NCERT Solution Class 12 Accountancy Accounting for Share Capital

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NCERT Solutions  for Accountancy Class XII Chapter Number – 1 - Accounting For Share  Capital

Short Answer Questions

Q1. What is public company?

Ans. It is a company which

(i) is not a private company;

(ii) has a minimum paid-up capital of Rs. 5,00,000 or such higher amount as may  be prescribed

The minimum number of members required to form a public  limited company is seven. There is no restriction on maximum number of members.

 

Q2. What is a private company? 

Ans.   A private company is one which  has a minimum paid up share capital of Rs. 1,00,000 or such higher paid  up share capital as may  be prescribed in the Companies Act,

2013  and by its Articles of Association:

(a) restricts the right to transfer its shares, if any

(b) limits the number of its members to 200  (excluding its present or past employee members).

(c) prohibits any invitation to the public  to subscribe for any securities of the company.

Q3. When can shares be  forfeited?

Ans. Some  shareholder may  fail  to pay one or more installments i.e. allotment money and/or call money. In such circumstances, the company can forfeit their shares i.e. the cancel  the allotment and treat the amount

already received thereon as forfeited to the company within the framework of the provisions in its articles.

Q4. What is meant by Calls in arrears?

Ans. When  any shareholder fails  to pay the amount due on allotment or any of the calls, such an amount is known as calls in arrears or unpaid calls.

Q5. What do  you mean by a listed company?

Ans. Company whose  shares are traded on an official stock exchange. It must adhere to the listing requirements of that exchange, which  may  include how many  shares are listed and a minimum earnings level.

Q6. What are the uses of a securities premium?

Ans. Section 52(2) of the Companies Act, 2013  restricts the use of the amounts received as premium on securities for the following purposes:

(i) Issuing fully  paid  bonus  shares to the members; (ii) Writing off preliminary expenses of the company;

(iii) Writing off the expenses of, or the commission paid or discount allowed on any issue of securities or debentures of the company.

(iv)Providing for the premium payable on the redemption of any redeemable Preference Shares or any of the debentures of the company

(v) Buyback of shares

Q7. What is meant by Calls in advance?

Ans. Sometimes shareholders pay a part or whole of the amount of the calls not yet made. The amount so received from the shareholders is known as calls in advance. 

Q8. Write a brief note on Minimum Subscription.

Ans. Section 39(1) of the Companies Act 2013  provides that a company cannot allot any securities of the company to the public  unless  the amount stated in the prospectus as the minimum amount has been subscribed and the sums  payable on application for the amount so stated have  been received by the company. According to SEBI guidelines minimum subscription has been fixed at 90% of the issued amount.

Long Answer Questions

Q1. What is meant by the word Company? Describe its characteristics.

Ans.       A company is an association of person who contribute money or money’s worth to a common inventory and uses it for a common purpose. Company has certain special features which distinguish it from the other forms of organization. These are as follows:

a) Body corporate: A company is formed according to the provisions of law enforced from time to time. Generally in India Companies are registered and formed under Companies Act.

b) Separate legal entity: A company has a separate legal entity which is which is distinct and separate from its members. It can hold and deal with any type of property. It can enter into contracts and even open a bank account in its own name.

c) Limited liability: The liability of the members of the company is limited to the extent of unpaid amount of the shares held by them.

d) Perpetual succession: A company being an artificial person created by law can be terminated only through law. The death or insanity or insolvency of any member of the company in no way affects the existence of the company.

e) Common seal: A Company being an artificial person cannot sign its name by itself. Therefore every company is required to have its own seal which acts as official signature of the company.

f) Transferability of shares: The shares of a public limited company are freely transferable. But the articles of the company can prescribe the manner in which the transfer of shares will be made.

Q2. Explain in brief the main categories in which the share capital of a company is divided.

Ans. The various terms used in connection with the

Share Capital of the company are the following:

(i) Authorized, Registered or Nominal Capital: It is the maximum capital which a company is authorized to issue shares during its lifetime. Authorized capital is stated in the Memorandum of Association.

(ii) Issued Capital: It is that part of Authorized Capital which is actually offered to the public for subscription.

(iii) Subscribed Capital: It is that part of the Issued Capital which has been subscribed for by the public. Subscribed Capital is shown in the Balance Sheet under two heads:

a) Subscribed and fully paidup and b) Subscribed but not fully paid up

a) Subscribed and fully paid up capital: It is a case when entire nominal value of a share is called by the company and also paid by the shareholder.

b) Subscribed but not fully paid up: It is a case when:

(i) The company has called up the full nominal value of the share but the shareholder has not paid some part of the nominal value of the share.

(ii) The company has not called up the full nominal value of the share.

(iii) Called up Capital: It refers to that part of the face value of a share called by the directors from shareholders.

(iv) Paid up Capital: It refers to that part of the Called up Capital which has been actually received from the shareholders. When the shareholders have paid the entire call amount, the called up capital and paid up capital are same.

Q3. What do you mean by the term ‘Share’? Discuss the types of shares, which can be issued under the Companies Act as amended to the date.

Ans. Shares refer to the units into which the total share capital of a company is divided. Thus a share is a fractional part of the share capital and forms the basis of ownership interests in the company. The persons who contribute money through shares are called shareholders.

 

Q3. What do you mean by the term ‘Share’? Discuss the types of shares, which can be issued under the Companies Act as amended to the date.

Ans. Shares refer to the units into which the total share capital of a company is divided. Thus a share is a fractional part of the share capital and forms the basis of ownership interests in the company. The persons who contribute money through shares are called shareholders.

As per Section 43 of the Companies Act, 2013 a

Company may issue two types of shares: (1) Preference Shares

(2) Equity Shares

(1) Preference Shares: These shares carry the following two preferential rights:

(a) Dividend at a fixed rate before any dividend is paid to equity shares.

(b) Repayment of capital before anything is paid to equity shares.

However, notwithstanding the above  two conditions, a holder of preference shares may  have  a right to participate fully  or to a limited extent in the surpluses of the company as specified in the Memorandum or Articles of the Company. Thus preference shares can be participating or non-participating, cumulative or non- cumulative with reference to dividend, convertible and non-convertible.

(2) Equity Shares: Equity share is that share which is not a preference share. The dividend on equity shares is not fixed and it may vary from year to year depending upon the amount of profits available for distribution. These are the most commonly issued class of shares which carry. The maximum rewards and risks of the business.

Q4. Discuss the process of allotment of shares of a company in case of over subscription.

Ans. ‘Over Subscription’ is a case when applications for more shares are received than the number offered to the public for subscription. In such condition, three alternatives are available to the directors to deal with the situation:

1) They can accept some applications in full and totally reject the others.

2) They can make a pro rata allotment to all. And

3) They can adopt a combination of the above two alternatives.

1) First alternative, when the directors decide to fully accept some applications and totally reject the others. For example, a company invited applications for 20,000 shares and received the applications for 30,000 shares. The directors rejected the applications for 10,000 shares Which are in excess of the required number and refunded their application money in full.

2) Second alternative, in this directors opt to make a proportionate allotment to all applicants (called pro-rata allotment) the excess application money received is normally adjusted towards the amount due on allotment. For example, in the event of applications for 20,000 shares being invited and those received are for 30,000 shares, it is decided to allot shares in the ratio of 2:3 to All applicants. It is a case of pro rata allotment and the excess application money received on 10,000 shares would be adjusted towards the amount due on the allotment of 20,000 shares.

3) Third alternative, when  the application for some shares is rejected out  rightly and pro rata allotment is made  to the remaining applicants, the money on rejected applications is refunded and the excess application

Money received from applicants to whom pro rata allotment has been made is adjusted towards the amount due on the allotment of shares allotted. For example, in the event of applications for 20,000 shares being invited and those received are for 30,000 shares. The directors decided to reject the application for 5,000 shares outright and to make pro rata allotment of 20,000 shares to the applicants for the remaining 25,000 shares so that 4 shares are allotted to every 5 shares applied. In this

Case, the money on applications for 5,000 shares rejected would be refunded fully and on the remaining 5,000 shares (25,000 – 20,000) would be adjusted Against the allotment amount due on 20,000 shares.

Q5. What is a preference share? Describe the various types of preference shares. 

Ans.  Preference Shares are the shares carry the following two preferential rights:

(a) Dividend at a fixed rate before any dividend is paid to equity shares.

(b) Repayment of capital before anything is paid to equity shares.

 

Preference shares can be classified as follows:

1) With reference to dividend

2) With reference to participation in surplus profit and

3) With reference to convertibility

1) With reference to dividend: Cumulative preference shares and Non-cumulative preference shares.

a) Cumulative preference shares: When unpaid dividends on preference shares are treated as arrears and are carried forward to subsequent years, then such preference shares are known as cumulative preference shares. It means unpaid dividend on such shares is accumulated till it is paid off in full.

b) Non-cumulative preference shares: These preference shares have right to get fixed rate of dividend out of the profits of current year only. They do not carry the right to receive arrears of dividend. 

2) With reference to participation in surplus profit: Participating preference shares and Non- participating preference shares.

a) Participating preference shares: Those preference shares, which have right to participate in any surplus profit of the company after paying the equity Shareholders, in addition to the fixed rate of their dividend, are called participating preference shares.

b) Non- participating preference shares: Preference shares, which have no right to participate on the surplus profit or in any surplus on liquidation of the company, are called non-participating preference shares.

3) With reference to convertibility: Convertible preference shares and Non- convertible preference shares.

a) Convertible preference shares: Those preference shares, which can be converted into equity shares at the option of the holders after a fixed period according to the terms and conditions of their issue, are known as convertible preference shares.

b) Non- convertible preference shares: Preference shares, which are not convertible into equity shares, are called non-convertible preference shares.

 

Q6. Describe the provision of law relating to Calls in Arrears’ and Calls in Advance.

Ans. When any shareholder fails to pay the amount due on allotment or any of the calls, such an amount is known as calls in arrears or unpaid calls. The company if authorized by its Articles of Association may charge interest at the specified rate on calls in arrears from due date to the date of payment. In case, the Articles of Association of the company is silent, Table F of the Companies Act, 2013 shall apply which provides for

Interest @ 10% p.a. However, the directors have the right to waive the interest on calls in arrears.

Sometimes shareholders pay a part or whole of the amount of the calls not yet made. The amount so received from the shareholders is known as Calls in advance. It is a liability for the company. In case of calls in advance, the company pays interest at the rate stated in its Articles of Association. In the absence of interest clause in the Articles of Association, provisions of Table F of the Companies Act, 2013 apply and the company is liable to pay interest @ 12% p.a. on calls in advance.

Q7. Explain the terms ‘Over subscription and ‘Under subscription. How are they dealt in accounting records?

Ans.

‘Over Subscription’ is a case when applications for more shares are received than the number offered to the public for subscription. In such condition, three alternatives are available to the directors to deal with the situation:

1) They can accept some applications in full and totally reject the others. The following entries are passed:

Journal Entries

2) They can make a pro rata allotment to all. The following entries are passed:

Journal Entries

3) They can adopt a combination of the above two alternatives. The following entries are passed:

Journal Entries

Under subscription is a situation where number of shares applied is less than the number for which application has been invited for subscription. For example a company offered 1, 00,000 shares for subscription to the public but the applications were received for 96,000 shares only. In such a situation, the allotment will be confirmed to 96,000 shares and entries shall be made accordingly. The following entries are passed:

Journal Entries

Q8. Describe the purposes for which a company can use the amount of Securities Premium.

Ans. Section 52(2) of the Companies Act, 2013 restricts the use of the amounts received as premium on securities for the following purposes:

(i) Issuing fully paid bonus shares to the members; (ii) Writing off preliminary expenses of the company;

(iii) Writing off the expenses of, or the commission paid or discount allowed on any issue of securities or debentures of the company.

(iv) Providing for the premium payable on the redemption of any redeemable Preference Shares or any of the debentures of the company

(v) Buyback of shares

Q9. State clearly the conditions under which a company can issue shares at discount.

Ans. Section 79 of the Companies Act 1956 states that a company is permitted to issue shares at a discount provided the following conditions are satisfied 

(a) The issue of shares at a discount is authorized by an ordinary resolution passed by the company at its general meeting and sanctioned by the Company Law Board.

(b) The resolution must specify the maximum rate of discount at which the shares are to be issued but the rate

Of discount must not exceed 10 per cent of the nominal value of the shares?

 

(c) At least one year must have elapse since the date on which the company became entitled to commence the business.

(d) The shares are of a class which has already been issued.

(e) The shares issued within two months from the date of receiving sanction for the same from the Government or within such extended period as the Government may allow.

As per Companies Act, 2013 a company cannot issue shares at a discount hence this question is Out of CBSE syllabus.

 

Q10. Explain the term Forfeiture of Shares’ and give the accounting treatment on forfeiture.

Ans. Some shareholder may fail to pay one or more installments i.e. allotment money and/or call money. In such circumstances, the company can forfeit their shares i.e. the cancel the allotment and treat the amount

Already received thereon as forfeited to the company within the framework of the provisions in its articles. The following journal entries are passed on forfeiture of shares:

When issued at par:

Journal Entry

 

Particulars

 

Rs

Rs

Share capital a/c                                                 Dr.

 

Amount called  up on forfeited shares

To calls in arrears a/c

 

Amount not received on forfeited shares

To share forfeiture a/c

 

Amount received on forfeited shares

(……shares forfeited for non- payment of first and final call money)

 

 

 

When issued at premium and premium money is already paid on forfeited shares then we will ignore the securities premium and the following entry will be passed.

Journal Entry

Particulars

 

Rs

Rs

Share capital a/c                                                 Dr.

 

Amount called  up on forfeited shares

To calls in arrears a/c

 

Amount not received on forfeited shares

To share forfeiture a/c

 

Amount received on forfeited shares

(……shares forfeited for non- payment of first and final call money)

 

 

 

When issued at premium and premium money is not paid on forfeited shares then the following journal entry will

Be passed:

Journal Entry

Particulars

 

Rs

Rs

Share capital a/c                                                 Dr.

 

Amount called  up on forfeited shares

Securities Premium a/c                                      Dr.

 

Amount  of securities premium not paid  on forfeited shares

To calls in arrears a/c

 

Amount not received on forfeited shares

To share forfeiture a/c

 

Amount received on forfeited shares

(……shares forfeited for non- payment of first and final call money)

 

 

Numerical Questions

Q1. Anish Limited issued 30,000 equity shares of Rs. 100 each payable at Rs. 30 on application, Rs. 50 on allotment and Rs. 20 on 1st and final call. All money was duly received.Record these transactions in the journal of the company.

Cash Book  (Bank column only)   
ParticularsRsParticularsRs
To Equity share By balance c/d32,00,000
application a/c3,00,000  
To 10% Pref. share   
application a/c6,00,000  
To equity share   
allotment a/c5,00,000  
To 10% Pref. share   
allotment a/c8,00,000  
To Equity share F & F   
call a/c4,00,000  
To 10% Pref. sh. F&F   
call a/c6,00,000  
    
 32,00,000 32,00,000

Q7. Eastern Company Limited, with an authorised capital of 10,00,000 is divided into shares of Rs. 10 each, issued 50,000 shares at a premium of Rs. 3 share payable as follows:

On Application: Rs. 3 per share

On Allotment (including premium): Rs. 5 per share. On first call (due three months after allotment): Rs. 3 per share. And the balance as and when required.

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

Applicants for 40,000 shares received in full.

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

Applicants for 5,000 shares received 2,000 shares on allotment, 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 the call due on 100 shares.

Give journal and cash book entries to record these transactions of the companies.

Also prepare the Balance Sheet of the Company.

Answer 7

ParticularsRSRS
Share application a/c Dr.1,80,000 
To share capital a/c (50000 x 3) 1,50,000
To share allotment a/c 30,000
(Application money transferred to share capital account and excess money on share allotment )  
Share allotment a/c Dr.2,50,000 
To share capital a/c 1,00,000
To securities premium a/c 1,50,000
(Share allotment money due on  
50,000 shares @ Rs. 5 per share including premium of Rs. 3 per share)
Share first and final call  Dr.1,50,000 
To share capital a/c 1,50,000
(Share first call due on 50,000 shares @ Rs. 3 per share)  

Cash Book (Bank Column)

ParticularsRsParticularsRs
To share By balance c/d5,49,700
application a/c1,80,000  
To share   
allotment a/c2,20,000  
To share first call1,49,700  
 5,49,700 5,49,700

 

ParticularsRs
I. Equity and Liabilities 
1. Shareholders’ Funds 
Share Capital3,99,700
Reserves and Surplus1,50,000
  
II Assets 
1. Cash and cash equivalents5,49,700
  
Notes to Accounts: 
ParticularsRs
1. Share Capital 
Authorised Capital 
1,00,000 shares of Rs. 10 each 
Issued Capital 
50,000 shares of  10 each 
Subscribed Capital 
Subscribed but not fully paid-up 
50,000 shares of  8 each  4,00,000 
Less:   calls in arrears  3003,99,700
2. Reserves and Surplus 
Securities premium reserve1,50,000
3. Cash and Cash Equivalents 
Cash at bank5,49,700

Amount transferred to share allotment on application

Category B excess shares 7000  x 3 = Rs. 21,00

Category C excess shares 3000  x 3 = Rs. 9,000

Amount received on allotment

Category A (40,000 x 5) = Rs. 2,00,000

Category B (8,000 x 5) = 40,000 – 21,000 (advance) = Rs. 19,000

Category C (2,000 x 5) = 10,000 – 9,000 (advance) = Rs. 11,000

 

Question 8. Sumit Machine Ltd. issued 50,000 shares of Rs. 100 each at discount of 5%. The shares were payable Rs. 25 on application, Rs. 40 on allotment and Rs. 30 on first and final calls. The issue was fully subscribed and money was dull received except the final call on 400 shares. The discount was adjusted on allotment. Give journal entries and prepare the balance sheet.

Ans. 8

ParticularsRs. Rs. 
Bank  A/c Dr.12,50,000 
To share application a/c 12,50,000
(Application money received on  
50,000 shares @ Rs. 25 per share)
Share application a/c Dr.12,50,000 
To share capital a/c 12,50,000
(Application money transferred to share capital)  
Share allotment a/c Dr.20,00,000 
Disc. on issue  a/c Dr.2,50,000 
To share capital a/c 22,50,000
(Share allotment money due on  
50,000 shares @ Rs. 40 per share, and   Rs. 5 discount)
Bank  A/c Dr.20,00,000 
To share allotment a/c 20,00,000
(Allotment money received on  
50,000 shares @ Rs. 40 per share)
Share first and final call a/c Dr.15,00,000 
To share capital a/c 15,00,000
(Share first call due on 50,000 shares @ Rs. 30 per share)  
Bank  A/c Dr.14,88,000 
To Share first and final call a/c 14,88,000
(Share first call received on 49,600 shares @ Rs. 30 per share)  

 

ParticularsRs. 
I. Equity and Liabilities 
1. Shareholders’ Funds 
Share Capital49,88,000
  
II Assets 
1. Cash and cash equivalents47,38,000
  
Notes to Accounts: 
ParticularsRs. 
1. Share Capital 
Authorised Capital 
……shares of Rs. … each 
Issued Capital 
50,000 shares of Rs. 100  each50,00,000
Subscribed Capital 
Subscribed and fully paid-up 
49,600 shares of Rs. 100  each49,60,000
Subscribed but not fully paid-up 
400  shares of Rs. 100  each  40,000 
Less: Calls-in-arrear  12,00028,000
 49,88,000
2. Cash and Cash Equivalents 
Cash at bank47,38,000

 

Question 9. Kumar Ltd. purchased assets of Rs. 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 shares are issued, (a) at par, (b) at discount of 10% and (c) at premium of 20%.

Ans. 

Journal  Entries  
ParticularsRs. Rs. 
Sundry Assets A/c Dr.6,30,000 
To Bhanu  Oil Ltd’s   a/c 6,30,000
(Assets purchased from Bhanu  Oil Ltd)  
Bhanu  Oil Ltd’s   a/c Dr.6,30,000 
To share capital a/c 6,30,000
(Shares issued  to Bhanu  Oil Ltd. at par)  
   
Case (ii)  
ParticularsRs. Rs. 
Sundry Assets A/c Dr.6,30,000 
To Bhanu  Oil Ltd’s   a/c 6,30,000
(Assets purchased from Bhanu  Oil Ltd)  
Bhanu  Oil Ltd’s   a/c Dr.6,30,000 
Disc. on issue of share a/c Dr.70,000 
To share capital a/c 7,00,000
(Shares issued  to Bhanu  Oil Ltd. at a discount of 10% for assets purchased)  
   
Case (iii)  
ParticularsRs. Rs. 
Sundry Assets A/c Dr.6,30,000 
To Bhanu  Oil Ltd’s   a/c 6,30,000
(Assets purchased from Bhanu  Oil Ltd)  
Bhanu  Oil Ltd’s   a/c Dr.6,30,000 
To share capital a/c 5,25,000
To securities premium a/c 1,05,000
(5250 Shares issued  to Bhanu  Oil Ltd. at a premium of 20% for assets purchased)  

Question 10.  Bansal Heavy Machine Ltd. purchased machine worth Rs. 3,20,000 from Handa Trader. Payment was made as Rs. 50,000 cash and remaining amount by issue of equity shares of the face value of Rs. 100 each fully paid at an issued price of Rs. 90 each. Give journal entries to record the above transaction.

Answer:

ParticularsRs. Rs. 
Machinery A/c Dr.3,20,000 
To cash a/c 50,000
To Handa  trader’s a/c 2,70,000
(Purchased machinery for Handa traders and payment made  in part)  
Handa  trader’s a/c Dr.2,70,000 
Disc. on issue of shares a/c Dr.30,000 
To share capital a/c 3,00,000
(3000 shares issued  to Handa Traders @ Rs. 90 each, having face value  of Rs. 100  each)  


Number of equity shares to be issued  = 2,70,000/90  = 3,000 shares

Question 11. Naman Ltd. issued 20,000 shares of Rs. 100 each, payable Rs. 25 on application Rs. 30 on allotment, Rs. 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. 

Answer :

ParticularsRs. Rs. 
Bank  A/c (20,000 x 25)  Dr.5,00,000 
To share application a/c 5,00,000
(Application money received on  
20,000 shares @ Rs. 25 per share)
Share application a/c Dr.5,00,000 
To share capital a/c 5,00,000
(Application money transferred to share capital)  
Share allotment a/c Dr.6,00,000 
To share capital a/c 6,00,000
(Share allotment money due on  
20,000 shares @ Rs. 30 per share)
Bank  A/c Dr.5,94,000 
To share allotment a/c 5,94,000
(Allotment money received on  
19,800 shares @ Rs. 30 per share)
Share first call  Dr.5,00,000 
To share capital a/c 5,00,000
(Share first call due on 20,000 shares @ Rs. 25 per share)  
Bank  A/c Dr.4,92,500 
To share first call 4,92,500
(Share first call received on  
19,700 shares @ Rs. 25 per share)
Share final call a/c Dr.4,00,000 
To share capital a/c 4,00,000
(Share final call due on 20,000 shares @ Rs. 20 per share)  
Bank  A/c Dr.3,94,000 
To share final call 3,94,000
(Share final call money received on 19,700 shares @ Rs. 20 per share)  
Share capital a/c Dr.30,000 
To share forfeiture a/c 10,500
To calls-in-arrear a/c 19,500
(300 shares forfeited for failing to pay the amount due)  


Calculation of amount received on shares forfeited. Application money on 300  shares (300 x 25) = Rs. 7,500, Allotment money on 100  shares (100 x 30) = Rs. 3,000

Question 12. Kishna Ltd. issued 15,000 shares of Rs. 100 each at a premium of Rs. 10 per share, payable as follows:

On application: Rs. 30

On allotment: Rs. 50 (including premium)

On first and final call: Rs. 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 of Rs. 12 each.

Give journal entries in the books of the company.

Answer . 12

ParticularsRs. Rs. 
Bank  A/c (20,000 x 25)  Dr.4,50,000 
To share application a/c 4,50,000
(Application money received on  
15,000 shares @ Rs. 30 per share)
Share application a/c Dr.4,50,000 
To share capital a/c 4,50,000
(Application money transferred to share capital)  
Share allotment a/c Dr.7,50,000 
To share capital a/c 6,00,000
To sec. premium a/c 1,50,000
(Share allotment money due on  
15,000 shares @ Rs. 50 per share, including Rs. 10 securities premium)
Bank  A/c Dr.7,42,500 
To share allotment a/c 7,42,500
(Allotment money received on  
14,850 shares @ Rs. 50 per share)
Share first and final call  Dr.4,50,000 
To share capital a/c 4,50,000
(Share first and final call due on  
15,000 shares @ Rs. 30 per share)  
Bank  A/c Dr.4,45,500 
To share first and final call a/c 4,45,500
(Share first and final call received  
on 14,850 shares @ Rs. 30 per share)
Share capital a/c Dr.15,000 
Securities premium a/c Dr.1,500 
To share forfeiture a/c 4,500
To calls-in-arrear a/c 12,000
(150 shares forfeited for non- payment of allotment and first and final call money)  
Bank  a/c Dr.18,000 
To share capital a/c 15,000
To securities premium a/c 3,000
(150 shares re-issued @ 120  per share)  
Share forfeiture a/c Dr.4,500 
To capital reserve a/c 4,500
(Balance in share forfeiture transferred to capital reserve)  

Question 13. Arushi Computer Ltd. issued 10,000 equity shares of Rs. 100 each at 10% discount. The net amount payable as follows:

On application: Rs. 20

On allotment: Rs. 30 (40 – discount 10) On first call: Rs. 30

On final call: Rs. 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 Rs. 75 per share. Give journal entries in the books of the company.

Answer. 13.

 

ParticularsRs. Rs. 
Bank  A/c Dr.2,00,000 
To share application a/c 2,00,000
(Application money received on  
10,000 shares @ Rs. 20 per share)
Share application a/c Dr.2,00,000 
To share capital a/c 2,00,000
(Application money transferred to share capital)  
Share allotment a/c Dr.3,00,000 
Disc. on issue  a/c Dr.1,00,000 
To share capital a/c 4,00,000
(Share allotment money due on  
10,000 shares @ Rs. 30 per share, Rs. 
10 discount)
Bank  A/c Dr.3,00,000 
To share allotment a/c 3,00,000
(Allotment money received on  
10,000 shares @ Rs. 30 per share)
Share first call a/c Dr.3,00,000 
To share capital a/c 3,00,000
(Share first call due on 10,000 shares @ Rs. 30 per share)  
Bank  A/c Dr.3,00,000 
To Share first call a/c 3,00,000
(Share first call received on 10,000 shares @ Rs. 30 per share)  
Share final call a/c Dr.1,00,000 
To share capital a/c 1,00,000
(Share final call due on 10,000 shares @ Rs. 10 per share)  
Bank  A/c Dr.98,000 
To Share final call a/c 98,000
(Share final call received on 9,800 shares @ Rs. 10 per share)  
Share capital a/c Dr.20,000 
To disc. on issue of shares a/c 2,000
To share forfeiture a/c 16,000
To calls-in-arrear a/c 2,000
(200 shares forfeited for non- payment of final call of Rs. 10 per share)  
Bank  a/c Dr.11,250 
Share forfeiture a/c Dr.2,250 
Disc. on issue of shares a/c Dr.1,500 
To share capital a/c 15,000
(150 shares re-issued @ 75 per share, fully paid  up)  
Share forfeiture a/c Dr.9,750 
To capital reserve a/c 9,750
(Balance in share forfeiture transferred to capital reserve after adjustment of 150  reissued shares)  
Amount of share forfeiture on forfeited shares = 200  x 80 = Rs. 16,000.  
Calculation of capital reserve  
Credit balance  on 150  shares (150 x 80)Rs. 12,000 
Less: Debit balance  on re-issued sharesRs. 2,250 
   
   
Capital reserveRs. 9,750 

 

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

On application: Rs. 20

On allotment: Rs. 50 (including premium) On first call: Rs. 30

On final call: Rs. 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 towards 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 two calls and her shares were also forfeited. All these shares were sold to ‘K’ as fully paid for Rs. 80 per share. Give journal entries in the books of the company.

Answer . 14

 

ParticularsRs. Rs. 
Bank  A/c Dr.2,00,000 
To share application a/c 2,00,000
(Application money received on  
10,000 shares @ Rs. 20 per share)
Share application a/c Dr.2,00,000 
To share capital a/c 1,20,000
To share allotment a/c 40,000
To bank  a/c 40,000
(Application money transferred to share capital, adjusted in share allotment and refunded)  
Share allotment a/c Dr.3,00,000 
To share capital a/c 1,80,000
To securities premium a/c 1,20,000
(Share allotment money due on  
6000  shares @ Rs. 50 per share, including Rs. 20 securities premium)
Bank  A/c Dr.2,47,000 
To share allotment a/c 2,47,000
(Allotment money received except on 300  shares)  
Share first call a/c Dr.1,80,000 
To share capital a/c 1,80,000
(Share first call due on 6,000 shares @ Rs. 30 per share)  
Bank  A/c Dr.1,57,500 
To Share first call a/c 1,57,500
(Share first call received except on  
750  shares (300+450)
Share final call a/c Dr.1,20,000 
To share capital a/c 1,20,000
(Share final call due on 6,000 shares @ Rs. 20 per share)  
Bank  A/c Dr.1,05,000 
To Share final call a/c 1,05,000
(Share final call received except on  
750  shares (300+450)
Share capital a/c Dr.75,000 
Securities premium a/c Dr.6,000 
To calls in arrears a/c 50,500
To share forfeiture a/c 30,500
(750 shares forfeited for non- payment of first and final call money)  
Bank  a/c Dr.60,000 
Share forfeiture a/c Dr.15,000 
To share capital a/c 75,000
(750 shares re-issued @ 80 per share fully paid  up)  
Share forfeiture a/c Dr.15,500 
To capital reserve a/c 15,500
(Balance in share forfeiture transferred to capital reserve)  


Number of shares applied by Rohit

= 8, 000/ 6, 000 x 300= 400  shares

Number of shares alloted to Itika - = 6,000/ 8, 000 x 600= 450  shares alloted

Calculation of amount not received from Rohit on allotment:

Amount received on application8,000
(400 x 20) 
Less: amount transferred on appli.(300x 20)6,000
Advance  of allotment received on appl.2,000
Money  due on allotment (300x50)15,000
Less: excess already received with appli.2,000
Amount not received from Rohit on allotment13,000
Calculation of money received on allotment: 
Total amount due on allotment3,00,000
Less: received on application as advance40,000
 2,60,000
Less: Amount not received from Rohit13,000
Amount received on allotment2,47,000

Amount transferred to forfeiture account = Amount received from Rohit + Amount received from Itika = 8,000 + 22,500 (12,000+10,500) = Rs. 30,500.

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

With application: Rs. 3 per share.

On allotment (including premium): Rs. 5 per shar

On first call: Rs. 2 per share.

On Second and final call: Rs. 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 on allotment.

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

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

Answer : 

ParticularsRs. Rs. 
Bank  A/c Dr.4,80,000 
To share application a/c 4,80,000
(Application money received on  
1,60,000 shares @ Rs. 3 per share)
Share application a/c Dr.4,80,000 
To share capital a/c 3,60,000
To share allotment a/c 1,20,000
(Application money transferred to share capital and adjusted in share allotment)  
Share allotment a/c Dr.6,00,000 
To share capital a/c 3,60,000
To securities premium a/c 2,40,000
(Share allotment money due on  
1,20,000 shares @ Rs. 5 per share, including Rs. 2 securities premium)
Bank  A/c Dr.4,80,000 
To share allotment a/c 4,80,000
(Allotment money received on  
1,20,000 shares @ Rs. 5 per share less amount already)
Share first call a/c Dr.2,40,000 
To share capital a/c 2,40,000
(Share first call due on 1,20,000 shares @ Rs. 2 per share)  
Bank  A/c Dr.2,30,400 
To Share first call a/c 2,30,400
(Share first call received on  
1,15,200 shares @ Rs. 2 per share)
Share final call a/c Dr.2,40,000 
To share capital a/c 2,40,000
(Share final call due on 1,20,000 shares @ Rs. 2 per share)  
Bank  A/c Dr.2,30,400 
To Share final call a/c 2,30,400
(Share final call received on  
1,15,200 shares @ Rs. 2 per share)
Share capital a/c Dr.48,000 
To share first call a/c 9,600
To share final call a/c 9,600
To share forfeiture a/c 28,800
(4800 shares forfeited for non- payment of first and final call money)  
Bank  a/c Dr.33,600 
Share forfeiture a/c Dr.14,400 
To share capital a/c 48,000
(4800 shares re-issued @ 7 per  
   
   
share)  
Share forfeiture a/c Dr.14,400 
To capital reserve a/c 14,400
(Balance in share forfeiture transferred to capital reserve for  
4800  shares)
   
Amount due on allotment6,00,000 
(1,20,000 x 5)  
Less: Already received with application1,20,000 
Money  received with allotment4,80,000 

 

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

With application: Rs. 2

On allotment (including premium): Rs. 5

On first call: Rs. 3

On second call: Rs. 3

Applications were received for 3,000 shares and allotment was made on pro rata basis. Money overpaid on applications was adjusted to the amount due allotment. Mr. Mohit whom 400 shares were allotted, failed to pay the allotment more and the first call and his shares were forfeited after the first call. Mr. Joly whom 600 shares were allotted, failed to pay for the two calls and hence, The shares were forfeited. Of the shares forfeited, 800 shares were reissued to Supriya as fully paid: Rs. 9 per share, the whole of Mr. Mohit’s shares being included. Record journal entries in the books of the company.

Ans. 16 

ParticularsRs. Rs. 
Bank  A/c Dr.6,00,000 
To share application a/c 6,00,000
(Application money received on  
3,00,000 shares @ Rs. 2 per share)
Share application a/c Dr.6,00,000 
To share capital a/c 4,00,000
To share allotment a/c 2,00,000
(Application money transferred to share capital and adjusted in share allotment)  
Share allotment a/c Dr.10,00,000 
To share capital a/c 4,00,000
To securities premium a/c 6,00,000
(Share allotment money due on  
2,00,000 shares @ Rs. 5 per share, including Rs. 3 securities premium)
Bank  A/c Dr.7,98,400 
To share allotment a/c 7,98,400
(Allotment money received on  
2,99,600 shares less amount already received with application)  
Share first call a/c Dr.6,00,000 
To share capital a/c 6,00,000
(Share first call due on 2,00,000 shares @ Rs. 3 per share)  
Bank  A/c Dr.5,97,000 
To Share first call a/c 5,97,000
(Share first call received on  
1,99,000 shares @ Rs. 3 per share)
Share final call a/c Dr.2,40,000 
To share capital a/c 2,40,000
(Share final call due on 1,20,000 shares @ Rs. 2 per share)  
Share capital a/c Dr.2,800 
Securities premium a/c Dr.1,200 
To share allotment a/c 1,600
To share final call a/c 1,200
To share forfeiture a/c 1,200
(400 shares forfeited after first call for non-payment of allotment  and first call)  
Share second  and final call a/c Dr.5,98,800 
To share capital a/c 5,98,800
(Share final call due on 1,99,600 shares @ Rs. 3 per share)  
Bank  A/c Dr.5,97,000 
To share second  and final call a/c 5,97,000
(Share final call received on  
1,99,000 shares @ Rs. 3 per share)
Share capital a/c Dr.6,000 
To share first call a/c 1,800
To share final call a/c 1,800
To share forfeiture a/c 2,400
(600 shares forfeited for non- payment of first and final call money)  
Bank  a/c Dr.7,200 
Share forfeiture a/c Dr.800 
To share capital a/c 8,000
(800 shares re-issued @ 9 per share)  
Share forfeiture a/c Dr.2,000 
To capital reserve a/c 2,000
(Balance in share forfeiture transferred to capital reserve)  
   
Calculation of amount not received from Mohit on allotment:  
Shares applied by Mohit600 
Amount received on application from Mohit1,200 
(600 x 2)  
Less: amount transferred on appli.(400x 2)800 
Advance  of allotment received on appl.400 
Mohit’s money due on allotment (400x5)2,000 
Less: excess already received with appli.400 
Amount not received from Mohit on allotment1,600 
   
Calculation of money received on allotment:  
Total amount due on allotment10,00,000 
Less: received on application as advance2,00,000 
 8,00,000 
Less: Amount not received from Mohit1,600 
Amount received on allotment7,98,400 

Capital reserve = Mohit’s capital reserve + Joly’s capital reserve

 

Rs. 800  (1,200 – 400) + Rs. 1,200 (1,600 – 400) = Rs. 2,000.

 

Question 17. Life Machine Tools Limited issued 50,000 equity shares of Rs. 10 each at Rs. 12 per share payable at to Rs. 5 on application (including premium), Rs. 4 on allotment and the balance on the first and final call. Applications for 70,000 shares had been received. Of the cash received, Rs. 40,000 was returned and Rs. 60,000 was applied to the amount due on allotment. All shareholders paid the call due with the exception of one shareholder of 500 shares. These shares were forfeited and reissued as fully paid at Rs. 8 per share. Journalise the transactions.

Answer. 17

ParticularsRs. Rs. 
Bank  A/c (24000 x 30)  Dr.3,50,000 
To share application a/c 3,50,000
(Application money received on  
70,000 shares @ Rs. 5 per share including premium)
Share application a/c Dr.3,50,000 
To share capital a/c (50000x3) 1,50,000
To sec. premium a/c (50000x2) 1,00,000
To share allotment a/c 60,000
To Bank  A/c 40,000
(Application money transferred to share capital, securities premium, allotment and balance refunded)  
Share allotment a/c Dr.2,00,000 
To share capital a/c 2,00,000
(Share allotment money due on  
50,000 shares @ Rs. 4 per share)
Bank  A/c Dr.1,40,000 
To share allotment a/c 1,40,000
(Allotment money received)  
Share first and final call  Dr.1,50,000 
To share capital a/c 1,50,000
(Share first call due on 50,000 shares @ Rs. 3 per share)  
Bank  A/c Dr.1,48,500 
To share first and final call 1,48,500
(Share first and final call received on 49,500 shares @ Rs. 3 per share)  
Share capital a/c Dr.5,000 
To share first & final call a/c 1,500
To share forfeiture a/c 3,500
(500 shares forfeited for non- payment of first and final call money)  
Bank  a/c Dr.4,000 
Share forfeiture a/c Dr.1,000 
To share capital a/c 5,000
(500 shares re-issued @ 8 per share)  
Share forfeiture a/c Dr.2,500 
To capital reserve a/c 2,500
(Balance in share forfeiture transferred to capital reserve)  

 

Question 18. The Orient Company Limited offered for public subscription 20,000 equity shares of Rs. 10 each at a premium of 10% payable at Rs. 2 on application; Rs. 4 on allotment including premium; Rs. 3 on first call and Rs. 2 on second and final call. Applications for 26,000 shares were received. Applications for 4,000 shares were rejected. Pro-rata allotment was made to the remaining applicants. Both the calls were made and all the money were received except the final call on 500 shares which were forfeited. 300 of the forfeited shares were later reissued as fully paid at Rs. 9 per share. Give journal entries.

Answer . 18

ParticularsRs. Rs. 
Bank  A/c Dr.52,000 
To share application a/c 52,000
(Application money received on  
26,000 shares @ Rs. 2 per share)
Share application a/c Dr.52,000 
To share capital a/c 40,000
To share allotment a/c 4,000
To bank  a/c 8,000
(Application money transferred to share capital, adjusted in share allotment and rejected shares refunded)  
Share allotment a/c Dr.80,000 
To share capital a/c 60,000
To securities premium a/c 20,000
(Share allotment money due on  
20,000 shares @ Rs. 4 per share, including Rs. 1 securities premium)
Bank  A/c Dr.76,000 
To share allotment a/c 76,000
(Allotment money received on  
20,000 shares @ Rs. 4 per share less amount already)
Share first call a/c Dr.60,000 
To share capital a/c 60,000
(Share first call due on 20,000 shares @ Rs. 3 per share)  
Bank  A/c Dr.60,000 
To Share first call a/c 60,000
(Share first call received on 20,000 shares @ Rs. 3 per share)  
Share second  & final call a/c Dr.40,000 
To share capital a/c 40,000
(Share final call due on 20,000 shares @ Rs. 2 per share)  
Bank  A/c Dr.39,000 
To Share second  & final call a/c 39,000
(Share final call received on 19,500 shares @ Rs. 2 per share)  
Share capital a/c Dr.5,000 
To share second  & final a/c 1,000
To share forfeiture a/c 4,000
(500 shares forfeited for non- payment of second  and final call money)  
Bank  a/c Dr.2,700 
Share forfeiture a/c Dr.300 
To share capital a/c 3,000
(300 shares re-issued @ 9 per share)  
Share forfeiture a/c Dr.2,100 
To capital reserve a/c 2,100
(Balance in share forfeiture transferred to capital reserve for  
300  shares)

 

Credit balance  in share forfeiture for2,400
300  shares (300x8)
Less: Debit balance  of share forfeiture300
Amount to be transferred to capital reserve2,100

 

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

Payable on application: Rs. 5 per share

Payable on allotment: Rs. 3 per share

Payable on first and final call: Rs. 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 pro-rata 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.

 

Answer . 19

ParticularsRs. Rs. 
Share application a/c Dr.25,00,000 
To share capital a/c (400000x5) 20,00,000
To share allotment a/c 4,00,000
To bank  a/c 1,00,000
(Application money transferred to share capital account, refunded and transferred to share allotment )  
Share allotment a/c Dr.12,00,000 
To share capital a/c 12,00,000
(Share allotment money due on  
4,00,000 shares @ Rs. 3 per share)
Share first and final call  Dr.8,00,000 
To share capital a/c 8,00,000
(Share first and final call due on  
4,00,000 shares @ Rs. 2 per share)
Share capital a/c Dr.4,000 
To share forfeiture a/c 2,500
To share allotment a/c 700
To share first and final call a/c 800
(400 shares forfeited for failing to pay the amount due on allotment and call)  
Share forfeiture a/c Dr.400 
To share capital a/c 400
(Discount on reissue debited to share capital)  
Share forfeiture a/c Dr.2,100 
To capital reserve a/c 2,100
(Balance in share forfeiture transferred to capital reserve)  

Cash Book  (Bank column only)

ParticularsRs. ParticularsRs. 
To share By share 
application a/c25,00,000application a/c1,00,000
To share By balance c/d40,02,100
allotment a/c7,99,300  
To share first and   
final call7,99,200  
To share capital a/c3,600  
    
 41,02,100 41,02,100

 

Working notes: Calculation of amount not received on 400  shares alloted:

Shares applied500
Amount received on application2,500
(500 x 5) 
Less: amount transferred on appli.(400x 5)2,000
Advance  of allotment received on appl.500
Amount due on allotment (400x3)1,200
Less: excess already received with appli.500
Amount not received on allotment700
Calculation of money received on allotment: 
Total amount due on allotment12,00,000
Less: received on application as advance4,00,000
 8,00,000
Less: Amount not received on 400  shares700
Amount received on allotment7,99,300

 

Question 20. Ashoka Limited Company which had issued equity shares of Rs. 20 each at a discount of Rs. 4 per share, forfeited 1,000 shares for non-payment of final call of Rs. 2 per share. 400 of the forfeited shares were reissued at Rs. 14 per share out of the remaining shares of 200 shares reissued at Rs. 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.

Answer . 20

ParticularsDr. (Rs. )Cr. (Rs. )
Share capital a/c Dr.20,000 
To share forfeiture a/c 14,000
To disc. on issue of shares a/c 4,000
To share final call a/c 2,000
(1,000 shares forfeited for failing to pay the amount due on final call)  
Bank  a/c Dr.5,600 
Disc. on issue of shares a/c Dr.1,600 
Share forfeiture a/c Dr.800 
To share capital a/c 8,000
(400 shares reissued at the rate of  
Rs. 14 per share)
Bank  a/c Dr.4,000 
To share capital a/c 4,000
(200 shares reissued at the rate of Rs.   
20 per share)
Share forfeiture a/c Dr.7,600 
To capital reserve a/c 7,600
(Balance of 600  shares in share forfeiture transferred to capital reserve)  

Question 21. Amit holds 100 shares of Rs. 10 each on which he has paid Rs. 1 per share as application money. Bimal holds 200 shares of Rs. 10 each on which he has paid Rs. 1 and Rs. 2 per share as application and allotment money respectively. Chetan holds 300 shares of Rs. 10 each and has paid Rs. 1 on application, Rs. 2 on allotment and Rs. 3 for the first call. They all failed to pay their arrears at the second call of Rs. 2 per share and the directors, therefore forfeited the shares. The shares are reissued subsequently for Rs. 11 per share as fully paid. Journalise the transactions.

Answer. 21 

ParticularsDr. (Rs. )Cr. (Rs. )
Share capital a/c Dr.4,800 
To share forfeiture a/c 2,500
To share allotment a/c 200
To share first call a/c 900
To share second  call a/c 1,200
(600 shares forfeited for failing to pay the amount after making second  call)  
Bank  a/c Dr.6,600 
To share capital a/c 6,000
To securities premium a/c 600
(600 shares reissued at the rate of  
Rs. 11 per share, fully paid  up)
Share forfeiture a/c Dr.2,500 
To capital reserve a/c 2,500
(Balance in share forfeiture transferred to capital reserve after the re-issue)  

 

Calculation of amount transferred to capital reserve:

Application money received from Amit (100 shares x 1 )100
Application and allotment money received from600
Bimal  (200 shares x 3)
Application, allotment and first call money1,800
received from Chetan (300 shares x 6) 
Transferred to capital reserve2,500

Question 22. Ajanta Company Limited having a normal capital of

Rs. 3,00,000, divided into shares of Rs. 10 each offered for public subscription of 20,000 shares payable at

Rs. 2 on application; Rs. 3 on allotment and the balance in two calls of Rs. 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 Rs. 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.

Answer. 22

ParticularsRs. Rs. 
Bank  A/c (24000 x 2)  Dr.48,000 
To share application a/c 48,000
(Application money received on  
24,000 shares @ Rs. 2 per share)
Share application a/c Dr.48,000 
To share capital a/c (20000x2) 40,000
To Bank  A/c (4000 x 2) 8,000
(Application money transferred to share capital and balance refunded)  
Share allotment a/c Dr.60,000 
To share capital a/c 60,000
(Share allotment money due on  
20,000 shares @ Rs. 3 per share)
Bank  A/c Dr.60,000 
To share allotment a/c 60,000
(Allotment money received)  
Share first call  Dr.50,000 
To share capital a/c 50,000
(Share first call due on 20,000 shares @ Rs. 2.5 per share)  
Bank  A/c Dr.50,000 
To share first call 50,000
(Share first call money received)  
Share final call a/c Dr.50,000 
To share capital a/c 50,000
(Share final call due on 20,000 shares @ Rs. 2.5 per share)  
Bank  A/c Dr.48,500 
To share final call 48,500
(Share final call money received on 19,400 shares)  
Share capital a/c Dr.6,000 
To share final call a/c 1,500
To share forfeiture a/c 4,500
(600 shares forfeited for non- payment of final call money)  
Bank  A/c Dr.3,600 
Share forfeiture a/c Dr.400 
To share capital a/c 4,000
(400 shares re-issued @ 9 per share)  
Share forfeiture a/c Dr.2,600 
To capital reserve a/c 2,600
(Balance in share forfeiture transferred to capital reserve for  
400  shares)

 

Balance  Sheet (Extract)

 

ParticularsRs. 
I. Equity and Liabilities 
1. Shareholders’ Funds 
Share Capital1,99,500
Reserves and Surplus2,600
  
II Assets 
1. Cash and cash equivalents2,02,100

 

Notes to Accounts:

ParticularsRs. 
1. Share Capital 
Authorised Capital 
30,000 shares of Rs. 10 each3,00,000
Issued Capital 
20,000 shares of Rs. 10 each2,00,000
Subscribed Capital 
Subscribed and fully paid-up 
19,800 shares of Rs. 10 each  1,98,000 
Add: Share forfeiture  1,5001,99,500
2. Reserves and Surplus 
Capital reserve2,600
3. Cash and Cash Equivalents 
Cash at bank2,02,100

Working notes:  Calculation of capital reserve

Credit balance in share forfeiture for3,000
(400x7.5)
Less: Debit balance of share forfeiture400
(400x1)
Amount to be transferred to capital reserve2,600

 

Question 23. Journalise the following transactions in the books of Bhushan Oil Ltd:

(a) 200 shares of Rs. 100 each issued at a discount of Rs. 10 were forfeited for the non-payment of allotment money of Rs. 50 per share. The first and final call of Rs. 20 per share on these shares were not made. The forfeited shares were reissued at Rs. 70 per share as fully paid- up.

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

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

Answer. 23

Case (a)

ParticularsDr. (Rs. )Cr. (Rs. )
Share capital a/c Dr.16,000 
To share forfeiture a/c 4,000
To disc. on issue of shares a/c 2,000
To share allotment a/c 10,000
(200 shares forfeited for failing to pay the amount due on allotment)  
Bank  a/c Dr.14,000 
Disc. on issue of shares a/c Dr.2,000 
Share forfeiture a/c Dr.4,000 
To share capital a/c 20,000
(200 shares reissued at the rate of Rs.   
70 per share fully paid  up)

 

Case B

 

ParticularsDr. (Rs. )Cr. (Rs. )
Share capital a/c Dr.900 
Securities premium a/c Dr.600 
To share forfeiture a/c 300
To calls-in-arrear a/c 1,200
(150 shares forfeited for non- payment of allotment money inc)  
Bank  a/c Dr.2,250 
To share capital a/c 1,500
To securities premium a/c 750
(150 shares re-issued @ 15 per share fully paid)  
Share forfeiture a/c Dr.300 
To capital reserve a/c 300
(Balance in share forfeiture transferred to capital reserve)  

 

CASE C

ParticularsDr. (Rs. )Cr. (Rs. )
Share capital a/c Dr.20,000 
To share forfeiture a/c 16,000
To share final call a/c 4,000
(400 shares forfeited for failing to pay the amount due on final call)  
Bank  a/c Dr.18,000 
Share forfeiture a/c Dr.2,000 
To share capital a/c 20,000
(400 shares reissued at the rate of Rs.   
45 per share fully paid  up)
Share forfeiture a/c Dr.14,000 
To capital reserve a/c 14,000
(Balance in share forfeiture transferred to capital reserve)  

 

Question 24. Amisha Ltd. invited applications for 40,000 shares of Rs. 100 each at a premium of Rs. 20 per share payable on application Rs. 40: On allotment Rs. 40 (including premium): on first call Rs. 25 and second and final call Rs. 15. Applications were received for 50,000 shares and allotment was made on pro-rata 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 1,000 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 Rs. 85 per share as fully paid, the whole of Rohit’s shares being included. Record necessary journal entries.

Answer . 24

ParticularsRs. Rs. 
Bank  A/c Dr.20,00,000 
To share application a/c 20,00,000
(Application money received on  
50,000 shares @ Rs. 40 per share)
Share application a/c Dr.20,00,000 
To share capital a/c 16,00,000
To share allotment a/c 4,00,000
(Application money transferred to share capital and adjusted in share allotment)  
Share allotment a/c Dr.16,00,000 
To share capital a/c 8,00,000
To securities premium a/c 8,00,000
(Share allotment money due on  
40,000 shares @ Rs. 40 per share, including Rs. 20 securities premium)
Bank  A/c Dr.11,82,000 
To share allotment a/c 11,82,000
(Allotment money received on  
39,400 shares @ Rs. 40 per share less amount already)
Share capital a/c Dr.36,000 
Securities premium a/c Dr.12,000 
To share allotment a/c 18,000
To share forfeiture a/c 30,000
(600 shares forfeited for non- payment of allotment money)  
Share first call a/c Dr.9,85,000 
To share capital a/c 9,85,000
(Share first call due on 39,400 shares @ Rs. 25 per share)  
Bank  A/c Dr.9,65,000 
To Share first call a/c 9,65,000
(Share first call received on 38,600  
shares @ Rs. 25 per share)  
Share second  & final call a/c Dr.5,91,000 
To share capital a/c 5,91,000
(Share final call due on 39,400 shares @ Rs. 15 per share)  
Bank  A/c Dr.5,79,000 
To Share second  & final call a/c 5,79,000
(Share final call received on 38,600 shares @ Rs. 15 per share)  
Share capital a/c Dr.80,000 
To share second  & final a/c 12,000
To Share first call a/c 20,000
To share forfeiture a/c 48,000
(800 shares forfeited for non- payment of two calls money)  
Bank  a/c Dr.1,02,000 
Share forfeiture a/c Dr.18,000 
To share capital a/c 1,20,000
(1,200 shares re-issued @ 85 per share as fully paid  up)  
Share forfeiture a/c Dr.48,000 
To capital reserve a/c 48,000
(Balance in share forfeiture transferred to capital reserve)  

 

 

Working notes: Calculation of amount not received from Rohit on allotment:

Shares applied by Rohit750
Amount received on application from Rohit30,000
(750 x 40) 
Less: amount adjusted on appli.(600x 40)24,000
Advance  of allotment received on appl.6,000
Rohit’s money due on allotment (600x40)24,000
Less: excess already received with appli.6,000
Amount not received from Rohit on allotment18,000
  
Calculation of money received on allotment: 
  
Total amount due on allotment16,00,000
(40,000x40)
Less: received on application as advance4,00,000
 12,00,000
Less: Amount not received from Rohit18,000
Amount received on allotment11,82,000
  
Calculation of Capital reserve 
On 600  shares of Rohit + On 600  shares of Ashmita 
21,000 + 27,000 = Rs. 48,000 
  

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