Accounting For Share Capital Important Questions for CBSE Class 12 Accountancy

Official CBSE Study Materials for Class 12 Accountancy

Explore structured advanced study materials through the CBSE Class 12 Accountancy Accounting For Share Capital Important Questions Set 01. Tailored for Class 12 learners, utilizing these Accountancy resources ensures thorough preparation and strengthens foundational knowledge before final CBSE evaluations.

Advanced Resources for Accountancy

View or download the dedicated CBSE Class 12 Accountancy Accounting For Share Capital Important Questions Set 01 resource below. Engaging with these advanced study guides under focused conditions ensures continuous academic progress and mastery of the 2026-27 curriculum for Part 2 Chapter 01 Accounting for Share Capital.

Very Short Answer Questions (1 Mark)

Question 1. State whether the following statement is True or False: Authorised Capital for Equity share capital and Preference share capital is required to be shown separately in the Notes to Accounts on Share Capital.
Answer:
True

Teacher's Note:
1. Each class of shares is shown separately under Authorised, Issued and Subscribed capital.

Question 2. State whether the following statement is True or False: Profit on reissue of shares is transferred to Capital Redemption Reserve.
Answer:
False

Teacher's Note:
1. Gain on reissue of forfeited shares is a capital profit and goes to Capital Reserve, not Capital Redemption Reserve.

Question 3. State whether the following statement is True or False: Securities Premium Reserve cannot be used for writing off Loss or Discount on issue of Debentures.
Answer:
False

Teacher's Note:
1. Section 52(2) allows Securities Premium to be used for writing off discount on issue of debentures.

Question 4. State whether the following statement is True or False: Redeemable preference shares are shown as long-term Borrowings in the Balance Sheet.
Answer:
False

Teacher's Note:
1. Redeemable preference shares are part of Share Capital under Shareholders' Funds.

Question 5. State whether the following statement is True or False: Cumulative Preference shares are such shares which carry the right to receive arrears of dividend before dividend payment to equity shareholders.
Answer:
True

Teacher's Note:
1. Unpaid dividend of cumulative preference shares accumulates and is paid before any equity dividend.

Question 6. Fill in the blank: A company issues 1,00,000 shares of ₹50 each for subscription. It receives applications for 80,000 shares. It cannot issue shares as it has not received ______________.
Answer:
minimum subscription

Teacher's Note:
1. Minimum subscription is 90% of the issue; here only 80% was applied for.

Question 7. Fill in the blank: ______________ on reissue of forfeited shares cannot be more than the amount received on forfeited shares.
Answer:
Discount

Teacher's Note:
1. Any balance left in Share Forfeited after the discount is a capital profit.

Question 8. Fill in the blank: Shares can be issued for ______________ to promoters or for purchase of business or assets.
Answer:
consideration other than cash

Teacher's Note:
1. In such issues no cash is received; the vendor or promoter is credited instead.

Question 9. Fill in the blank: Securities premium reserve can be utilised for issuing ______________ shares.
Answer:
bonus

Teacher's Note:
1. Fully paid bonus shares are the commonest permitted use of Securities Premium under Section 52(2).

Question 10. Fill in the blank: Unlike ______________ Preference shares, ______________ Preference shares are those shares on which dividend, if not paid in one year, arrears will not be paid in later years.
Answer:
Cumulative, Non-Cumulative

Teacher's Note:
1. Preference shares are presumed cumulative unless stated otherwise.

Question 11. What is meant by Authorised Capital of a company? [CBSE (AI) 2011]
OR
Give the meaning of 'Registered Capital' of a company. [CBSE (F) 2011]
Answer:
This is the amount stated in the capital clause of the memorandum of association with which the company is registered. It is the maximum amount which a company can raise during its lifetime.

Teacher's Note:
1. Authorised capital can be increased by altering the capital clause; it is shown first in the Notes to Accounts on Share Capital.

Question 12. What is meant by Issued Capital? [CBSE 2019]
Answer:
The part of Authorised Share Capital, which is offered to the public for subscription is called 'Issued Capital'.

Teacher's Note:
1. Issued capital also includes shares issued to vendors or promoters for consideration other than cash.

Question 13. What do you mean by Capital Reserve? [CBSE (AI) 2010]
Answer:
Capital reserve is that reserve which is created out of capital profits such as profit on sale of fixed assets, profit on revaluation of assets, premium on issue of shares and debentures etc.

Teacher's Note:
1. Do not confuse Capital Reserve with Reserve Capital, which is uncalled capital kept for winding up.

Question 14. Give the meaning of forfeiture of shares. [CBSE Delhi and (AI) 2015]
Answer:
Forfeiture of shares means cancellation of shares allotted for the non-payment of allotment or call money and treating actually received amount as forfeited.

Teacher's Note:
1. Forfeiture must be done as per the Articles of Association, after giving due notice to the shareholder.

Question 15. Y Ltd. forfeited 100 equity shares of ₹10 each for the non-payment of the first call of ₹2 per share. The final call of ₹2 per share was yet to be made.
Calculate the maximum amount of discount at which these shares can be reissued. [CBSE Delhi 2017]
Answer:
The maximum amount of discount at which these shares can be reissued is ₹6 per share or ₹600.

Teacher's Note:
1. Amount paid = ₹10 − ₹2 (first call unpaid) − ₹2 (final call not made) = ₹6; the discount cannot exceed this.

Question 16. What is meant by Pro-rata Allotment of shares? [CBSE (AI) 2010]
Answer:
Pro-rata allotment is that allotment of shares when applicants may be allotted less number of shares than they have applied for.

Teacher's Note:
1. In pro-rata allotment, excess application money is usually adjusted towards allotment and calls.

Short Answer Questions (2 Marks)

Question 17. State any three purposes other than 'issue of bonus shares' for which securities premium can be utilised. [CBSE Delhi 2015]
Answer:
The amount received as securities premium can be used other than 'issue of bonus shares' for the following purposes:
(i) In writing off the preliminary expenses of the company.
(ii) For providing the premium payable on redemption of redeemable preference shares or debentures of the company.
(iii) For buy-back of its own shares.

Teacher's Note:
1. Another permitted use under Section 52(2) is writing off expenses, commission or discount on issue of shares or debentures.

Question 18. Guru Ltd. invited applications for issuing 5,00,000 equity shares of ₹100 each at a premium of ₹5 per share. Because of favourable market conditions the issue was over-subscribed and applications for 15,00,000 shares were received.
Suggest the alternatives available to the Board of Directors for the allotment of shares. [CBSE (AI) 2015]
Answer:
Alternatives available to the Board of directors are:
(i) Excess applications may be rejected and shares may be allotted to the remaining applicants as full.
(ii) Shares may be allotted to all the applicants on pro-rata basis.
(iii) Some of the applications may be rejected and shares may be allotted to the remaining applicants on pro-rata basis.

Teacher's Note:
1. Money on rejected applications is refunded; excess money on pro-rata applicants is usually adjusted towards allotment.

Question 19. Rose Ltd. issued 25,000 shares of ₹10 each credited as fully paid to the promoters for their services. It also issued 15,000 shares of ₹10 each credited as fully paid to the underwriters for their commission. Give Journal entries.
Answer:
Journal

Particulars	Dr. (₹)	Cr. (₹)
Incorporation Expenses A/c Dr.	2,50,000
To Promoters A/c		2,50,000
(Being amount due to the promoters)
Promoters' A/c Dr.	2,50,000
To Share Capital A/c		2,50,000
(Being the issue of 25,000 shares to promoters @ ₹10 each)
Underwriting Commission A/c Dr.	1,50,000
To Underwriters' A/c		1,50,000
(Being underwriters' commission due)
Underwriters' A/c Dr.	1,50,000
To Share Capital A/c		1,50,000
(Being issue of shares of ₹10 each to underwriters)

Teacher's Note:
1. First record the amount due to promoters/underwriters, then discharge it by issuing shares.

Question 20. Complete the following Journal entries:
In the Books of Madhav Ltd.
Journal Entries
Date Particulars L.F. Dr. (₹) Cr. (₹)
Plant A/c   Dr. 5,00,000
Vehicles A/c   Dr. 7,00,000
Stock A/c   Dr. 3,00,000
Machinery A/c   Dr. 6,00,000
    To Capital Reserve A/c (Balancing Figure) 1,00,000
    To Sundry Creditors A/c 5,00,000
    To Gupta Brothers ………
(Being business purchased from Gupta Bros.)
………   Dr. ………
    To ……… ………
(Being 15,000 equity shares of ₹100 each issued at par against purchase consideration)

Answer:
In the Books of Madhav Ltd.
Journal Entries

Particulars	Dr. (₹)	Cr. (₹)
Plant A/c Dr.	5,00,000
Vehicles A/c Dr.	7,00,000
Stock A/c Dr.	3,00,000
Machinery A/c Dr.	6,00,000
To Capital Reserve A/c (Balancing Figure)		1,00,000
To Sundry Creditors A/c		5,00,000
To Gupta Brothers		15,00,000
(Being business purchased from Gupta Bros.)
Gupta Brothers Dr.	15,00,000
To Equity Share Capital A/c		15,00,000
(Being 15,000 equity shares of ₹100 each issued at par against purchase consideration)

Purchase consideration = 15,000 × ₹100 = ₹15,00,000.

Teacher's Note:
1. The purchase consideration comes from the shares issued (15,000 × ₹100); assets ₹21,00,000 less creditors ₹5,00,000 = ₹16,00,000 net assets, so the ₹1,00,000 surplus is Capital Reserve.
2. When purchase consideration is less than net assets, the difference is credited to Capital Reserve; when more, it is debited to Goodwill.

Question 21. You are required to complete the following incomplete journal entries related to forfeiture of shares originally issued at premium:
Journal
Date Particulars L.F. Dr. (₹) Cr. (₹)
Share Capital A/c   Dr. 350
………   Dr. 250
    To ……… ………
    To ……… ………
(Being 50 shares forfeited for non-payment of allotment money of ₹9 per share including ₹5 of securities premium per share)
Bank A/c   Dr. 600
    To ……… ………
    To ……… ………
(Being 50 forfeited shares reissued at ₹12 each fully paid-up)
………   Dr. ………
    To ……… ………
(Being profit on reissue of forfeited shares transferred to capital reserve)

Answer:
Journal

Particulars	Dr. (₹)	Cr. (₹)
Share Capital A/c Dr.	350
Securities Premium Reserve A/c Dr.	250
To Share Forfeited A/c		150
To Share Allotment A/c		450
(Being 50 shares forfeited for non-payment of allotment money of ₹9 per share including ₹5 of securities premium per share)
Bank A/c Dr.	600
To Share Capital A/c		500
To Securities Premium Reserve A/c		100
(Being 50 forfeited shares reissued at ₹12 each fully paid-up)
Share Forfeited A/c Dr.	150
To Capital Reserve A/c		150
(Being profit on reissue of forfeited shares transferred to capital reserve)

Allotment unpaid = 50 × ₹9 = ₹450; Share Forfeited = (350 + 250) − 450 = ₹150 (₹3 per share received on application).

Teacher's Note:
1. Work backwards: Share Capital ₹350 for 50 shares means ₹7 called up, of which ₹4 (₹9 − ₹5 premium) was due on allotment, so ₹3 per share had been received.
2. Reissue at ₹12 for a ₹10 share gives ₹2 premium; no discount, so the full ₹150 goes to Capital Reserve.

Short Answer Questions (3 Marks)

Question 22. 'India Auto Ltd.' is registered with an authorised capital of ₹7,00,00,000 divided into 7,00,000 shares of ₹100 each. The company issued 50,000 shares to the vendor for building purchased and 2,00,000 shares were issued to the public. The amount was payable as follows:
On application and allotment – ₹20 per share
On first call – ₹50 per share
On second and final call – The balance
All calls were made and were duly received except on 100 shares held by Rajani, who failed to pay the second and final call. Her shares were forfeited.
Present the 'Share Capital' in the Balance Sheet of the company as per Schedule III Part I of the Companies Act, 2013. Also prepare 'Notes to Accounts'. [CBSE (AI) 2015]
Answer:
Balance Sheet of India Auto Ltd.
as at ..... (As per Schedule III)

Particulars	Note No.	Current Year (₹)
EQUITY AND LIABILITIES
1. Shareholders' Funds
(a) Share Capital	1	2,49,97,000

Notes to Accounts:

Particulars	₹	₹
1. Share Capital
Authorised Capital: 7,00,000 equity shares of ₹100 each		7,00,00,000
Issued Capital:
50,000 equity shares of ₹100 each (issued to vendor)	50,00,000
2,00,000 equity shares of ₹100 each	2,00,00,000	2,50,00,000
Subscribed Capital Subscribed and fully paid:
50,000 equity shares of ₹100 each (issued to vendor)	50,00,000
1,99,900 equity shares of ₹100 each	1,99,90,000
Add: Share forfeited A/c (100 × 70)	7,000	2,49,97,000

Teacher's Note:
1. Rajani had paid ₹20 + ₹50 = ₹70 per share; this forfeited amount is added to share capital until the shares are reissued.
2. Shares issued to the vendor are part of issued and subscribed capital, though no cash was received.

Question 23. On 1st April, 2016, Vishwas Ltd. was formed with an authorised capital of ₹10,00,000 divided into 1,00,000 equity shares of ₹10 each. The company issued prospectus inviting applications for 90,000 equity shares. The company received applications for 85,000 equity shares. During the first year, ₹8 per share were called. Ram holding 1,000 shares and Shyam holding 2,000 shares did not pay the first call of ₹2 per share. Shyam's shares were forfeited after the first call and later on 1,500 of the forfeited shares were re-issued at ₹6 per share, ₹8 called up.
Show the following:
(a) Share Capital in the Balance Sheet of the company as per Schedule III Part I of the Companies Act, 2013.
(b) Also prepare 'Notes to Accounts' for the same. [CBSE (AI) 2014]
Answer:
Balance Sheet of Vishwas Ltd.
as at 31st March, 2017

Particulars	Note No.	Current Year (₹)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds
(a) Share Capital	1	6,77,000

Notes to Accounts:

Particulars	₹	₹
1. Share Capital:
Authorised Share Capital: 1,00,000 equity shares of ₹10 each		10,00,000
Issued Share Capital: 90,000 equity shares of ₹10 each		9,00,000
Subscribed Capital: Subscribed but not fully paid capital
84,500 shares of ₹10 each, ₹8 called up	6,76,000
Less: Calls-in-Arrears	(2,000)
Add: Share Forfeited A/c	3,000	6,77,000

Working Notes:
1. Shares subscribed = 85,000 − 2,000 (forfeited) + 1,500 (reissued) = 84,500; called up 84,500 × ₹8 = ₹6,76,000.
2. Calls-in-arrears (Ram) = 1,000 × ₹2 = ₹2,000.
3. Share Forfeited on 500 shares not yet reissued = 500 × ₹6 = ₹3,000.

Teacher's Note:
1. Only the forfeited amount on shares not yet reissued is shown in the Notes; the gain on the 1,500 reissued shares has gone to Capital Reserve.

Question 24. The authorised capital of Suhani Ltd. is ₹45,00,000 divided into 30,000 shares of ₹150 each. Out of these, company issued 15,000 shares of ₹150 each at a premium of ₹10 per share. The amount was payable as follows:
₹50 per share on application, ₹40 per share on allotment (including premium), ₹30 per share on first call and balance on final call. Public applied for 14,000 shares. All the money was duly received.
Prepare an extract of Balance Sheet of Suhani Ltd. as per Schedule III Part I of the Companies Act, 2013 disclosing the above information. Also prepare 'Notes to Accounts' for the same. [CBSE Delhi 2013]
Answer:
Balance Sheet of Suhani Ltd.
as at .....

Particulars	Note No.	Current Year (₹)
*I. EQUITY AND LIABILITIES*
1. Shareholders' Funds
(a) Share Capital	1	21,00,000
(b) Reserves and Surplus	2	1,40,000
Total		22,40,000
*II. ASSETS*
1. Current Assets
(a) Cash and Cash Equivalents	3	22,40,000
Total		22,40,000

Notes to Accounts:

Particulars	₹	₹
1. Share Capital
Authorised Capital: 30,000 shares of ₹150 each		45,00,000
Issued Capital: 15,000 shares of ₹150 each		22,50,000
Subscribed Capital: Subscribed and fully paid up: 14,000 shares of ₹150 each		21,00,000
2. Reserves and Surplus Securities Premium Reserve (14,000 × ₹10)		1,40,000
3. Cash and Cash Equivalents Cash at Bank (14,000 × ₹160)		22,40,000

Teacher's Note:
1. Securities premium goes under Reserves and Surplus, never under Share Capital.
2. Quick check: 14,000 shares × (₹150 + ₹10) = ₹22,40,000 equals the cash at bank.

Question 25. Disha Ltd. purchased machinery from Nisha Ltd. and paid to Nisha Ltd. as follows:
(i) By issuing 10,000, equity shares of ₹10 each at a premium of 10%.
(ii) By issuing 200, 9% debentures of ₹100 each at a discount of 10%.
(iii) Balance by accepting a bill of exchange of ₹50,000 payable after one month.
Pass necessary journal entries in the books of Disha Ltd. for the purchase of machinery and making payment to Nisha Ltd. [CBSE (AI) 2017]
Answer:
Disha Ltd.
Journal

Date	Particulars	Dr. (₹)	Cr. (₹)
(i)	Machinery A/c Dr.	1,78,000
	To Nisha Ltd.		1,78,000
	(Being machinery purchased from Nisha Ltd.)
(ii)	Nisha Ltd. Dr.	1,10,000
	To Equity Share Capital A/c		1,00,000
	To Securities Premium Reserve A/c		10,000
	(Being 10,000 equity shares of ₹10 each issued at 10% premium)
(iii)	Nisha Ltd. Dr.	18,000
	Discount on Issue of Debentures A/c Dr.	2,000
	To 9% Debentures A/c		20,000
	(Being 200, 9% debentures of ₹100 each issued at 10% discount)
(iv)	Nisha Ltd. Dr.	50,000
	To Bills Payable A/c		50,000
	(Being balance payment made by accepting one month bill of exchange)

Working Note: Price of machinery = 1,10,000 (shares) + 18,000 (debentures) + 50,000 (bill) = ₹1,78,000.

Teacher's Note:
1. The machinery's cost is the total consideration: shares at issue price, debentures at issue price and the bill.
2. Discount on issue of debentures is written off in the year of issue, first from Securities Premium and the balance to the Statement of Profit and Loss.

Question 26. K Ltd. took over the assets of ₹15,00,000 and liabilities of ₹5,00,000 of P Ltd. for a purchase consideration of ₹13,68,500. ₹25,500 were paid by issuing a promissory note in favour of P Ltd. payable after two months and the balance was paid by issue of equity shares of ₹100 each at a premium of 25%.
Pass necessary journal entries for the above transactions in the books of K Ltd. [CBSE (AI) 2016]
Answer:
K Ltd.
Journal

Date	Particulars	Dr. (₹)	Cr. (₹)
(i)	Sundry Assets A/c Dr.	15,00,000
	Goodwill A/c Dr.	3,68,500
	To Sundry Liabilities A/c		5,00,000
	To P Ltd.		13,68,500
	(Being Assets and Liabilities acquired)
(ii)	P Ltd. Dr.	13,68,500
	To Bills Payable A/c		25,500
	To Equity Share Capital A/c		10,74,400
	To Securities Premium Reserve A/c		2,68,600
	(Being promissory note accepted and 10,744 equity shares issued at a premium of 25%)

Working Notes:
1. Goodwill = 13,68,500 − (15,00,000 − 5,00,000) = ₹3,68,500.
2. No. of shares = \( \frac{13,68,500 - 25,500}{125} \) = \( \frac{13,43,000}{125} \) = 10,744 shares; Share Capital = 10,744 × 100 = ₹10,74,400; Premium = 10,744 × 25 = ₹2,68,600.

Teacher's Note:
1. Purchase consideration above net assets is goodwill; below net assets it would be Capital Reserve.

Question 27. Pass necessary journal entries for the following transactions in the books of Gopal Ltd.:
(i) Purchased furniture for ₹2,50,000 from M/s Furniture Mart. The payment to M/s Furniture Mart was made by issuing equity shares of ₹10 each at a premium of 25%.
(ii) Purchased a running business from Aman Ltd. for a sum of ₹15,00,000. The payment of ₹12,00,000 was made by issue of fully paid equity shares of ₹10 each and balance by a bank draft. The assets and liabilities consisted of the following:
Plant ₹3,50,000; Stock ₹4,50,000; Land and Building ₹6,00,000; Sundry Creditors ₹1,00,000. [CBSE (AI) 2014]
Answer:
In the Books of Gopal Ltd.
Journal Entries

Date	Particulars	Dr. (₹)	Cr. (₹)
(i)	Furniture A/c Dr.	2,50,000
	To M/s Furniture Mart		2,50,000
	(Being furniture purchased from M/s Furniture Mart)
	M/s Furniture Mart Dr.	2,50,000
	To Equity Share Capital A/c		2,00,000
	To Securities Premium Reserve A/c		50,000
	(Being issue of shares as purchase consideration)
(ii)	Plant A/c Dr.	3,50,000
	Stock A/c Dr.	4,50,000
	Land and Building A/c Dr.	6,00,000
	Goodwill A/c (Balancing figure) Dr.	2,00,000
	To Sundry Creditors A/c		1,00,000
	To Aman Ltd.		15,00,000
	(Being business purchased from Aman Ltd.)
	Aman Ltd. Dr.	15,00,000
	To Equity Share Capital A/c		12,00,000
	To Bank A/c		3,00,000
	(Being shares issued and balance paid by bank draft)

Working Note:
(i) No. of shares to be issued = \( \frac{\text{Purchase Price}}{\text{Issued Price per share}} \) = \( \frac{2,50,000}{10 + 2.5} \) = 20,000 shares.

Teacher's Note:
1. Goodwill = 15,00,000 − (14,00,000 assets − 1,00,000 creditors) = ₹2,00,000.

Question 28. MCS Ltd issued 40,000 shares of ₹10 each payable at ₹2 on application, ₹4 on allotment and balance in two equal instalments.
Applications were received for 80,000 shares and the allotment was made as follows:
(i) Applications of 50,000 shares were allotted 30,000 shares.
(ii) Applications of 30,000 shares were allotted 10,000 shares.
Neeraj to whom 600 shares were allotted from category (i) failed to pay the allotment money.
Pass the necessary journal entries up to allotment only. [CBSE Delhi 2010(C); (AI) 2009]
Answer:
Journal

Date	Particulars	Dr. (₹)	Cr. (₹)
	Bank A/c (80,000 × 2) Dr.	1,60,000
	To Share Application A/c		1,60,000
	(Being application money received on 80,000 shares)
(i)	Share Application A/c Dr.	1,60,000
	To Share Capital A/c		80,000
	To Share Allotment A/c		80,000
	(Being application money transferred and adjusted)
	Share Allotment A/c (40,000 × 4) Dr.	1,60,000
	To Share Capital A/c		1,60,000
	(Being allotment money due on 40,000 shares)
	Bank A/c Dr.	78,400
	To Share Allotment A/c		78,400
	(Being allotment money received)

Working Notes:

	Shares Applied	Shares Allotted
(i)	50,000	30,000 (Pro-rata allotment)
(ii)	30,000	10,000 (Pro-rata allotment)
(iii)	80,000	40,000 (Pro-rata allotment)

Shares applied by Neeraj = 600 × \( \frac{50,000}{30,000} \) = 1,000 Shares
Amount adjusted on Allotment on Neeraj's Shares

Application money received (1,000 × 2)	2,000
Less: Application money required (600 × 2)	(1,200)
Adjusted on allotment	800

Calculation of Amount Received on Allotment

Allotment money due (40,000 × 4)		1,60,000
Less: Excess received with application (40,000 × 2)		(80,000)
		80,000
Less: Calls-in-arrears (Neeraj)
Due (600 × 4)	2,400
Less: Surplus on application	(800)	(1,600)
Amount received on allotment		₹78,400

Teacher's Note:
1. Excess application money = 80,000 × 2 − 40,000 × 2 = ₹80,000; here all of it is needed for allotment, so nothing is refunded.
2. Work out a defaulter's shares applied first; his own surplus reduces the arrears on allotment.

Question 29. JCV Ltd. forfeited 200 shares of ₹10 each issued at a premium of ₹2 per share for the non-payment of allotment of ₹3 per share (including premium). The first and final call of ₹4 per share has not been made yet. 50% of forfeited shares were reissued at ₹8 per share fully paid-up. Pass necessary journal entries for the forfeiture and reissue of shares. [CBSE Delhi 2011(C)]
Answer:
Journal

Particulars	Dr. (₹)	Cr. (₹)
Share Capital A/c (200 × 6) Dr.	1,200
Securities Premium Reserve A/c (200 × 2) Dr.	400
To Share Forfeited A/c (200 × 5)		1,000
To Share Allotment A/c (200 × 3)		600
(Being 200 shares forfeited for the non-payment of allotment)
Bank A/c (100 × 8) Dr.	800
Share Forfeited A/c (100 × 2) Dr.	200
To Share Capital A/c (100 × 10)		1,000
(Being reissue of 100 forfeited shares)
Share Forfeited A/c Dr.	300
To Capital Reserve A/c		300
(Being profit on reissue transferred to Capital Reserve A/c)

Working Note:
Amount forfeited on 100 shares = 1,000 × \( \frac{100}{200} \) = ₹500
Profit on reissue transferred to capital reserve = 500 − 200 = ₹300.

Teacher's Note:
1. Premium not received (it was due with allotment) is debited to Securities Premium Reserve on forfeiture.

Long Answer Questions (5 Marks)

Question 30. AB Ltd. invited applications for issuing 75,000 equity shares of ₹100 each at a premium of ₹30 per share. The amount was payable as follows:
On Applications and Allotment – ₹85 per share (including premium)
On First and Final Call – the balance Amount
Applications for 1,27,500 shares were received. Applications for 27,500 shares were rejected and shares were allotted on pro-rata basis to the remaining applicants. Excess money received on applications and allotment was adjusted towards sums due on first and final call. The calls were made. A shareholder, who applied for 1,000 shares, failed to pay the first and final call money. His shares were forfeited. All the forfeited shares were reissued at ₹150 per share fully paid-up.
Pass necessary journal entries for the above transactions in the books of AB Ltd. [CBSE Delhi 2014]
Answer:
In the books of AB Ltd.
Journal

Particulars	Dr. (₹)	Cr. (₹)
Bank A/c Dr.	1,08,37,500
To Share Application and Allotment A/c		1,08,37,500
(Being application money received)
Share Application and Allotment A/c Dr.	1,08,37,500
To Share Capital A/c (75,000 × 55)		41,25,000
To Securities Premium Reserve A/c (75,000 × 30)		22,50,000
To Bank A/c (27,500 × 85)		23,37,500
To Share First and Final Call A/c		21,25,000
(Being application money transferred, excess adjusted and rejected and refunded)
Share First and Final Call A/c (75,000 × 45) Dr.	33,75,000
To Share Capital A/c		33,75,000
(Being first and final call money due)
Bank A/c (See W.N. 3) Dr.	12,37,500
To Share First and Final Call A/c		12,37,500
(Being first and final call money received)
Share Capital A/c (750 × 100) Dr.	75,000
To Share Forfeited A/c (750 × 55 + 21,250)		62,500
To Share First and Final Call A/c (750 × 45 − 21,250)		12,500
(Being 750 shares forfeited)
Bank A/c (750 × 150) Dr.	1,12,500
To Share Capital A/c (750 × 100)		75,000
To Securities Premium Reserve A/c (750 × 50)		37,500
(Being 750 forfeited shares reissued at ₹150 per share)
Share Forfeited A/c Dr.	62,500
To Capital Reserve A/c		62,500
(Being profit on reissue regarding 750 shares transferred to Capital Reserve A/c)

Working Notes:
(1)

Shares Applied	Shares Allotted
27,500	Nil
1,00,000	75,000
1,27,500	75,000

If no. of shares applied is 1,000, then no. of shares allotted = 1,000 × \( \frac{75,000}{1,00,000} \) = 750
(2) Calculation of unpaid amount on First and Final Call on 750 shares

	₹
Amount due (750 × 45)	33,750
Less: adjusted from application and allotment (250 × 85)	21,250
Amount unpaid	12,500

(3) Calculation of amount received on First and Final Call

Total amount due (75,000 × 45)	33,75,000
Less: adjusted from application and allotment (25,000 × 85)	(21,25,000)
Less: Unpaid on 750 shares	(12,500)
Amount received on first and final call	12,37,500

Teacher's Note:
1. The premium was collected with application, so it is not debited on forfeiture; the shareholder's ₹21,250 surplus is part of the amount forfeited.
2. Check: 41,25,000 + 22,50,000 + 23,37,500 + 21,25,000 = ₹1,08,37,500, the full application money.

Question 31. Saral Ltd. invited applications for issuing 25,000 equity shares of ₹100 each at par. The amount per share was payable as follows:
On Application : ₹20 per share
On Allotment : ₹30 per share
On First Call : ₹25 per share
On Second and Final Call : ₹25 per share
Applications were received for 24,000 shares and the shares were allotted to all the applicants. All calls were made and were received as follows:
On 18,000 shares : Full amount
On 2,000 shares : ₹75 per share
On 2,500 shares : ₹50 per share
On 1,500 shares : ₹20 per share
The company forfeited those shares on which less than ₹75 per share were received. The forfeited shares were reissued at ₹95 per share fully paid up.
Pass necessary journal entries for the above transactions in the books of the company. [CBSE 2019]
Answer:
In the books of Saral Ltd.
Journal

Particulars	Dr. (₹)	Cr. (₹)
Bank A/c Dr.	4,80,000
To Equity Share Application A/c		4,80,000
(Being amount received on application)
Equity Share Application A/c Dr.	4,80,000
To Equity Share Capital A/c		4,80,000
(Being amount transferred to share capital)
Equity Share Allotment A/c Dr.	7,20,000
To Equity Share Capital A/c		7,20,000
(Being share allotment made due)
Bank A/c Dr.	6,75,000
Calls-in-Arrears A/c Dr.	45,000
To Equity Share Allotment A/c		7,20,000
(Being share allotment received)
Equity Share First Call A/c Dr.	6,00,000
To Equity Share Capital A/c		6,00,000
(Being First call due)
Bank A/c Dr.	5,00,000
Calls-in-Arrears A/c Dr.	1,00,000
To Equity Share First Call A/c		6,00,000
(Being 1st call received)
Equity Share Second and Final Call A/c Dr.	6,00,000
To Equity Share Capital A/c		6,00,000
(Being second call due)
Bank A/c Dr.	4,50,000
Calls-in-Arrears A/c Dr.	1,50,000
To Equity Share Second and Final Call A/c		6,00,000
(Being second call received)
Equity Share Capital A/c Dr.	4,00,000
To Share Forfeiture A/c		1,55,000
To Calls-in-Arrears A/c		2,45,000
(Being shares forfeited)
Bank A/c Dr.	3,80,000
Share Forfeiture A/c Dr.	20,000
To Equity Share Capital A/c		4,00,000
(Being forfeited shares reissued)
Share Forfeiture A/c Dr.	1,35,000
To Capital Reserve A/c		1,35,000
(Being amount transferred to capital reserve)

Working Note:
Table Showing Amount received and Calls-in-Arrears

Particulars	Application ₹20	Allotment ₹30	First Call ₹25	Second and Final call ₹25	Total
18,000 shares	3,60,000	5,40,000	4,50,000	4,50,000	—
2,000 shares	40,000	60,000	50,000	50,000*	—
2,500 shares	50,000	75,000	62,500*	62,500*	—
1,500 shares	30,000	45,000*	37,500*	37,500*	—
Amount received on 4,000 shares	80,000	75,000	—	—	1,55,000
Amount not received on 4,000 shares		45,000*	1,00,000*	1,00,000*	2,45,000*

* Amount not received
According to the above statement we will forfeit those shares which have paid less than ₹75. Only 4,000 (2,500 + 1,500) shares have paid less than ₹75. It is clear from the above table that the total amount received on 4,000 shares is (80,000 + 75,000) = ₹1,55,000. This amount will be transferred to 'Share forfeiture A/c'.

Teacher's Note:
1. The 2,000 shares that paid ₹75 are not forfeited, so their ₹50,000 second-call arrears stay in Calls-in-Arrears.
2. Discount on reissue = 4,000 × ₹5 = ₹20,000; Capital Reserve = 1,55,000 − 20,000 = ₹1,35,000.

Question 32. Dinesh Ltd. invited applications for issuing 10,000 Equity shares of ₹10 each. The amount was payable as follows:
On Application – ₹1
On Allotment – ₹2
On First Call – ₹3
On Second and Final Call — Balance
The issue was fully subscribed. Ram to whom 100 shares were allotted, failed to pay the allotment money and his shares were forfeited immediately after allotment. Shyam to whom 150 shares were allotted, failed to pay the first call. His shares were also forfeited after the first call. Afterwards the second and final call was made. Mohan to whom 50 shares were allotted, failed to pay the second and final call. His shares were also forfeited. All the forfeited shares were reissued at ₹9 per share fully paid up. Pass necessary journal entries in the books of Dinesh Ltd. [CBSE (AI) 2011]
Answer:
Journal

Particulars	Dr. (₹)	Cr. (₹)
Bank A/c Dr.	10,000
To Equity Share Application A/c		10,000
(Being application money received)
Equity Share Application A/c Dr.	10,000
To Equity Share Capital A/c		10,000
(Being application money transferred to share capital)
Equity Share Allotment A/c Dr.	20,000
To Equity Share Capital A/c		20,000
(Being allotment due)
Bank A/c Dr.	19,800
Calls-in-Arrears A/c Dr.	200
To Equity Share Allotment A/c		20,000
(Being allotment money received)
Equity Share Capital A/c Dr.	300
To Calls-in-Arrears A/c		200
To Share Forfeited A/c		100
(Being 100 shares forfeited for non-payment of allotment money)
Equity Share First Call A/c Dr.	29,700
To Equity Share Capital A/c		29,700
(Being first call due on 9,900 shares)
Bank A/c Dr.	29,250
Calls-in-Arrears A/c Dr.	450
To Equity Share First Call A/c		29,700
(Being first call money received with exception of 150 shares)
Equity Share Capital A/c Dr.	900
To Calls-in-Arrears A/c		450
To Share Forfeited A/c		450
(Being 150 shares forfeited)
Equity Share Second and Final Call A/c Dr.	39,000
To Equity Share Capital A/c		39,000
(Being second & final call money due on 9,750 shares)
Bank A/c Dr.	38,800
Calls-in-Arrears A/c Dr.	200
To Equity Share Second and Final Call A/c		39,000
(Being Second and Final call money received with exception of 50 shares)
Equity Share Capital A/c Dr.	500
To Calls-in-Arrears A/c		200
To Share Forfeited A/c		300
(Being 50 shares forfeited for non-payment of second and final call money)
Bank A/c Dr.	2,700
Share Forfeited A/c Dr.	300
To Equity Share Capital A/c		3,000
(Being all 300 shares are reissued)
Share Forfeited A/c Dr.	550
To Capital Reserve A/c		550
(Being profit on reissue transferred to capital reserve)

Working Note: Share Forfeited balance = 100 + 450 + 300 = ₹850; less discount on reissue (300 × ₹1) ₹300; Capital Reserve = ₹550.

Teacher's Note:
1. Each later call is made only on the shares still outstanding: first call on 9,900 shares and second call on 9,750 shares.

Question 33. KS Ltd. invited applications for issuing 1,60,000 equity shares of ₹10 each at a premium of ₹6 per share. The amount was payable as follows:
On Application ₹4 per share (including premium ₹1 per share)
On Allotment ₹6 per share (including premium ₹3 per share)
On First and Final Call – Balance.
Applications for 3,20,000 shares were received. Applications for 80,000 shares were rejected and application money refunded. Shares were allotted on pro-rata basis to the remaining applicants. Excess money received with applications was adjusted towards sums due on allotment. Jain holding 800 shares failed to pay the allotment money. His shares were forfeited immediately after allotment. Afterwards the final call was made. Gupta who had applied for 1,200 shares failed to pay the final call. His shares were also forfeited. Out of the forfeited shares 1,000 shares were re-issued at ₹8 per share fully paid up. The re-issued shares included all the forfeited shares of Jain.
Pass necessary journal entries for the above transactions in the books of KS Ltd. [CBSE Delhi 2016]
Answer:
KS Ltd.
Journal

Particulars	Dr. (₹)	Cr. (₹)
Bank A/c Dr.	12,80,000
To Equity Share Application A/c		12,80,000
(Being application money received on 3,20,000 shares)
Equity Share Application A/c Dr.	12,80,000
To Equity Share Capital A/c		4,80,000
To Securities Premium Reserve A/c		1,60,000
To Bank A/c		3,20,000
To Equity Share Allotment A/c		3,20,000
(Being application money transferred to share capital account and securities premium reserve, and excess refunded and adjusted)
Equity Share Allotment A/c Dr.	9,60,000
To Equity Share Capital A/c		4,80,000
To Securities Premium Reserve A/c		4,80,000
(Being share allotment made due)
Bank A/c Dr.	6,36,800
To Equity Share Allotment A/c		6,36,800
(Being allotment money received except on 800 shares and advance received on applications adjusted)
OR
Bank A/c Dr.	6,36,800
Calls-in-Arrears A/c Dr.	3,200
To Equity Share Allotment A/c		6,40,000
(Being allotment money received except on 800 shares)
Equity Share Capital A/c Dr.	4,800
Securities Premium Reserve A/c Dr.	2,400
To Shares Forfeited A/c		4,000
To Equity Share Allotment A/c/Calls-in-Arrears A/c		3,200
(Being 800 shares of Jain forfeited after allotment)
Equity Share First and Final Call A/c Dr.	9,55,200
To Equity Share Capital A/c		6,36,800
To Securities Premium Reserve A/c		3,18,400
(Being first and final call due on 1,59,200 shares)
Bank A/c Dr.	9,50,400
To Equity Share First and Final Call A/c		9,50,400
(Being first and final call money received except on 800 shares)
OR
Bank A/c Dr.	9,50,400
Calls-in-Arrears A/c Dr.	4,800
To Equity Share First and Final Call A/c		9,55,200
(Being first and final call money received except on 800 shares)
Equity Share Capital A/c (800 × 10) Dr.	8,000
Securities Premium Reserve A/c (800 × 2) Dr.	1,600
To Shares Forfeited A/c (800 × 6)		4,800
To Equity Share First and Final Call/Calls-in-Arrears A/c (800 × 6)		4,800
(Being 800 shares of Gupta forfeited)
Bank A/c Dr.	8,000
Share Forfeited A/c Dr.	2,000
To Equity Share Capital A/c		10,000
(Being 1,000 shares reissued for ₹8 per share fully paid up)
Share Forfeited A/c Dr.	3,200
To Capital Reserve A/c		3,200
(Being gain on reissue on forfeited shares transferred to capital reserve account)

Working Notes:
1.

Amount due on allotment	9,60,000
Less: Excess Application money adjusted	3,20,000
	6,40,000
Less: Amount not received on 800 shares	3,200
Total amount received on allotment	6,36,800

2. Amount transferred to Capital Reserve:

Amount forfeited on Jain's shares	4,000
Amount forfeited on Gupta's shares = 4,800 × \( \frac{200}{800} \) =	1,200
	5,200
Less: Discount on reissue of shares	2,000
Amount transferred to Capital Reserve	3,200

Teacher's Note:
1. Jain was allotted 800 shares out of 1,200 applied (2,40,000 : 1,60,000 = 3 : 2), so his surplus of 400 × ₹4 = ₹1,600 reduces his allotment dues to ₹3,200.
2. Premium not received (₹3 on allotment for Jain, ₹2 on call for Gupta) is debited to Securities Premium Reserve on forfeiture.

Question 34. Record the Journal entries for forfeiture and reissue in the following cases:
(a) X Ltd. forfeited 200 shares of ₹100 each, ₹70 called up on which the shareholders had paid application and allotment money of ₹50 per share. Out of these, 150 shares were reissued to Naresh as ₹70 per share paid up for ₹80 per share.
(b) Y Ltd. forfeited 180 shares of ₹10 each, ₹8 called up, issued at a premium of ₹2 per share to ‘R’ for non-payment of allotment money of ₹5 per share (including premium). Out of these, 160 shares were reissued to Sanjay as ₹8 called up for ₹10 per share fully paid up. [CBSE (AI) 2013]
Answer:
Journal Entries

Date	Particulars	Dr. (₹)	Cr. (₹)
(a) (i)	Share Capital A/c (200 × 70) Dr.	14,000
	To Share Forfeited A/c (200 × 50)		10,000
	To Calls-in-Arrears A/c (200 × 20)		4,000
	(Being forfeiture of 200 shares for non-payment of money)
(ii)	Bank A/c (150 × 80) Dr.	12,000
	To Share Capital A/c (150 × 70)		10,500
	To Securities Premium Reserve A/c (150 × 10)		1,500
	(Being reissue of 150 equity shares of ₹70 each, at premium of ₹10 each)
(iii)	Share Forfeited A/c Dr.	7,500
	To Capital Reserve A/c		7,500
	(Being amount transferred to capital reserve)
(b) (i)	Share Capital A/c (180 × 8) Dr.	1,440
	Securities Premium Reserve A/c (180 × 2) Dr.	360
	To Share Forfeited A/c (180 × 5)		900
	To Calls-in-Arrears A/c (180 × 5)		900
	(Being forfeiture of 180 shares for non-payment of share allotment money)
(ii)	Bank A/c (160 × 10) Dr.	1,600
	To Share Capital A/c (160 × 8)		1,280
	To Securities Premium Reserve A/c (160 × 2)		320
	(Being reissue of 160 forfeited shares)
(iii)	Share Forfeited A/c (160 × 5) Dr.	800
	To Capital Reserve A/c (160 × 5)		800
	(Being amount of share forfeiture of 160 shares transferred to capital reserve)

Teacher's Note:
1. Securities Premium Reserve is debited on forfeiture only when the premium has not been received; in (a) there is no premium, in (b) the unpaid allotment included it.
2. When forfeited shares are reissued at a premium, the whole forfeited amount on those shares goes to Capital Reserve.

Category	No. of Shares Applied	No. of Shares Allotted
I	80,000	40,000
II	25,000	10,000

Question 35. JJK Ltd. invited applications for issuing 50,000 equity shares of ₹10 each at par. The amount was payable as follows:
On Application: ₹2 per share
On Allotment: ₹4 per share
On First and Final Call: Balance Amount
This issue was oversubscribed three times. Applications for 30% shares were rejected and money refunded. Allotment was made to the remaining applicants as follows:
Category No. of Shares Applied No. of Shares Allotted
I 80,000 40,000
II 25,000 10,000
Excess money paid by the applicants who were allotted shares was adjusted towards the sums due on allotment.
Deepak, a shareholder belonging to Category I, who had applied for 1,000 shares, failed to pay the allotment money. Raju, a shareholder holding 100 shares, also failed to pay the allotment money. Raju belonged to Category II. Shares of both Deepak and Raju were forfeited immediately after allotment. Afterwards, first and final call was made and was duly received. The forfeited shares of Deepak and Raju were reissued at ₹11 per share fully paid up.
Pass necessary journal entries for the above transactions in the books of the company. [CBSE (AI) 2017]
Answer:
Books of JJK Ltd.
Journal

Date	Particulars	Dr. (₹)	Cr. (₹)
(i)	Bank A/c Dr.	3,00,000
	To Equity Share Application A/c		3,00,000
	(Being application money received on 1,50,000 shares)
(ii)	Equity Share Application A/c Dr.	3,00,000
	To Equity Share Capital A/c		1,00,000
	To Bank A/c		90,000
	To Equity Share Allotment A/c		1,10,000
	(Being application money transferred)
(iii)	Equity Share Allotment A/c Dr.	2,00,000
	To Equity Share Capital A/c		2,00,000
	(Being share allotment money due)
(iv)	Bank A/c Dr.	88,900
	Calls-in-Arrears A/c Dr.	1,100
	To Equity Share Allotment A/c		90,000
	(Being balance amount received on allotment)
	OR
	Bank A/c Dr.	88,900
	To Equity Share Allotment A/c		88,900
	(Being balance amount received on allotment)
(v)	Equity Share Capital A/c (600 × 6) Dr.	3,600
	To Shares Forfeited A/c		2,500
	To Calls-in-Arrears A/c		1,100
	(Being the shares forfeited on which allotment money was not received)
(vi)	Equity Share First and Final Call A/c Dr.	1,97,600
	To Equity Share Capital A/c		1,97,600
	(Being first and final call money due on 49,400 shares)
(vii)	Bank A/c Dr.	1,97,600
	To Equity Share First and Final Call A/c		1,97,600
	(Being first and final call money received)
(viii)	Bank A/c Dr.	6,600
	To Equity Share Capital A/c		6,000
	To Securities Premium Reserve A/c		600
	(Being forfeited shares reissued @ ₹11 per share fully paid-up)
(ix)	Shares Forfeited A/c Dr.	2,500
	To Capital Reserve A/c		2,500
	(Being gain on reissue of forfeited shares transferred to capital reserve account)

Working Notes:
1. Shares applied = 50,000 × 3 = 1,50,000; rejected 30% = 45,000; remaining 1,05,000 (80,000 + 25,000).
2. Excess application money: Category I = (80,000 − 40,000) × ₹2 = ₹80,000; Category II = (25,000 − 10,000) × ₹2 = ₹30,000; Total = ₹1,10,000 adjusted on allotment.
3. Deepak: shares allotted = 1,000 × 40,000/80,000 = 500; excess paid = (1,000 − 500) × ₹2 = ₹1,000; allotment due 500 × ₹4 = ₹2,000; unpaid = ₹1,000.
4. Raju: shares applied = 100 × 25,000/10,000 = 250; excess paid = 150 × ₹2 = ₹300; allotment due 100 × ₹4 = ₹400; unpaid = ₹100.
5. Amount forfeited = 3,600 − 1,100 = ₹2,500; whole amount transferred to Capital Reserve as the shares were reissued at a premium.

Teacher's Note:
1. Work out each defaulter's shares applied and allotted from the category ratio first; the unpaid allotment is the allotment due less his own excess application money.
2. Forfeited amount = amount paid by the defaulter including excess money adjusted (here ₹2,500).

Question 36. Give Journal entries to record the following transactions on forfeiture and reissue of shares and open Share Forfeited Account in the books of the company:
L Ltd. forfeited 470 Equity Shares of ₹10 each issued at premium of ₹5 per share for non-payment of allotment money of ₹8 per share (including share premium ₹5 per share) and the first and final call of ₹5 per share. Out of these 60 Equity Shares were subsequently reissued at ₹14 per share. [CBSE Delhi 2011]
Answer:
Journal

Particulars	Dr. (₹)	Cr. (₹)
Equity Share Capital A/c (470 × 10) Dr.	4,700
Securities Premium Reserve A/c (470 × 5) Dr.	2,350
To Share Forfeited A/c (470 × 2)		940
To Equity Share Allotment A/c (470 × 8)		3,760
To Equity Share First and Final Call A/c (470 × 5)		2,350
(Being 470 shares forfeited)
Bank A/c (60 × 14) Dr.	840
To Equity Share Capital A/c (60 × 10)		600
To Securities Premium Reserve A/c (60 × 4)		240
(Being 60 shares reissue @ ₹14 per share)
Share Forfeited A/c Dr.	120
To Capital Reserve A/c		120
(Being the profit on reissue transferred to Capital Reserve A/c)

Share Forfeited Account

Dr.		Cr.
Particulars	₹	Particulars	₹
To Capital Reserve A/c	120	By Share Capital A/c	940
To Balance c/d	820
	940		940

Working Note:
Amount of profit on forfeited shares transferred to capital reserve = 940 × 60/470 = ₹120.

Teacher's Note:
1. Only the forfeited amount relating to the reissued shares (60/470 of ₹940) goes to Capital Reserve; the rest stays in Share Forfeited A/c.
2. The ₹4 received above face value on reissue is credited to Securities Premium Reserve, not to Capital Reserve.

Question 37. Petromax Ltd. issued 50,000 shares of ₹10 each at a premium of ₹2 per share payable as ₹3 on application, ₹5 including premium on allotment and the balance in equal instalments over two calls. Applications were received for 92,000 shares and the allotment was done as under:
(A) Applicants of 40,000 shares — Allotted 30,000 shares
(B) Applicants of 40,000 shares — Allotted 20,000 shares
(C) Applicants of 12,000 shares — Nil
Suresh, who had applied for 2,000 shares (Category A) did not pay any money other than application money.
Chander, who was allotted 800 shares (Category B) paid the call money due along with allotment.
All other allottees paid their dues as per schedule.
Pass necessary Journal entries in the books of Petromax Ltd. to record the above. [CBSE Delhi 2009; (AI) 2009; (F) 2009]
Answer:
In the books of Petromax Ltd.
Journal

Particulars	Dr. (₹)	Cr. (₹)
Bank A/c Dr.	2,76,000
To Share Application A/c		2,76,000
(Being the application money received on 92,000 shares @ ₹3 per share)
Share Application A/c Dr.	2,76,000
To Share Capital A/c (50,000 × ₹3)		1,50,000
To Bank A/c (12,000 × ₹3)		36,000
To Share Allotment A/c (30,000 × ₹3)		90,000
(Being the share application money transferred, adjusted and refunded)
Share Allotment A/c (50,000 × ₹5) Dr.	2,50,000
To Share Capital A/c (50,000 × ₹3)		1,50,000
To Securities Premium Reserve A/c (50,000 × ₹2)		1,00,000
(Being the allotment money due on 50,000 shares @ ₹5 each including premium)
Bank A/c (WN 4) Dr.	1,57,200
Calls-in-Arrears A/c Dr.	6,000
To Share Allotment A/c		1,60,000
To Calls-in-Advance A/c		3,200
(Being the allotment money received except for 1,500 shares of Suresh and call money is also received in advance for 800 shares of Chander)
Share First Call A/c (50,000 × ₹2) Dr.	1,00,000
To Share Capital A/c		1,00,000
(Being the first call money due on 50,000 shares @ ₹2 per share)
Bank A/c Dr.	95,400
Calls-in-Advance A/c (800 × ₹2) Dr.	1,600
Calls-in-Arrears A/c (1,500 × ₹2) Dr.	3,000
To Share First Call A/c		1,00,000
(Being the first call money received except for 1,500 shares and calls-in-advance adjusted towards 800 shares on first call money)
Share Final Call A/c Dr.	1,00,000
To Share Capital A/c		1,00,000
(Being the final call money due on 50,000 shares @ ₹2 per share)
Bank A/c Dr.	95,400
Calls-in-Advance A/c Dr.	1,600
Calls-in-Arrears A/c Dr.	3,000
To Share Final Call A/c		1,00,000
(Being the final call money received except for 1,500 shares and calls-in-advance adjusted towards 800 shares)

Working Notes:
(1) Money not received from Suresh on Allotment:
(i) Number of shares allotted to Suresh = 30,000/40,000 × 2,000 = 1,500 shares.
(ii) Application money paid by Suresh = 2,000 × ₹3 = ₹6,000.
(iii) Application money required = 1,500 × ₹3 = ₹4,500.
(iv) Excess application money adjusted on allotment = ₹6,000 − ₹4,500 = ₹1,500.
(v) Money due from Suresh on allotment = 1,500 × ₹5 = ₹7,500; Less: excess application money adjusted ₹1,500; Money due from Suresh on allotment = ₹6,000.
(2) Money received on Allotment: Total amount due on allotment ₹2,50,000 − excess application money adjusted ₹90,000 = ₹1,60,000; Less: money not paid by Suresh ₹6,000 = ₹1,54,000.
(3) Calls-in-Advance on 800 shares of Chander = 800 × ₹4 = ₹3,200.
(4) Total money received on Allotment = ₹1,54,000 + ₹3,200 = ₹1,57,200.

Teacher's Note:
1. Excess application money of Category A is (40,000 − 30,000) × ₹3 and of Category B is (40,000 − 20,000) × ₹3; Category C money is refunded in full.
2. Calls received in advance are credited to Calls-in-Advance A/c and transferred to each call account when that call is made.

Question 38. Hema Ltd. invited applications for issuing 30,000 Equity shares of ₹100 each at a premium of ₹20 each. The amount was payable as follows:
On Application and Allotment ₹40 (including premium ₹10) per share.
On First Call ₹50 (including premium ₹10) per share
On Second and Final Call — Balance
Applications for 75,000 shares were received. Applications for 15,000 shares were rejected and the money received from them was refunded. Shares were allotted on pro rata to the remaining applicants. All calls were made. A who had applied for 2,000 shares failed to pay the first call and second and final call on the shares allotted to him. B who was allotted 1,000 shares failed to pay the second and final call. The shares of both A and B were forfeited. The forfeited shares were reissued at ₹160 fully paid.
Pass necessary journal entries in the books of the company for the above transactions. [CBSE (F) 2011]
Answer:
Journal Entries

Particulars	Dr. (₹)	Cr. (₹)
Bank A/c Dr.	30,00,000
To Equity Share Application and Allotment A/c		30,00,000
(Being application and allotment money received for 75,000 shares @ ₹40 per share including premium of ₹10)
Equity Share Application and Allotment A/c Dr.	30,00,000
To Equity Share Capital A/c		9,00,000
To Securities Premium Reserve A/c		3,00,000
To Equity Share First Call A/c		12,00,000
To Bank A/c		6,00,000
(Being application and allotment money on 30,000 shares transferred to equity share capital account and excess applications for 15,000 shares refunded)
Equity Share First Call A/c Dr.	15,00,000
To Equity Share Capital A/c		12,00,000
To Securities Premium Reserve A/c		3,00,000
(Being first call money due on 30,000 shares @ ₹50 per share, including premium of ₹10)
Bank A/c Dr.	2,90,000
To Equity Share First Call A/c		2,90,000
(Being share first call money received)
Equity Share Second and Final Call A/c Dr.	9,00,000
To Equity Share Capital A/c		9,00,000
(Being share second and final call money due)
Bank A/c Dr.	8,40,000
To Equity Share Second and Final Call A/c		8,40,000
(Being share second and final call money received)
Securities Premium Reserve A/c Dr.	10,000
Equity Share Capital A/c Dr.	2,00,000
To Share Forfeited A/c		1,40,000
To Equity Share First Call A/c		10,000
To Equity Share Second and Final Call A/c		60,000
(Being forfeiture of 2,000 shares for non-payment of first call and second and final call money)
Bank A/c Dr.	3,20,000
To Equity Share Capital A/c		2,00,000
To Securities Premium Reserve A/c		1,20,000
(Being reissue of 2,000 shares @ ₹160 per share)
Share Forfeited A/c Dr.	1,40,000
To Capital Reserve A/c		1,40,000
(Being profit on reissue transferred to Capital Reserve A/c)

Working Notes:
1. Calculation and adjustment of amount received on application: Total applications received = 75,000 shares; Applications rejected = 15,000 shares; Balance = 60,000 shares. Pro rata allotment made on 60,000 shares.
Excess money received on Application and Allotment = 30,000 shares × ₹40 = ₹12,00,000. Money to be refunded = 15,000 shares × ₹40 = ₹6,00,000.
2. No. of shares allotted to A = 2,000 × 30,000/60,000 = 1,000 shares.
Application and Allotment money received from A = 2,000 shares × ₹40 = ₹80,000; Less: amount utilised for application and allotment ₹40,000; Excess money retained for first call = ₹40,000.
Amount of first call due from A = 1,000 shares × ₹50 = ₹50,000; Less: amount received in advance for first call with application ₹40,000; Amount not received of first call = ₹10,000.
3. Calculation of amount received on share first call: Total amount due on first call = 30,000 shares × ₹50 = ₹15,00,000; Less: amount adjusted on first call received in advance ₹12,00,000 = ₹3,00,000; Less: amount not received from A ₹10,000 = ₹2,90,000.

Teacher's Note:
1. Here the excess application money is adjusted towards the first call, as there is no separate allotment instalment.
2. Forfeited shares of A and B are 1,000 each; check: amount forfeited ₹1,40,000 equals capital received on them, so the whole of it goes to Capital Reserve after reissue at a premium.

Category	No. of Shares Applied	No. of Shares Allotted
I	2,00,000	1,50,000
II	1,00,000	50,000

Question 39. Sunstar Ltd. invited applications for issuing 2,00,000 equity shares of ₹50 each. The amount was payable as follows:
On Application – ₹15 per share
On Allotment – ₹10 per share
On First and Final Call – ₹25 per share
Applications for 3,00,000 shares were received. Allotment was made to the applicants as follows:
Category No. of Shares Applied No. of Shares Allotted
I 2,00,000 1,50,000
II 1,00,000 50,000
Excess money received with applications was adjusted towards sums due on allotment and calls. Namita, a shareholder of Category I, holding 3,000 shares failed to pay the allotment money. Her shares were forfeited immediately after allotment. Manav, a shareholder of Category II, who had applied for 1,000 shares failed to pay the first and final call. His shares were also forfeited. All the forfeited shares were reissued at ₹60 per share fully paid up.
Pass necessary journal entries and prepare Cash Book for the above transactions in the books of Sunstar Ltd. [CBSE 2019 (67/3/1)]
Answer:
Books of Sunstar Ltd.
Journal

Date	Particulars	Dr. (₹)	Cr. (₹)
(i)	Equity Share Application A/c Dr.	45,00,000
	To Equity Share Capital A/c		30,00,000
	To Equity Share Allotment A/c		12,50,000
	To Share 1st and Final Call A/c		2,50,000
	(Being adjustment of application money done)
(ii)	Equity Share Allotment A/c Dr.	20,00,000
	To Equity Share Capital A/c		20,00,000
	(Being allotment money due)
(iii)	Calls-in-Arrears A/c Dr.	15,000
	To Equity Share Allotment A/c		15,000
	(Being allotment money not received)
(iv)	Equity Share Capital A/c Dr.	75,000
	To Equity Share Forfeited A/c		60,000
	To Calls-in-Arrears A/c		15,000
	(Being 3,000 equity shares forfeited after non-payment of allotment money)
(v)	Share 1st and Final Call A/c Dr.	49,25,000
	To Equity Share Capital A/c		49,25,000
	(Being 1st and final call money due on 1,97,000 equity shares)
(vi)	Calls-in-Arrears A/c Dr.	10,000
	To Share 1st and Final Call A/c		10,000
	(Being 1st and final call money received except on 500 shares)
(vii)	Equity Share Capital A/c Dr.	25,000
	To Equity Share Forfeited A/c		15,000
	To Calls-in-Arrears A/c		10,000
	(Being 500 shares forfeited after non-payment of 1st and final call)
(viii)	Share Forfeited A/c (60,000 + 15,000) Dr.	75,000
	To Capital Reserve A/c		75,000
	(Being profit on re-issue of forfeited shares transferred to capital reserve account)

Cash Book (Bank Column Only)

Dr.		Cr.
Particulars	₹	Particulars	₹
To Equity Share Application A/c	45,00,000	By Balance c/d	1,01,10,000
To Equity Share Allotment A/c	7,35,000
To Equity Share First Call A/c	46,65,000
To Equity Share Capital A/c (3,500 × ₹50)	1,75,000
To Securities Premium Reserve A/c (3,500 × ₹10)	35,000
	1,01,10,000		1,01,10,000

Working Notes:
1. Table showing adjustment of Excess Application Money:

Particulars	Category – I (₹)	Category – II (₹)	Total (₹)
Application money received	30,00,000 (2,00,000 × ₹15)	15,00,000 (1,00,000 × ₹15)	45,00,000
Less: Application money utilised	22,50,000 (1,50,000 × ₹15)	7,50,000 (50,000 × ₹15)	30,00,000
Surplus Application money	7,50,000	7,50,000	15,00,000
Less: Adjusted on Allotment	7,50,000	5,00,000	12,50,000
Still Surplus	—	2,50,000	2,50,000
Less: Adjusted on First and Final Call	—	2,50,000	2,50,000
	—	—	—

2. Calculation of allotment money due but not paid by Namita: Shares applied by Namita (Category I) = 2,00,000/1,50,000 × 3,000 = 4,000 shares.
Excess application money paid by Namita = (4,000 × ₹15) − (3,000 × ₹15) = ₹15,000; Allotment money due from Namita (3,000 × ₹10) = ₹30,000; Less: excess application money adjusted towards allotment ₹15,000; Unpaid = ₹15,000.
3. Calculation of Allotment Money received: Allotment money due (2,00,000 × ₹10) ₹20,00,000; Less: excess application money adjusted on allotment ₹12,50,000 = ₹7,50,000; Less: allotment money not paid by Namita ₹15,000 = ₹7,35,000.
4. Shares allotted to Manav = 50,000/1,00,000 × 1,000 = 500 shares. Amount due on first and final call from Manav (500 × ₹25) = ₹12,500; Less: excess application money adjusted on first and final call (2,50,000/50,000 × 500) = ₹2,500; Amount of first and final call not received from Manav = ₹10,000.
5. First and final call received = 49,25,000 − 2,50,000 − 10,000 = ₹46,65,000.

Teacher's Note:
1. When a Cash Book is asked, bank receipts are recorded only in the Cash Book, so the journal shows only non-cash entries such as dues, adjustments and forfeiture.
2. Once the unpaid amount is transferred to Calls-in-Arrears A/c, the forfeiture entry credits Calls-in-Arrears, not the allotment or call account.

Question 40. Megha Ltd. invited applications for issuing 90,000 equity shares of ₹100 each at a premium of ₹60 per share. The amount was payable as follows:
On Application – ₹30 per share (including premium ₹10)
On Allotment – ₹70 per share (including premium ₹50)
On First and Final Call – Balance amount
Applications for 1,00,000 shares were received. Shares were allotted on pro-rata basis to all the applicants. Excess money received with application was adjusted towards sums due on allotment. Sudha, a shareholder holding 4,500 shares, failed to pay the allotment money. Her shares were forfeited immediately after allotment. Afterwards the first and final call was made. Rajat, a holder of 3,600 shares, failed to pay the first and final call. His shares were also forfeited. All the forfeited shares were re-issued for ₹90 per share fully paid up.
Pass necessary journal entries and prepare Cash Book for the above transactions in the books of Megha Ltd. [CBSE 2019 (67/3/1)]
Answer:
Books of Megha Ltd.
Journal

Date	Particulars	Dr. (₹)	Cr. (₹)
(i)	Equity Share Application A/c Dr.	30,00,000
	To Equity Share Capital A/c		18,00,000
	To Equity Share Allotment A/c		3,00,000
	To Securities Premium Reserve A/c		9,00,000
	(Being adjustment of application money done)
(ii)	Equity Share Allotment A/c Dr.	63,00,000
	To Equity Share Capital A/c		18,00,000
	To Securities Premium Reserve A/c		45,00,000
	(Being allotment money due along with premium)
(iii)	Calls-in-Arrears A/c Dr.	3,00,000
	To Equity Share Allotment A/c		3,00,000
	(Being calls-in-arrears recorded)
(iv)	Equity Share Capital A/c Dr.	1,80,000
	Securities Premium Reserve A/c Dr.	2,25,000
	To Equity Share Forfeited A/c		1,05,000
	To Calls-in-Arrears A/c		3,00,000
	(Being 4,500 equity shares forfeited)
(v)	Share First and Final Call A/c Dr.	51,30,000
	To Equity Share Capital A/c		51,30,000
	(Being first and final call money due on 85,500 equity shares @ ₹60 per share)
(vi)	Calls-in-Arrears A/c Dr.	2,16,000
	To Share First and Final Call A/c		2,16,000
	(Being first and final call money not received on 3,600 shares)
(vii)	Equity Share Capital A/c Dr.	3,60,000
	To Equity Share Forfeited A/c		1,44,000
	To Calls-in-Arrears A/c		2,16,000
	(Being 3,600 shares forfeited)
(viii)	Share Forfeited A/c Dr.	81,000
	To Equity Share Capital A/c		81,000
	(Being 8,100 equity shares were re-issued at ₹90 per share fully paid up, so ₹10 per share adjusted from share forfeited account)
	Share Forfeited A/c Dr.	1,68,000
	To Capital Reserve A/c		1,68,000
	(Being profit on re-issue of forfeited shares transferred to capital reserve account)

Cash Book (Bank Column Only)

Dr.		Cr.
Particulars	₹	Particulars	₹
To Equity Share Application A/c	30,00,000	By Balance c/d	1,43,43,000
To Equity Share Allotment A/c	57,00,000
To Equity Share First & Final Call A/c	49,14,000
To Equity Share Capital A/c	7,29,000
	1,43,43,000		1,43,43,000

Working Notes:
1. Calculation of Money Received on Allotment:
(i) Pro-rata Allotment = 1,00,000 : 90,000 or 10 : 9
(ii) No. of shares applied by Sudha = 10/9 × 4,500 = 5,000 shares
(iii) Money received on application from Sudha (5,000 × ₹30) ₹1,50,000; Less: amount adjusted on application (4,500 × ₹30) ₹1,35,000; Excess application money adjusted on allotment ₹15,000
(iv) Money due from Sudha on allotment (4,500 × ₹70) ₹3,15,000; Less: excess application money adjusted on allotment (iii) ₹15,000; Money not paid by Sudha on allotment ₹3,00,000
(v) Total amount due on allotment (90,000 × ₹70) ₹63,00,000; Less: excess application money adjusted (10,000 × ₹30) ₹3,00,000 = ₹60,00,000; Less: money not paid by Sudha on allotment ₹3,00,000 = ₹57,00,000
2. Calculation of amount transferred to Capital Reserve: Amount forfeited on 8,100 (4,500 + 3,600) shares (1,05,000 + 1,44,000) = ₹2,49,000; Less: discount on re-issue (8,100 × ₹10) ₹81,000; Gain on re-issue transferred to Capital Reserve ₹1,68,000.

Teacher's Note:
1. Sudha's allotment premium (₹50 per share) was never received, so Securities Premium Reserve is debited on forfeiture; Rajat had paid all premium, so only Share Capital is debited.
2. Reissue proceeds of 8,100 × ₹90 = ₹7,29,000 appear in the Cash Book; the ₹10 discount per share comes out of Share Forfeited A/c.

Question 41. Denspar Ltd. invited applications for issuing 2,00,000 equity shares of ₹10 each at a premium of ₹20 per share. The amount was payable as follows:
On Application – ₹2 per share
On Allotment – ₹13 per share (including ₹10 premium)
On First Call – ₹7 per share (including ₹5 premium)
On Final Call – ₹8 per share (including ₹5 premium)
Applications for 1,80,000 shares were received. Shares were allotted to all the applicants. Yogesh, a shareholder holding 5,000 shares paid his entire share money along with the allotment money. Vishesh, a holder of 7,000 shares, failed to pay the allotment money. Afterwards the first call was made. Vishesh paid the allotment money along with the first call money. Samyesh, holding 2,000 shares did not pay the final call. Samyesh's shares were forfeited immediately after the final call. Out of the forfeited shares, 1,500 shares were reissued at ₹8 per share fully paid up.
Pass the necessary journal entries for the above transactions in the books of Denspar Ltd. [CBSE 2019 (67/2/1)]
Answer:
In the books of Denspar Ltd.
Journal

Particulars	Dr. (₹)	Cr. (₹)
Bank A/c Dr.	3,60,000
To Equity Share Application A/c		3,60,000
(Being the application money received on 1,80,000 shares @ ₹2 per share)
Equity Share Application A/c Dr.	3,60,000
To Equity Share Capital A/c		3,60,000
(Being the application money transferred to Share Capital A/c)
Equity Share Allotment A/c Dr.	23,40,000
To Equity Share Capital A/c		5,40,000
To Securities Premium Reserve A/c		18,00,000
(Being the allotment money due along with securities premium)
Bank A/c Dr.	23,24,000
Calls-in-Arrear A/c (7,000 × ₹13) Dr.	91,000
To Equity Share Allotment A/c		23,40,000
To Calls-in-Advance A/c (5,000 × ₹15)		75,000
(Being allotment money received with calls-in-advance on 5,000 shares, calls-in-arrears on 7,000 shares)
Equity Share First Call A/c Dr.	12,60,000
To Equity Share Capital A/c		3,60,000
To Securities Premium Reserve A/c		9,00,000
(Being share first call money due)
Bank A/c Dr.	13,16,000
Calls-in-Advance A/c Dr.	35,000
To Share First Call A/c		12,60,000
To Calls-in-Arrear A/c		91,000
(Being share first call money received along with arrears amount of allotment on 7,000 shares)
Equity Share Final Call A/c Dr.	14,40,000
To Equity Share Capital A/c		5,40,000
To Securities Premium Reserve A/c		9,00,000
(Being share final call money due along with premium)
Bank A/c Dr.	13,84,000
Calls-in-Arrear A/c (2,000 × ₹8) Dr.	16,000
Calls-in-Advance A/c Dr.	40,000
To Equity Share Final Call A/c		14,40,000
(Being final call money received and calls-in-arrears and calls-in-advance adjusted)
Equity Share Capital A/c Dr.	20,000
Securities Premium Reserve A/c Dr.	10,000
To Calls-in-Arrear A/c		16,000
To Share Forfeiture A/c		14,000
(Being forfeiture of 2,000 shares for non-payment of final call)
Bank A/c (1,500 × ₹8) Dr.	12,000
Share Forfeiture A/c Dr.	3,000
To Equity Share Capital A/c		15,000
(Being re-issue of 1,500 forfeited shares at ₹8 per share fully paid up)
Share Forfeiture A/c Dr.	7,500
To Capital Reserve A/c		7,500
(Being balance of forfeiture account on 1,500 shares transferred to capital reserve account)

Working Notes:
(i) Calls-in-advance: on First Call (5,000 × ₹7) = ₹35,000; on Final Call (5,000 × ₹8) = ₹40,000; Total ₹75,000.
(ii) Share final call due ₹14,40,000; Less: calls-in-advance ₹40,000 = ₹14,00,000; Less: calls-in-arrears ₹16,000; Received on final call ₹13,84,000.
(iii) Amount of forfeiture on 2,000 shares = ₹14,000; Amount of forfeiture on 1,500 shares = 14,000/2,000 × 1,500 = ₹10,500; Less: discount on reissue ₹3,000; Amount transferred to Capital Reserve A/c ₹7,500.

Teacher's Note:
1. Samyesh had paid ₹7 per share of capital (₹2 + ₹3 + ₹2) before forfeiture, so ₹14,000 is credited to Share Forfeiture A/c and the unpaid premium of ₹5 per share is debited to Securities Premium Reserve.
2. Only the forfeited amount on the 1,500 reissued shares, less the ₹2 discount, goes to Capital Reserve; the balance on 500 shares stays in Share Forfeiture A/c.

More Accountancy Study Material ›

Free study material for Accountancy

Free Printable Worksheets PDF

Value Based Questions

Important Notes and Sure Shot Questions

Latest Syllabus

CBSE Sample Papers Latest PDF

Previous Year Question Papers PDF

Practice Worksheets PDF

Online Mock Tests

NCERT Solutions

MCQs with Answers

HOTS Questions with Answers

NCERT Book PDF

Revision Notes

Assignments with Questions and Answers PDF

CBSE Class 12 Accountancy Study Material: Part 2 Chapter 01 Accounting for Share Capital

Quick Revision Material for Part 2 Chapter 01 Accounting for Share Capital

Explore essential learning tools for Class 12 Accountancy Part 2 Chapter 01 Accounting for Share Capital. This curated collection features in-depth notes and targeted practice questions built around the active 2026 curriculum to streamline your daily revision.

Expert Notes and Solved Exam Questions

Each resource draws directly from authorized textbooks to maintain academic accuracy. Evaluating solved examples allows Class 12 students to master the formal presentation and answer-writing standards expected in upcoming school exams.

Additional Study Resources for Class 12

Wrap up your chapter revision by testing your knowledge against standard objective question formats. Explore our full library of free, up-to-date sample papers and online assessments to secure top grades in your CBSE examinations.

FAQs

Where can I find the most advanced study material for CBSE Class 12 Accountancy for 2026-27?

The latest 2026-27 advanced study resources for Class 12 Accountancy are available for free on StudiesToday.com which includes NCERT Exemplars, high-order thinking skills (HOTS) questions, and deep-dive concept summaries.

What does the 2026-27 Accountancy study package for Class 12 include?

Our exhaustive Class 12 Accountancy package includes chapter wise revision notes, solved practice sheets, important formulas and Concept Maps to help in better understanding of all topics.

Is this study material enough for both CBSE exams and competitive tests?

Yes. For Class 12, our resources have been developed to help you get better marks in CBSE school exams and also build fundamental strength needed for entrance tests including Competency Based learning.

How should Class 12 students use this Accountancy material for maximum marks?

in Class 12, students should use Active Recall method, read the concept summary, then solve the Important Questions section without looking at the answers and then check your answers.

Can I download Class 12 Accountancy study notes in PDF for offline use?

All CBSE Accountancy study materials are provided in mobile-friendly PDF. You can download and save them on your device.

Are the Class 12 Accountancy resources updated for the latest NEP guidelines?

Yes, our team has ensured that all Accountancy materials for Class 12 are strictly aligned with the National Education Policy (NEP) 2020 and the latest 2026-27 CBSE syllabus.

Particulars	Dr. (₹)	Cr. (₹)
Share Capital A/c Dr.	350
……… Dr.	250
To ………		………
To ………		………
(Being 50 shares forfeited for non-payment of allotment money of ₹9 per share including ₹5 of securities premium per share)
Bank A/c Dr.	600
To ………		………
To ………		………
(Being 50 forfeited shares reissued at ₹12 each fully paid-up)
……… Dr.	………
To ………		………
(Being profit on reissue of forfeited shares transferred to capital reserve)