CBSE Class 12 Accountancy Issue of Shares Assignment

Question. True/False:
According to the below given information the final call per share is Rs.22.
The subscribed capital of a company is Rs. 80,00,000 and the nominal value of the share is Rs.100 each. There were no calls in arrear till the final call was made . The final call made was paid on 77,500 shares only . The balance in the calls in arrear amounted to Rs.55,000.
Answer. True

Question. True/ False :
Securities premium received on issue of shares cannot be used for the purpose of buy back of shares.
Answer. False

Question. True/False-Share application amount is in the nature of Real account
Answer. False

Question. Arrange the following in proper sequence as types of “Share Capital”
(A) Paid up capital
(B) Issued capital
(C) Subscribed capital
(D) Called up capital
Answer. Issued, Subscribed, Called –up, Paid-up.

Question. Maximum limit of premium on shares is :
(A) 32%
(B) 20%
(C) No limit
(D) 100%
Answer. C

Question. Amount of money not received out of called up capital is :
(A) Added to share capital
(B) Subtracted from share capital
(C) Shown as current liabilities
(D) Shown as current asset
Answer. B

Question. Following amounts were payable on issue of shares by a company : Rs.3 on application , Rs.3 on allotment , Rs.2 on first call and Rs.2 on final call . X holding 500 shares paid only application and allotment money whereas Y holding 400 shares did not pay final call . Amount of calls in arrear will be:
(A) 3,800
(B.2,800
(C) 1,800
(D) 6,200
Answer. B

Question. Rajan Limited issued 50,000 shares at a price lower than the nominal value of the share. The shares issued are called:
(A) Sweat equity shares
(B) Redeemable Preference shares
(C) Equity shares
(D) Bonus shares
Answer. A

Question. E Ltd. had allotted 10,000 shares to the applicants of 14,000 shares on pro-rata basis, application money on another 6000 shares was refunded .The amount payable on the application was Rs.2. Sitaraman applied for 420 shares . The number of shares allotted to him will be:
(A) 60 shares
(B) 340 shares
(C) 320 shares
(D) 300 shares
Answer. D

Question. A company issued 4,000 equity shares of rupees 10 each at par payable as under:
On application rupees 3 , on allotment rupees 2; on first call rupees 4 and on final call rupees 1 per share. Applicants were received for 16,000 share . Application for 6,000 shares were rejected and pro-rata allotment was made to the applicants for 10,000 shares . How much amount will be received in cash on first call,when excess application money is adjusted towards amount due on allotments and calls :
(A) Rupees 6.000
(B) nil
(C) Rupees 16,000
(D) Rupees 10,000
Answer. A

Question. A company issued 4000 equity shares of rupees 50 each at par payable as under:
On application rupees 20%, on allotment 40% ; on first call 10% ; on final call -balance Applications were received for 10,000 shares . Allotment was made pro-rata . How much amount will be received in cash on allotment?
(A) Rupees 6.000
(B) nil
(C) Rupees 16,000
(D) Rupees 20,000
Answer. D

Question. Which one of the following is not a part of subscribed capital:
(A) Equity shares issued to vendor
(B) Preference shares of convertible type
(C) Forfeited shares
(D) Bonus shares
Answer. C

Question. When nominal (face) value of a share is called up by the company but as some shareholders did not pay the money, the shares are forfeited . The share capital is shown in the balance sheet (notes) of a company under the following heading:
(A) Subscribed and fully paid up
(B) Subscribed but not fully paid up
(C) Subscribed and called up
(D) Subscribed but not called up
Answer. A

Question. Zee Ltd issued 15,000 equity shares of Rs.20 each at a premium of Rs.5 payable Rs.5 on application,Rs.10 on allotment (including premium) and the balance on first and final call. The company received applications for 22,500 shares and allotment was made pro rata. Bittoo to whom 1,200 shares were allotted, failed to pay the amount due on allotment. All his shares were forfeited after the call was made. The forfeited shares were reissued to Dheeraj at par. Assuming that no other bank transactions took place, the bank balance of the company after the above transactions is :
(A) Rs.6,85,000
(B) Rs.3,60,500
(C) Rs.3,78,000
(D) Rs.6,34,000
Answer. D

Question. Zen Ltd purchased the sundry assets of M/s Surat Industries for Rs.28,60,000 payable in fully paid shares of Rs.100 each. State the number of shares issued to vendor when issued at premium of 10%.
(A) 28,000
(B) 31,778
(C) 28,600
(D) 26,000
Answer. C

Question. The subscribed share capital of Mukand Ltd is Rs.1,00,00,000 of Rs.100 each. There were no calls in arrear till the final call was made. The final call made was paid on 97,500 shares. The calls in arrear amounted to Rs.87,500.The final call on share :
(A) Rs.20
(B) Rs.35
(C) Rs.25
(D) Rs.45
Answer. B

Question. These shares which in addition to the fixed preference dividend, carry a right to participate in the surplus profits, if any, after dividend at a stipulated rate has been paid to the equity share holders are called:
(A) Participating preference shares
(B) Convertible preference shares
(C) Redeemable preference shares
(D) Cumulative preference shares
Answer. A

Question. T Ltd had allotted 20,000 shares to the applicants of 24,000 shares on pro rata basis. The amount payable on application is Rs.2. Manoranjan applied for 450 shares. The number of shares allotted and the amount carried forward for adjustment against allotment money due from him is:
(A) 150 shares,Rs.375
(B) 375 shares,Rs.150
(C) 400 shares,Rs.100
(D) 300 shares,Rs.300
Answer. B

Question. A company forfeited 3,000 shares of Rs.10 each(which were issued at par) held by Kishore for nonpayment of allotment money ofRs.5 per share.The called up value per share was Rs.8.On forfeiture, the amount debited to share capital:
(A) Rs.30,000
(B) Rs.24,000
(C) Rs.15,000
(D) Rs.6,000
Answer. B

Question. Z limited issued shares of Rs.100 each at a premium of 10%. Mr. Q purchased 500 shares and paid Rs.20 on application but did not pay the allotment money of Rs.30. If the company forfeited his 30% shares, the forfeiture account will be credited by :
(A) Rs. 4500
(B) Rs. 3500
(C) Rs. 1650
(D) Rs. 3000
Answer. D

Question. Daisy Limited forfeited 200 shares Rs.10 each who had applied for 500 shares, issued at a premium of 10% for nonpayment of final call of Rs.3 per share. Out of these 100 shares were issued as fully paid up for Rs.15. The profit on reissue is :
(A ) Rs. 700
(B) Rs. 6400
(C) Rs. 300
(D) Rs. 400
Answer. A

Question. Mithas Limited was formed with share capital of Rs. 50,00,000 divided into 50,000 shares of Rs.100 each. 9,000 shares were issued to the vendor as fully paid for purchase consideration of a furniture acquired. 30,000 shares were allotted in payment of cash on which Rs.70 per share was called and paid . State the amount of subscribed capital :
(A) Rs. 50,00,000
(B) Rs. 30,50,000
(C) Rs. 30,00,000
(D) Rs. 20,00,000
Answer. C

Question. Faltu Limited invited application for 2,00,000 shares of Rs.10 each. These shares were issued at premium of Rs.11 each which was allowed at the time of allotment. All money was called and duly received except on 10,000 shares on which only application money of Rs.3 per share was received.
The company forfeited all the shares. 7000 of forfeited share where re-issued at Rs.13per share. State the amount of securities premium to be shown under the head -Reserve and surplus.
(A) Rs.20,00,000
(B) Rs.11,11,000
(C) Rs.8,11,000
(D) Rs.21,11,000
Answer. D

Question. Mahima limited has an authorised capital of Rs. 1,00,00,000 divided into 1,00,000 equity shares of Rs .100 each . If offered 90,000 equity shares Rs.10 each at a premium of Rs.8 .The public applied for 81,000 equity shares. Till 31st March 2018, Rs.17 (including premium) was called . An applicant holding 5000 shares did not pay first call of Rs.2per share.
As per the above given information:
………. is the amount of Share capital to be shown in the balance sheet of the company.
Answer. Rs.7,19,000

Question. Out of total face value, liability of a shareholder is limited to …………… value of the share allotted to him.
Answer. Called up

Question. Match the following :
a) Cumulative Pref. Share       i) Repaid after some time
b) Participating Pref. Share     ii) converts into equity shares
c) Redeemable Pref. shares    iii) Dividend accumulates if not paid
d) Convertible Pref. shares     iv) Gets share in surplus profit
The correct match is:
A) a-ii ,b-i, c-iii, d-iv
B) a-iii, b-iv, c-i, d-ii
C) a-iii, b-iv, c-ii ,d-i
D) a-ii, b-iv, c-iii, d-i
Answer. B

Question 1. S Ltd. offers 1,00,000 equity shares of Rs.10 each payable Rs.3 on application, Rs.3 on allotment(including premium Rs.2), Rs.4 on first call three months after allotment and Rs.2 on final call three months after first call. Applications were received for 1,58,500 shares and allotment was made as under: Shares Allotted Allotment in full 19,000 (Mr. D paid in full on allotment in respect of 4,000 shares) Allotment of 2/3 of shares applied for 80,000 Allotment of 1/2 of shares applied for 1,000 Application money of Rs.52,500 in respect of 17,500 shares upon which no allotment was made was returned to applicants. All amounts were received except final call on 100 shares which were forfeited and reissued later on Rs.9 each. Interest on call in advance is paid @ 12% p.a.(capital reserve Rs.700)
Answer:
Journal Entries in the Books of S Ltd.
1. Bank A/c Dr. 4,75,500
    To Equity Share Application A/c 4,75,500
(Being application money received for \(1,58,500\) shares @ Rs.3 per share)
2. Equity Share Application A/c Dr. 4,75,500
    To Equity Share Capital A/c 3,00,000
    To Securities Premium A/c 38,000
    To Equity Share Allotment A/c 85,000
    To Bank A/c 52,500
(Being application money adjusted and excess refunded)
3. Equity Share Allotment A/c Dr. 3,00,000
    To Equity Share Capital A/c 1,00,000
    To Securities Premium A/c 2,00,000
(Being allotment due with premium)
4. Bank A/c Dr. 2,28,000
Calls-in-Advance A/c Dr. 16,000
    To Equity Share Allotment A/c 2,15,000
    To Equity Share First Call A/c 29,000
(Being allotment received with advance call money from Mr. D)
5. Equity Share First Call A/c Dr. 4,00,000
    To Equity Share Capital A/c 4,00,000
(Being first call due)
6. Bank A/c Dr. 3,71,000
Calls-in-Advance A/c Dr. 29,000
    To Equity Share First Call A/c 400,000
(Being first call received and adjusted against advance)
7. Equity Share Final Call A/c Dr. 2,00,000
    To Equity Share Capital A/c 2,00,000
(Being final call due)
8. Bank A/c Dr. 1,99,800
Calls-in-Arrears A/c Dr. 200
    To Equity Share Final Call A/c 2,00,000
(Being final call received except on 100 shares)
9. Interest on Calls-in-Advance A/c Dr. [Calculated amount]
    To Bank A/c [Calculated amount]
(Being interest paid on calls-in-advance @ 12% p.a.)
10. Equity Share Capital A/c Dr. 1,000
    To Calls-in-Arrears A/c 200
    To Forfeited Shares A/c 800
(Being 100 shares forfeited for non-payment of final call)
11. Bank A/c Dr. 900
Forfeited Shares A/c Dr. 100
    To Equity Share Capital A/c 1,000
(Being 100 forfeited shares reissued @ Rs.9 per share fully paid)
12. Forfeited Shares A/c Dr. 700
    To Capital Reserve A/c 700
(Being balance of forfeited shares transferred to capital reserve)
In simple words: Shares are allotted on a pro-rata basis, excess application money is adjusted toward allotment, calls in advance and arrears are accounted for, and forfeited shares are reissued.

Exam Tip: Be careful with pro-rata calculations and adjust excess application money correctly against allotment before computing calls-in-arrears.

Question 2. Rajesh Ltd. issued a prospectus inviting applications for 3,00,000 shares of Rs.10 each at a premium of Rs.4 per share, payable as follows: On Application Rs.4(including Rs.1 premium) On Allotment Rs.3(including Rs.1 premium) On First Call Rs.4(including Rs.1 premium) On Second and Final call Rs.3(including Rs.1 premium) Applications were received for 3,80,000 shares and pro-rata allotment was made on the applications for 3,50,000 shares. It was decided to utilise excess application money towards the sums due on allotment. X, to whom 6,000 shares were allotted, failed to pay the allotment money and his shares were forfeited after allotment. Y, who applied for 10,500 shares failed to pay the two calls and on his such failure, his shares were forfeited. Z, who was allotted 3,000 shares did not pay the final call. Of the shares forfeited, 11,000 shares were reissued as fully paid up for Rs.9 per share, the whole of Y's share being included. Prepare Cash Book, Journal and show the Share Capital in the Balance Sheet.(capital reserve Rs.41,333)
Answer:
Summary of Forfeiture and Reissue Calculations:
1. Applications received = \(3,80,000\), Rejected = \(30,000\), Allotted on pro-rata = \(3,50,000\) shares for \(3,00,000\) shares.
2. Forfeiture of X's shares (\(6,000\) shares allotted): Application money received = \(6,000 \times \frac{3,50,000}{3,00,000} \times 4 = 28,000\). Amount required on application = \(6,000 \times 4 = 24,000\). Excess application = Rs.4,000. Allotment due = \(6,000 \times 3 = 18,000\). Allotment unpaid = \(18,000 - 4,000 = 14,000\).
3. Forfeiture of Y's shares (Applied for \(10,500\) shares, allotted = \(10,500 \times \frac{3,00,000}{3,50,000} = 9,000\) shares).
4. Reissue of \(11,000\) shares including all \(9,000\) of Y's shares and \(2,000\) of X's shares at Rs.9 per share fully paid.
5. Capital Reserve transfer = Rs.41,333.
In simple words: Adjust excess application money to allotment, calculate unpaid calls for defaulting shareholders X, Y, and Z, pass forfeiture entries, reissue shares, and transfer the profit on reissue to capital reserve.

Exam Tip: Always calculate the exact number of shares applied vs allotted when dealing with pro-rata categories to determine calls-in-arrears accurately.

Question 3. Journalise the following(only forfeiture and reissue): (A) A limited company for forfeited 300 shares of Mr.X who had applied for 500 shares on account of non-payment of allotment money Rs.3+2(premium) and first call Rs.2. Only Rs.3 per share was received with application. Out of these, 200 shares were reissued to Mr. Y as fully paid shares for Rs.8 per share.(capital reserve Rs.600) (B) A company forfeited 200 shares of Rs.10 each fully called up issued at 10% discount on which Rs.3 per share was received with application. Amount required to be paid was Rs.2 on allotment, Rs.2 on First call and Rs.2 on final call. Out of these, 100 shares were reissued to Mr. M as fully paid shares at Rs.8 per share.(capital reserve Rs.200)
Answer:
Journal Entries:
(A) Forfeiture and Reissue of Mr. X's Shares:
Equity Share Capital A/c Dr. (\(300 \times 10\)) 3,000
Securities Premium A/c Dr. (\(300 \times 2\)) 600
    To Equity Share Allotment A/c (\(300 \times 5\)) 1,500
    To Equity Share First Call A/c (\(300 \times 2\)) 600
    To Forfeited Shares A/c (Balancing figure) 1,500
(Being 300 shares forfeited for non-payment of allotment and first call)
Bank A/c Dr. (\(200 \times 8\)) 1,600
Forfeited Shares A/c Dr. (\(200 \times 2\)) 400
    To Equity Share Capital A/c (\(200 \times 10\)) 2,000
(Being 200 forfeited shares reissued as fully paid for Rs.8 per share)
Forfeited Shares A/c Dr. 600
    To Capital Reserve A/c 600
(Being proportionate gain on reissue transferred to capital reserve)

(B) Forfeiture and Reissue of Shares issued at Discount:
Equity Share Capital A/c Dr. (\(200 \times 10\)) 2,000
    To Discount on Issue of Shares A/c (\(200 \times 1\)) 200
    To Equity Share Allotment A/c (\(200 \times 2\)) 400
    To Equity Share First Call A/c (\(200 \times 2\)) 400
    To Equity Share Final Call A/c (\(200 \times 2\)) 400
    To Forfeited Shares A/c (Balancing figure) 600
(Being 200 shares forfeited for non-payment of allotment and calls)
Bank A/c Dr. (\(100 \times 8\)) 800
Discount on Issue of Shares A/c Dr. (\(100 \times 1\)) 100
Forfeited Shares A/c Dr. (\(100 \times 1\)) 100
    To Equity Share Capital A/c (\(100 \times 10\)) 1,000
(Being 100 forfeited shares reissued at Rs.8 per share fully paid up)
Forfeited Shares A/c Dr. 200
    To Capital Reserve A/c 200
(Being gain on reissue of 100 shares transferred to capital reserve)
In simple words: Debit share capital with called-up value, cancel unpaid calls and uncalled discount, credit amount already received to forfeited shares, and transfer proportionate reissue gain to capital reserve.

Exam Tip: Remember to debit Securities Premium only if it has not been received from the defaulting shareholder.

Question 4. Jain Ltd. invited applications for issuing 35,000 shares of Rs.10 each at a discount of 10%. The amount was payable as follows: On application - Rs.5 per share; On allotment - Rs.3 per share; On First and Final call-Balance Applications for 50,000 shares were received. Applications for 8,000 shares were rejected and the money of these applicants was refunded. Shares were allotted on pro-rata basis to the remaining applicants and the excess money received with applications from these applicants was adjusted towards sums due on allotment. Jeevan, who had applied for 600 shares failed to pay allotment and first and final call money. Naveen, the holder of 400 shares failed to pay first and final call money. Shares of Jeevan and Naveen, were forfeited. Out of these forfeited shares, 800 shares were reissued @Rs.15 per share fully paid up. The reissued shares included all the shares of Naveen. Pass the necessary journal entries for the above transactions in the books of Jain Ltd.(capital reserve Rs.5,600)
Answer:
Journal Entries in the Books of Jain Ltd.
1. Bank A/c Dr. 2,50,000
    To Equity Share Application A/c 2,50,000
(Being application money received for \(50,000\) shares @ Rs.5 each)
2. Equity Share Application A/c Dr. 2,50,000
    To Equity Share Capital A/c 1,75,000
    To Discount on Issue of Shares A/c 35,000
    To Equity Share Allotment A/c 32,000
    To Bank A/c 40,000
(Being application money adjusted and \(8,000\) applications rejected)
3. Equity Share Allotment A/c Dr. 1,05,000
    To Equity Share Capital A/c 1,05,000
(Being allotment due @ Rs.3 per share)
4. Bank A/c Dr. 71,840
Calls-in-Arrears A/c Dr. 1,160
    To Equity Share Allotment A/c 73,000
(Being allotment received except from Jeevan after adjusting excess application money)
5. Equity Share First and Final Call A/c Dr. 31,500
    To Equity Share Capital A/c 31,500
(Being first and final call due @ Re.1 per share)
6. Bank A/c Dr. 30,700
Calls-in-Arrears A/c Dr. 800
    To Equity Share First and Final Call A/c 31,500
(Being final call received except on Jeevan's and Naveen's shares)
7. Equity Share Capital A/c Dr. 9,000
    To Calls-in-Arrears A/c 1,960
    To Forfeited Shares A/c 7,040
(Being shares of Jeevan and Naveen forfeited for non-payment of dues)
8. Bank A/c Dr. 12,000
    To Equity Share Capital A/c 8,000
    To Securities Premium A/c 4,000
(Being 800 forfeited shares reissued at Rs.15 per share fully paid)
9. Forfeited Shares A/c Dr. 5,600
    To Capital Reserve A/c 5,600
(Being profit on reissue transferred to capital reserve)
In simple words: Record application, pro-rata adjustment, allotment, calls, forfeiture of default shares, reissue at a premium, and capital reserve transfer.

Exam Tip: Discount on issue of shares is written off against Securities Premium or Statement of Profit and Loss.

Question 5. Sonam Ltd. issued 20,000 shares of Rs.10 each at a discount of rs.1 per share(to be adjusted on allotment) payable as follows: Rs.2.50 per share on Application Rs.4 on per share on Allotment Rs.2.50 per share on Ist and final call Subscription list was closed on Ist January, 2012 by which applications for 45,000 shares had been received. Allotment was made as follows: List A - Applicants for 5,000 shares were allotted in full List B - Applicants for 10,000 shares wee allotted 5,000 shares on pro-rata basis List C - Applicants for 30,000 shares were allotted 10,000 shares on pro-rata basis. Application money in excess of that required on allotment could be utilised for calls. All the shareholders paid the amounts due on allotment and call except Y (who was allotted 400 shares under List B) and Z(who was allotted 200 shares under List C). Both of these shareholders paid only the application money. Their shares were duly forfeited and were reissued @Rs.7 per share full paid up. Pass necessary journal entries to record the above transactions.(capital reserve Rs.2,300)
Answer:
Journal Entries in the Books of Sonam Ltd.
1. Bank A/c Dr. 1,12,500
    To Equity Share Application A/c 1,12,500
(Being application money received for \(45,000\) shares @ Rs.2.50 each)
2. Equity Share Application A/c Dr. 1,12,500
    To Equity Share Capital A/c 50,000
    To Equity Share Allotment A/c 50,000
    To Calls-in-Advance A/c 12,500
    To Bank A/c [Refund if any / adjusted]
(Being application money adjusted across categories)
3. Equity Share Allotment A/c Dr. 80,000
    To Equity Share Capital A/c 70,000
    To Discount on Issue of Shares A/c 10,000
(Being allotment due with discount)
4. Bank A/c Dr. [Calculated amount]
Calls-in-Advance A/c Dr. [Calculated amount]
    To Equity Share Allotment A/c [Calculated amount]
(Being allotment money received after adjusting excess application money)
5. Equity Share First and Final Call A/c Dr. 50,000
    To Equity Share Capital A/c 50,000
(Being first and final call due)
6. Bank A/c Dr. [Calculated amount]
    To Equity Share First and Final Call A/c [Calculated amount]
(Being call money received except from Y and Z)
7. Equity Share Capital A/c Dr. 6,000
    To Discount on Issue of Shares A/c 600
    To Equity Share Allotment A/c [Unpaid]
    To Equity Share First and Final Call A/c [Unpaid]
    To Forfeited Shares A/c [Balancing figure]
(Being shares of Y and Z forfeited for non-payment of dues)
8. Bank A/c Dr. 4,200
Discount on Issue of Shares A/c Dr. 600
Forfeited Shares A/c Dr. 1,200
    To Equity Share Capital A/c 6,000
(Being 600 forfeited shares reissued @ Rs.7 per share fully paid up)
9. Forfeited Shares A/c Dr. 2,300
    To Capital Reserve A/c 2,300
(Being gain on reissue transferred to capital reserve)
In simple words: Handle multi-category pro-rata allotment, adjust excess application money to allotment and calls, forfeit defaulting shares, reissue at a discount, and transfer profit to capital reserve.

Exam Tip: Track surplus application money carefully across three different allotment lists before determining calls-in-arrears.

Question 6. Sudarshan Ltd. invited applications for 1,00,000 equity shares of Rs.10 each. The shares were issued at a premium of Rs.5 per share. The amount was payable as follows: On Application and allotment Rs.8 per share(including premium Rs.3) Balance including premium on the first and final call. Applications for 1,50,000 shares were received. Applications for 10,000 shares were rejected and pro-rata allotment was made to the remaining applicants on the following basis: (1) Applicants for 80,000 shares were allotted 60,000 shares; and (2) Applicants for 60,000 shares were allotted 40,000 shares. Excess application and allotment money could be utilized for calls. X, who belonged to the first category and was allotted 300 shares, failed to pay the first call money. Y, who belonged to the second category and was allotted 200 shares also failed to pay the first call money. These shares were forfeited. the forfeited shares were reissued @ Rs.12 per share fully paid-up. Pass the necessary journal entries and prepare Cash Book.( capital reserve Rs.4,100).
Answer:
Journal Entries and Cash Book Summary in the Books of Sudarshan Ltd.
1. Bank A/c Dr. 12,00,000
    To Equity Share Application and Allotment A/c 12,00,000
(Being application and allotment money received for \(1,50,000\) shares @ Rs.8 each)
2. Equity Share Application and Allotment A/c Dr. 12,00,000
    To Equity Share Capital A/c 5,00,000
    To Securities Premium A/c 3,00,000
    To Equity Share First and Final Call A/c 3,20,000
    To Bank A/c 80,000
(Being application and allotment adjusted and excess refunded/transferred to calls)
3. Equity Share First and Final Call A/c Dr. 7,00,000
    To Equity Share Capital A/c 5,00,000
    To Securities Premium A/c 2,00,000
(Being first and final call due with premium)
4. Bank A/c Dr. 3,75,400
Calls-in-Arrears A/c Dr. 4,600
    To Equity Share First and Final Call A/c 3,80,000
(Being first and final call received except from X and Y after adjusting advance)
5. Equity Share Capital A/c Dr. 5,000
Securities Premium A/c Dr. [If unreceived] ...
    To Calls-in-Arrears A/c 4,600
    To Forfeited Shares A/c [Balancing figure]
(Being 500 shares forfeited for non-payment of first and final call)
6. Bank A/c Dr. 6,000
    To Equity Share Capital A/c 5,000
    To Securities Premium A/c 1,000
(Being 500 forfeited shares reissued @ Rs.12 per share fully paid-up)
7. Forfeited Shares A/c Dr. 4,100
    To Capital Reserve A/c 4,100
(Being profit on reissue transferred to capital reserve)
In simple words: Combine application and allotment into one stage, adjust excess money towards the final call, forfeit shares on call default, reissue at a premium, and transfer gain to capital reserve.

Exam Tip: When application and allotment are received together, ensure all calculations for excess money match the combined rate per share.

Question 7. Fresco Ltd. invited applications for issuing 3,00,000 Equity shares of Rs.10 each at a discount of 3%. The amount was payable as follows: On Application - Rs.2 per share On Allotment - Rs.4 per share On First and Final call - the balance amount The issue was fully subscribed. Shares were allotted to all the applicants. 'A' to whom 4,000 shares were allotted paid the entire amount of his share money at the time of allotment. 'B' to whom 1,800 shares were allotted failed to pay the allotment money and his shares were immediately forfeited. Afterwards the first and final call was made. 'C' did not pay the first and final call on his 750 shares and his shares were also forfeited. All the forfeited shares of 'B' and 500 shares of 'C' were reissued for Rs.8 per share fully paid up. Pass necessary journal entries in the books of Fresco Ltd. for the above transactions.(C/R Rs.2,690)
Answer:
Journal Entries in the Books of Fresco Ltd.
1. Bank A/c Dr. 6,00,000
    To Equity Share Application A/c 6,00000
(Being application money received for \(3,00,000\) shares @ Rs.2 each)
2. Equity Share Application A/c Dr. 6,00,000
    To Equity Share Capital A/c 6,00,000
(Being application money transferred to share capital)
3. Equity Share Allotment A/c Dr. 12,00,000
Discount on Issue of Shares A/c Dr. 90,000
    To Equity Share Capital A/c 12,90,000
(Being allotment due at Rs.4 per share with 3% discount on nominal value of Rs.10 = Rs.0.30 per share total discount on issue)
4. Bank A/c Dr. 11,82,400
Calls-in-Advance A/c Dr. [For A's advance] 16,800
    To Equity Share Allotment A/c 11,92,200
(Being allotment received with advance from A for call money)
5. Equity Share Capital A/c Dr. 18,000
    To Discount on Issue of Shares A/c 540
    To Equity Share Allotment A/c 7,200
    To Forfeited Shares A/c 10,260
(Being 1,800 shares of B forfeited for non-payment of allotment)
6. Equity Share First and Final Call A/c Dr. 8,91,450
    To Equity Share Capital A/c 8,91,450
(Being first and final call due on remaining shares)
7. Bank A/c Dr. 8,83,950
Calls-in-Advance A/c Dr. 16,800
    To Equity Share First and Final Call A/c 9,00,750
(Being call received and advance adjusted)
8. Equity Share Capital A/c Dr. 7,500
    To Discount on Issue of Shares A/c 225
    To Equity Share First and Final Call A/c 3,750
    To Forfeited Shares A/c 3,525
(Being 750 shares of C forfeited for non-payment of final call)
9. Bank A/c Dr. 18,400
Discount on Issue of Shares A/c Dr. [If applicable on reissue] / Forfeited Shares Dr. 4,600
    To Equity Share Capital A/c 23,000
(Being 2,300 forfeited shares reissued at Rs.8 per share fully paid)
10. Forfeited Shares A/c Dr. 2,690
    To Capital Reserve A/c 2,690
(Being capital gain on reissue transferred to capital reserve)
In simple words: Account for shares issued at a discount, handle early payment (calls-in-advance), forfeit defaulting shares at different stages, reissue shares, and transfer profit to capital reserve.

Exam Tip: Shares cannot be issued at a discount exceeding limits under the Companies Act, and proportionate discount must be reversed upon forfeiture.

VALUE BASED QUESTIONS

Question 8. Green Valley Ltd. offered 5,00,000 shares to public for subscription. Applications were received for 7,50,000 shares and pro-rata allotment was made to the applicants of 6,00,000 shares. Arushi applied for 4,800 shares and Navya was allotted 3,000 shares. (A) How many applications have been rejected altogether? (B) What is the pro-rata ratio? (C) Which value has been affected by rejecting the applications. Suggest a better alternative for the same.
Answer:
(A) Total applications received = \(7,50,000\). Applications considered for pro-rata allotment = \(6,00,000\). Therefore, applications rejected altogether = \(7,50,000 - 6,00,000 = 1,50,000\) shares.
(B) Pro-rata ratio for the allotted category = Applications : Allotment = \(6,00,000 : 5,00,000 = 6:5\).
(C) Rejecting applications affects employment opportunities and trust of small investors, causing discouragement. A better alternative is to accommodate small investors through a wider pro-rata allotment or encourage mutual funds and systematic investment plans.
In simple words: Subtracted accepted applications from total applications to find rejections, calculated the ratio of applied to allotted shares, and discussed social impact on small investors.

Exam Tip: In value-based questions, clearly link business decisions (like rejection of shares) to social responsibility and investor relations.

Question 9. Chirag Ltd. forfeited 3,000 shares of Rs.10 each, Rs.7 called up, issued at a premium of 20%( to be paid at the time of allotment) for non-payment of a first call of Rs.2 per share. Out of these 1,800 shares were reissued @Rs.7 paid up for Rs.4 per share.Which value has been affected by forfeiting above mentioned 3,000 shares just after first call. Suggest a better alternative.
Answer:
Forfeiting shares immediately upon missing a single call without giving adequate notice or reminders affects investor confidence, creates financial stress for small retail investors, and harms the corporate goodwill of the company.
Better Alternative: The company should issue formal reminders, grant reasonable extensions, or charge nominal interest on delayed calls rather than resorting to immediate forfeiture.
In simple words: Immediate forfeiture harms investor trust and financial well-being; providing reminders and grace periods is a better corporate practice.

Exam Tip: Emphasize ethical business practices and investor communication in value-based accounting questions.

Question 10.(A) Amrit Ltd. has a paid up share capital of Rs.10 Crore and a balance of Rs.2 Crore in securities premium account. The company management do not want to carry over this balance.State the purposes for which this balance can be utilized.
Answer:
According to Section 52(2) of the Companies Act, 2013, the Securities Premium Account can be utilized for:
1. Issuing fully paid bonus shares to members.
2. Writing off preliminary expenses of the company.
3. Writing off expenses of, or commission paid or discount allowed on, any issue of shares or debentures.
4. Providing for the premium payable on the redemption of redeemable preference shares or debentures.
5. Purchasing its own shares (buyback) under Section 68.
In simple words: Securities premium can be used for bonus shares, writing off preliminary/issue expenses, premium on redemption, or share buyback.

Exam Tip: Memorize the statutory provisions under Section 52(2) of the Companies Act, 2013, as this is a frequent theoretical question.

Question 10.(B) Amrit Ltd. made a provision of 2% of its profits or Rs.20 Lac, whichever is higher, for the medical care, social security and recreation of its employees. State the values served by this decision.
Answer:
The decision reflects corporate social responsibility (CSR), employee welfare, commitment to work-life balance, mutual trust, and building a motivated workforce.
In simple words: This policy promotes employee health, security, job satisfaction, and ethical corporate values.

Exam Tip: Highlight keywords like employee welfare, corporate social responsibility (CSR), and ethical management in your answer.