To Equity Share Capital A/c				5,000
	(Being 500 shares reissued @ ₹8 per share fully paid up)
(ix)	Share Forfeiture A/c (3,500 – 1,000)	Dr.		2,500
	To Capital Reserve A/c				2,500
	(Being balance of 500 shares in forfeiture account after adjustment, transferred to capital reserve account)

18. The Orient Company Limited offered for public subscription 20,000 equity shares of ₹10 each at a premium of 10% payable at ₹2 on application; ₹4 on allotment including premium; ₹3 on First Call and ₹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 reissued as fully paid at ₹9 per share. Give journal entries and prepare the balance sheet

Ans.

Journal Entries

Date	Particulars		L.F.	Amount (₹)	Amount (₹)
(i)	Bank A/c (26,000 × 2)	Dr.		52,000
	To Share Application A/c				52,000
	(Being share application money received for 26,000 shares @ ₹2 per share)
(ii)	Share Application A/c	Dr.		52,000
	To Share Capital A/c (20,000 × 2)				52,000
	To Share Allotment A/c (2,000 × 2)				4,000
	To Bank A/c (4,000 × 2)				8,000
	(Being application money @₹2 per share of 20,000 shares transferred to share capital account and money of 4,000 shares returned, remaining to share allotment)
(iii)	Share Allotment A/c (20,000 × 4)	Dr.		80,000
	To Share Capital A/c (20,000 × 3)				60,000
	To Securities Premium Reserve A/c (20,000 × 1)				20,000
	(Being share allotment money due on 20,000 shares @ ₹4 per share including ₹1 securities premium)
(iv)	Bank A/c	Dr.		76,000
	To Share Allotment A/c				76,000
	(Being share allotment money received for all the shares after adjustment of money transferred from share application)
(v)	Share First Call A/c	Dr.		60,000
	To Share Capital A/c (20,000 × 3)				60,000
	(Being share first call money due on 20,000 share @ ₹2 per share)
(vi)	Bank A/c (20,000 × 3)	Dr.		60,000
	To Share First Call A/c				60,000
	(Being share first call received for 20,000 shares @ ₹2 per share)
(viii)	Bank A/c (9,500 × 2)	Dr.		39,000
	Calls-in-Arrears A/c (500 × 2)	Dr.		1,000
	To Share Second and Final Call A/c				40,000
	(Being share second and final call money received for 19,500 shares @ ₹2 per share 500 shares failed to pay)
(ix)	Share Capital A/c (500 × 10)	Dr.		5,000
	Calls-in-Arears A/c	Dr.			1,000
	To Share Forfeiture A/c (500 × 8)				4,000
	(Being 500 shares of ₹10 per share fully called-up forfeited for non-payment of second and final call ₹2 per share)
(x)	Bank A/c (300 × 9)	Dr.		2,700
	Share Forfeiture A/c (300 × 1)	Dr.		300
	To Share Capital A/c (300 × 10)				3000
	(Being 300 share @ 10 each reissued for 9 per share fully paid-up)
(xi)	Share Forfeiture A/c (Working Note)	Dr.		2,100
	To Capital Reserve A/c				2,100
	(Being balance of 300 shares in share forfeiture account transferred to capital reserve account after adjustment)

Balance Sheet

Particulars		Note	Amount (₹)
I. Equity and Liabilities
(i) Shareholders Funds
(a) Share Capital		1	1,99,600
(b) Reserve and Surplus	2		22,100
II. Assets
(ii) Current Assets
(a) Cash and Cash Equivalents		3	2,21,700
		Total	2,21,700

Notes to accounts

Particulars		Amount (₹)
I. Share Capital
Authorised Capital
______Shares of ₹10 each		—
Issued Capital
20,000 Shares @ ₹10 each		2,00,000
Subscribed Capital
(a) Subscribed and fully paid up
19,800 shares of ₹10 each		1,98,000
Add: Forfeited Amount not transferred to capital reserve		1,600
	Total	1,99,600
II. Reserves and Surplus
Securities Premium Reserve		20,000
Capital Reserve		2,100
III. Cash and Cash equivalents
Cash at Bank		2,21,700

Working Note: (i) On Allotment Money Due

Calculation of Capital Reserve

Money transferred to share forfeiture against forfeiture of 300 shares (300 × 8)	2,400
(–) Money adjusted on reissue of 300 shares from forfeiture account (300 × 1)	300
Amount transferred to Capital Reserve	₹2,100

19. Alfa Limited invited applications for 4,00,000 of its equity shares of ₹10 each on the following terms:

	(₹)
Payable on Application	5 per share
Payable on Allotment	3 per share
Payable on First and Final Call	2 per share

Applications for 5,00,000 shares were received. It was decided :

(a) to refuse allotment to the applicants for 20,000 shares;

(b) to allot in full to applicants for 80,000 shares;

(c) to allot the balance of the available shares’ pro-rata among the other applicants; and

(d) to utilise excess application money in part as payment of allotment money.
One applicant, whom shares had been allotted on prorata basis, did not pay the amount due on allotment and on the call, and his 400 shares were forfeited.

The shares were reissued @ ₹9 per share. Show the journal and prepare Cash book to record the above.

Ans.

Journal Entries

Date	Particulars		L.F.	Amount(₹)	Amount(₹)
(i)	Share Application A/c (5,00,000 × 5)	Dr.		24,00,000
	To Share Capital A/c (4,00,000 × 5)				20,00,000
	To Share Allotment A/c				4,00,000
	(Being share application money adjusted)
(ii)	Share Allotment A/c	Dr.		12,00,000
	To Share Capital A/c				12,00,000
	(Being shares allotment money due)
(iii)	Calls-in-Arrears A/c	Dr.		700
	To Share Allotment A/c				700
	(Being arrears on allotment)
(iv)	Share First and Final Call A/c	Dr.		8,00,000
	To Share Capital A/c				8,00,000
	(Being share first and final call due)
(v)	Calls-in-Arrears A/c	Dr.		800
	To Share First & Final Call A/c				800
	(Being arrears on first & final call)
	Share Capital A/c	Dr.		4,000
	To Calls-in-Arrears A/c	Dr.			1,500
	To Share Forfeiture A/c				2,500
	(Being 400 shares forfeited)
(vi)	Share ForfeitureA/c	Dr.		400
	To Share Capital A/c				400
	(Being share reissued and loss on issue charged from share forfeiture account)
(vii)	Share Forfeiture A/c (2,500 – 400)	Dr.		2,100
	To Share Capital A/c				2,100
	(Being share forfeiture account transferred to capital reserve account)

Dr.

Cash Book (Bank Column)

Cr.

Date	Particulars	J.F.	Amount(₹)	Date	Particulars	J.F.	Amount(₹)
	To Share Application A/c				By Shares
	(5,00,000 × 5)		25,00,000		Application A/c		1,00,000
	To Share Allotment A/c
	(Working Note iii)		7,99,300		By Balance b/d		40,02,100
	To Share First and
	Final Call A/c (Working Note i)		7,99,200
	To Share Capital A/c (400 × 9)		3,600
			41,02,100				41,02,100

Working Note:

(i) Calculation of Amount Received on Application

Money received on application (5,00,000 × 5)	= 25,00,000
(–) Money transferred to capital (4,00,000 × 5)	= (20,00,000)
	5,00,000
(–) Money refunded for shares rejected (20,000 × 5)	(1,00,000)
Amount to be taken as allotment advance	4,00,000

(ii) Amount of Arrear on Allotment for 400 Shares Unpaid

$$\text{Shares applied =}\frac{4,00,000}{3,20,000}×400=500\space\text{shares}$$

Money received on application from applicant (500 × 5)	= 2,500
(–) Money transferred to share capital (400 × 5)	= (2,000)
Taken as allotment advance	(500)
Amount due on allotment for 400 shares (400 × 3)	= 1.200
(–) Money received on application as advance	= (500)
Arrear on 400 shares on allotment	= 700
(iii) Calculation for Money Received on Allotment
Money due on allotment (4,00,000 × 3)	= 12,00,000
(–) Received as advance on application	= (4,00,000)
Money to be received on allotment	8,00,000
(–) Arrear of 400 shares to be forfeited	(700)
Net amount received on allotment	7,99,300
(iv) Calculation of Money Received on First Call
Money due (4,00,000 × 2)	= 8,00,000
(–) Amount of arrear (400 × 2)	= (800)
Net amount received on final call	7,99,200

20. Ashoka Limited Company which had issued equity shares of ₹20 each at a premium of ₹4 per share, forfeited 1,000 shares for non-payment of final call of ₹2 per share. 400 of the forfeited shares are reissued at ₹14 per share. Out of the remaining shares of 200 shares reissued at ₹20 per share. Give journal entries for the forfeiture and reissue of shares and show the amount transferred to capital reserve and the balance in Share Forfeiture Account.

Ans.

Journal Entries

Date	Particulars		L.F.	Amount(₹)	Amount(₹)
(i)	Share Capital A/c	Dr.		20,000
	To Calls-in-Arrears A/c (1,000 × 2)				2,000
	To Share Forfeiture A/c (1,000 × 18)				18,000
	(Being 1,000 shares of 20 per share forfeited for nonpayment of share final call money @ ₹4 per share)
(ii)	Bank A/c (400 × 14)	Dr.		5,600
	Share Forfeiture A/c (400 × 6)	Dr.		2,400
	To Share Capital A/c				8,000
	(Being 400 shares @ ₹20 per share reissued for ₹14 per share fully paid-up)
(iii)	Bank A/c (200 × 20)	Dr.		4,000
	To Share Capital A/c				4,000
	(Being 200 shares @ ₹20 per share reissued for ₹20 per share fully paid-up)
(iv)	Share Forfeiture A/c (Working Note)	Dr.		8,400
	To Capital Reserve A/c				8,400
	(Being balance of 600 shares in share forfeiture account transferred to capital reserve account, after reissue)

Working Note:

Calculation of Capital Reserve

Money transferred to share forfeiture on 600 shares = 600 × 18	= ₹10,800
Less: Money used in reissue	(2,400)
Amount transferred to Capital Reserve	₹8,400
Calculation of the amount left in share forfeiture A/c
No. of share not re-issued = 400 shares
Balance of share forfeiture A/c	₹18 × 400 = ₹7,200

21. Amit holds 100 shares of ₹10 each on which he has paid ₹1 per share as application money. Bimal holds 200 shares of ₹10 each on which he has paid ₹1 and ₹2 per share as application and allotment money, respectively.

Chetan holds 300 shares of ₹10 each and has paid Re.1 on application, ₹2 on allotment and ₹3 for the first call. They all failed to pay their arrears and the second call of ₹2 per share and the directors, therefore, forfeited their shares.

The shares are reissued subsequently for ₹11 per share as fully paid. Journalise the transactions.

Ans.

Journal Entries

Date	Particulars		L.F.	Amount(₹)	Amount(₹)
(i)	Share Capital A/c (600 × 8)	Dr.		4,800
	To Share Allotment A/c (100 × 2)				200
	To Share First Call A/c (300 × 3)				900
	To Share Second Call A/c (600 × 2)				1,200
	To Share Forfeiture A/c				2,500
	(Being 600 share @ ₹10 per share ₹8 called-up forfeited after making second call)
(ii)	Bank A/c	Dr.		6,600
	To Share Capital A/c				6,600
	To Securities Premium Reserve A/c				600
	(Being 600 shares @ ₹10 each ₹11 per share fully paid-up reissued)
(iii)	Share Forfeiture A/c	Dr.		2,500
	To Capital Reserve A/c				2,500
	(Being balance of share forfeiture account transferred to chapital reserve account after reissued)

Working Note:

Total Money Called-up

	(₹)
Application	1
Allotment	2
First Call	3
Second Call	2
	8

Amount Transferred to Share Forfeiture

Application money received from Amit (100 share × 1)	100
Application and allotment money received from
Bimal (200 share × 3)	600
Application allotment and first call received from Chetan (300 Share 6)	1,800
Amount transferred to share forfeiture	2,500

Calculation of Capital Reserve

As shares are reissued at price higher than face value hence full amount share forfeiture will be transferred to capital reserve.

22. Ajanta Company Limited having a normal capital of ₹3,00,000, divided into shares of ₹10 each offered for public subscription of 20,000 shares payable at ₹2 on application; ₹3 on allotment and the balance in two calls of ₹2.50 each. Applications were received by the company for 24,000 shares. Applications for 20,000 shares were accepted in full and the shares allotted. Applications for the remaining shares were rejected and the application money was refunded. All moneys due were received with the exception of the final call on 600 shares which were forfeited after legal formalities were fulfilled. 400 shares of the forfeited shares were reissued at ₹9 per share. Record necessary journal entries and prepare the balance Sheet showing the amount transferred to capital reserve and the balance in Share forfeiture account.

Ans.

Journal Entries

Balance Sheet

Date	Particulars		L.F.	Amount(₹)	Amount(₹)
(i)	Bank A/c	Dr.		48,000
	To Share Application A/c				48,000
	(Being share application money received for 24,000 shares @ ₹2 per share)
(ii)	Share Application A/c	Dr.		48,000
	To Share Capital A/c (20,000 × 2)				40,000
	To Bank A/c (4,000 × 2)				8,000
	(Being share application money @₹2 per share for 20,000 shares transferred to share capital and remaining for 4,000 shares rejected)
(iii)	Share Allotment A/c	Dr.		60,000
	To Share Capital A/c				60,000
	(Being share allotment money due on @ ₹3 per share on 20,000 shares)
(iv)	Bank A/c	Dr.		60,000
	To Share Allotment A/c				60,000
	(Being share allotment money received for 20,000 shares @ ₹3 per share)
(v)	Share First Call A/c	Dr.		50,000
	To Share Capital A/c				50,000
	(Being share first call money due on 20,000 share @ ₹2.5 per share)
(vi)	Bank A/c	Dr.		50,000
	To Share First Call A/c				50,000
	(Being share first call money received for 20,000 shares @ ₹2.5 per share)
(vii)	Share Final Call A/c	Dr.		50,000
	To Share Capital A/c				50,000
	(Being share final call money due on 20,000 shares @ ₹2.5 per share)
(viii)	Bank A/c (19,400 × 2.50)	Dr.		48,500
	Calls-in-Arrears A/c (600 × 2.50)	Dr.		1,500
	To Share Final Call A/c				50,000
	(Being share final call money received for 19,400 shares @ ₹2.5 per share except 600 shares)
(ix)	Share Capital A/c	Dr.		6,000
	To Calls-in-Arears A/c	Dr.			1,500
	To Share Forfeiture A/c				4,500
	(Being 600 shares forfeited @ ₹10 each for the non-payment of share Final Call @ ₹2.5 per share)
(x)	Bank A/c	Dr.		3,600
	Share Forfeiture A/c	Dr.		400
	To Share Capital A/c				4,000
	(Being 400 share @ 10 each for ₹9 per share reissued)
(xi)	Share Forfeiture A/c	Dr.		2,600
	To Capital Reserve A/c (Working Note)				2,600
	(Being after reissue balance of 400 shares in share in forfeiture account transferred to capital reserve account)

Particulars		Note	Current years (₹)	Previous years (₹)
I. Equity and Liabilities
Shareholders Funds
(a) Share Capital		1	1,99,500
(b) Reserve and Surplus		2	2,600
	Total		2,02,100
II. Assets
Current Assets
Cash at Bank		3	2,02,100
	Total		2,02,100

Notes to Account:

Particulars		Amount (₹)
1. Share Capital
Authorised Capital
30,000 share of ₹10 each		3,00,000
Issued and Subcribed Capital
20,000 shares of ₹10 each		2,00,000
Called-up and Paid-up
19,800 Shares of ₹10 each	1,98,000
(+) Share Forfeiture	1,500	1,99,500
2. Reserve and Surplus
Capital Reserve		2,600
3. Cash and Bank
Cash at Bank		2,02,100

Working Note:

Calculation of Capital Reserve

Amount transferred to share forfeiture account on forfeiture of 400 shares (400 × 7.50)	3,000
(–) Amount adjusted on reissue of 400 shares (400 × 1)	(400)
Amount transferred to capital reserve	₹2,600

23. Journalise the following transaction in the books Bhushan Oil Ltd:

(a) 200 shares of ₹100 each issued at a Premium of ₹10 were forfeited for the non payment of allotment money of ₹60 per share. The first and final call of ₹20 per share on these share were not made. The forfeited share were reissued at ₹70 per share as fully paid-up.

(b) 150 shares of ₹10 each issued at a premium of ₹4 per share payable with allotment were forfeited for non-payment of allotment money of ₹8 per share including premium. The first and final call of ₹4 per share were not made. The forfeited share were reissued at ₹15 per share fully paid-up.

(c) 400 share of ₹50 each issued at par were forfeited for non-payment of final call of ₹10 per share. These share were reissued at ₹45 per share fully paid-up.

Ans. Case (a)

Journal Entries

Date	Particulars		L.F.	Amount (₹)	Amount (₹)
(i)	Share Capital A/c	Dr.		16,000
	Securities premium Reserve A/c	Dr.		2,000
	To Calls-in-Arrears A/c (200 × 60)				12,000
	To Share Forfeiture A/c (200 × 30)				6,000
	(Being 200 shares forfeited @ ₹100 each issued at a discount of ₹10 for the nonpayment of allotment money ₹50 per share)
(ii)	Bank A/c (200 × 70)	Dr.		14,000
	Share Forfeiture A/c (200 × 30)			6,000
	To Share Capital A/c (200 × 100)				20,000
	(Being 600 shares reissued @ ₹70 per share fully paid-up)

Note : There will be no capital reserve in case (a) as full amount transferred to forfeiture account is adjusted on reissue.
Money received on application will be ₹20 per share after deducting ₹20 for final call ₹10 for discount and ₹50 for allotment from face value ₹100.

Case (b)

Journal Entries

Date	Particulars		L.F.	Amount (₹)	Amount (₹)
(i)	Share Capital A/c (150 × 6)	Dr.		900
	Securities Premium A/c (150 × 4)	Dr.		600
	To Calls in Arrears A/c (150 × 8)				1,200
	To Share Forfeiture A/c (150 × 2)				300
	(Being 150 shares @ ₹10 each forfeited for nonpayment of a allotment money ₹8 per share including premium ₹4)
(ii)	Bank A/c (150 × 15)	Dr.		2,250
	To Share Capital A/c (150 × 10)				1,500
	To Securities Premium Reserve A/c (150 × 5)				750
	(Being 150 shares @ ₹10 each reissued for ₹15 per share fully paid-up)
(iii)	Share Forfeiture A/c	Dr.		300
	To Capital Reserve A/c				300
	(Being balance of share forfeiture account transferred to control reserve account)

Case (c)

Journal Entries

Date	Particulars		L.F.	Amount (₹)	Amount (₹)
(i)	Share Capital A/c (400 × 50)	Dr.		20,000
	To Calls in Arrears A/c (400 × 10)				4,000
	To Share Forfeiture A/c (400 × 40)				16,000
	(Being 400 shares @ ₹50 per share forfeited for non-payment of final call ₹10 per share)
(ii)	Bank A/c (400 × 45)	Dr.		18,000
	Share Forfeiture A/c (400 × 5)	Dr.		2,000
	To Share Capital A/c				20,000
	(Being 400 shares @ ₹50 each reissued for ₹45 fully paid-up)
(iii)	Share Forfeiture A/c	Dr.		14,000
	To Capital Reserve A/c				14,000
	(Being balance in share forfeiture account transferred to capital reserve account)

Working Note:

Calculation of Capital Reserve

Amount transferred to share forfeiture	16,000
(–) Amount adjusted on reissue	(2,000)
Amount transferred to Capital Reserve	14,000

24. Amisha Ltd inviting application for 40,000 shares of ₹100 each at a premium of ₹20 per share amount payable; on application ₹40 ; on allotment ₹40 (Including premium): on first call ₹25 and Second and final call ₹15.

Application were received for 50,000 shares and allotment was made on prorata basis. Excess money on application was adjusted against the sums due on allotment.

Rohit to whom 600 shares were allotted failed to pay the allotment money and his shares were forfeited after allotment. Ashmita, who applied for 1000 shares failed to pay the two calls and her shares were forfeited after the second call. Of the shares forfeited, 1200 shares were sold to Kapil for ₹85 per share as fully paid, the whole of Rohit’s shares being included. Record necessary journal entries.

Ans.

Journal Entries

Date	Particulars		L.F.	Amount (₹)	Amount (₹)
(i)	Bank A/c	Dr.		20,00,000
	To Share Application A/c				20,00,000
	(Being share application money received on 50,000 shares @ ₹40 per share)
(ii)	Share Application A/c	Dr.		20,00,000
	To Share Capital A/c (40,000 × 40)				16,00,000
	To Share Allotment A/c (10,000 × 40)				4,00,000
	(Being shares application momey adjusted)
(iii)	Share Allotment A/c	Dr.		16,00,000
	To Share Capital A/c (40,000 × 20)			8,00,000
	To Securities Premium Reserve A/c (40,000 × 20)				8,00,000
	(Being share allotment money due including premium)
(iv)	Bank A/c (Working Note)	Dr.		11,82,000
	Calls-in-Arrears A/c	Dr.		18,000
	To Share Allotment A/c				12,00,000
	(Being share allotment money received except 600 shares)
(v)	Share Capital A/c (600 × 60)	Dr.		36,000
	Securities Premium Reserve A/c (600 × 20)	Dr.		12,000
	To Call-in-Arrears A/c (Working Note)				18,000
	To Share Forfeiture A/c (Working Note)				30,000
	(Being 600 share forfeited after allotment)
(vi)	Share First Call A/c	Dr.		9,85,000
	To Share Capital (39,400 × 25)				9,85,000
	(Being first call money in due on 39,400 shares)
(vii)	Bank A/c (38,600 × 25)	Dr.		9,65,000
	Calls-in-Arrears A/c (800 × 25)	Dr.		20,000
	To Share First Call A/c				9,85,000
	(Being first call money received except 800 shares)
(viii)	Share Second and Final Call A/c	Dr.		5,91,000
	To Share Capital A/c (39,400 × 15)				5,91,000
	(Being second and final call money due on 39,400 shares)
(ix)	Bank A/c (38,600 × 15)	Dr.		5,79,000
	Calls-in-Arears A/c	Dr.		12,000
	To Share Second and Final A/c				5,91,000
	(Being second and final call money received except 800 shares)
(x)	Share Capital A/c (800 × 100)	Dr.		80,000
	To Calls-in-Arears A/c				32,000
	To Share Forfeiture A/c (800 × 60)				48,000
	(Being 800 share forfeited for non payment of two calls)
(xi)	Bank A/c (1,200 × 85)	Dr.		1,02,000
	Share Forfeiture A/c (1,200 × 15)	Dr.		18,000
	To Share Capital A/c (1,200 × 100)				1,20,000
	(Being 1,200 shares reissued @ 85 per share fully paid-up)
(xii)	Share Forfeiture A/c (Working Note)	Dr.		48,000
	To Capital Reserve A/c				48,000
	(Being balance amount after reissue from share forfeiture account transferred to capital reserve)

Working Note:

(i) Calculation of Amount Received on Allotment

$$\text{Number of shares applied by Rohit}\\ =\frac{\text{Total shares applied}}{\text{Total shares alloted}}×\text{Shared Alloted}\\=\frac{50,000}{40,000}×600=750\space\text{shares}$$

Arrear of Rohit on Allotment

Money received on application (750 × 40)	= 30,000
(–) Money adjusted on application (600 × 40)	= (24,000)
Allotment advance	6,000
Rohit money due on Allotment (600 × 40)	24,000
(–) Allotment advance	(6,000)
Rohits arrear on allotment	18,000
(ii) Calculation of Capital Reserve
(a) On Rohits 600 Shares Reissued
Amount transferred to share forfeiture (750 × 40)	= 30,000
(–) Amount adjusted on reissue (600 × 15)	= (9,000)
Rohits transfer to capital reserve	21,000

(iii) On 600 Shares of Ashmita Reissued

$$\text{Number of share allotted }\\=\frac{\text{Total shares alloted}}{\text{Total shares applied}}×\text{Share applied}\\=\frac{40,000}{50,000}×1,000=800\space\text{share}$$

Amount transferred to share forfeiture on 600 share forfeited (600 × 60)	= 36,000
(–) Amount adjusted on reissue 600 shares (600 × 15)	= (9,000)
Ashmita’s transfer to capital reserve	27,000
Hence total capital reserve	= 21,000 + 27,000 = ₹48,000