CBSE Class 12 Accountancy Accounting For Share Capital Important Questions Set 02

Very Short Answer Questions (1 Mark)

Question 1. What is meant by Employees Stock Option Plan? [CBSE 2019]
Answer:
Employees Stock Option Plan means option granted by the company to its employees and directors to subscribe to the shares of the company at a price that is lower than the market price.

Teacher's Note:
1. It is an option, not an obligation: employees may choose not to exercise it.

Question 2. Define Preference Shares. [CBSE (AI) 2006]
Answer:
Preference shares are those shares which are entitled to a priority in the payment of dividend at fixed rate and return of their capital.

Teacher's Note:
1. Both preferences must be present: dividend at a fixed rate and repayment of capital before equity on winding up.

Question 3. What is the name given to the 'Part of Capital' of a company which is called-up only on winding-up? [CBSE (AI) 2011(C)]
Answer:
Reserve Capital.

Teacher's Note:
1. Reserve capital is created by a special resolution and cannot be called up while the company is a going concern.

Question 4. D Ltd. invited applications for issuing 10,00,000 equity shares of ₹10 each. The public applied for 8,55,000 shares. Can the company proceed for the allotment of shares? Give reason in support of your answer. [CBSE (AI) 2014]
Answer:
The company cannot proceed for the allotment of shares as the minimum subscription has not been received which should be 90% of the shares offered for subscription (i.e. 9,00,000).

Teacher's Note:
1. If minimum subscription is not received, the entire application money has to be refunded.

Teacher's Note:
1. Bank = 3,00,000 − 1,500 (arrears) + 5,000 (advance) = ₹3,03,500; check that both sides total ₹3,05,000.

Question 6. Identify the purpose of utilising the 'Securities Premium Reserve' that would maximise the return to shareholders. [CBSE Delhi 2012(C)]
Answer:
A company can maximise the return to shareholders by utilising the amount of securities premium reserve through buy back of its shares.

Teacher's Note:
1. Buy-back reduces the number of shares, so the earnings per remaining share go up.

Question 7. Mr. X holding 100 shares did not pay the amount of ₹3 due on first call of his shares. Under which head will the unpaid amount be shown in the Balance Sheet?
Answer:
The Calls-in-Arrears of ₹300 will be shown in the Balance Sheet under the heading 'Share Capital' as a deduction from Subscribed Share Capital.

Teacher's Note:
1. Calls-in-arrears is never shown on the Assets side; it is deducted from 'Subscribed but not fully paid-up' capital.

Question 8. Determine the amount of permissible discount at the time of reissue on a share of ₹10 issued originally at a premium of ₹2 on which application and allotment money (including premium) of ₹7 has been received.
Answer:
Total money received in respect of share capital is ₹5 (Total money received − premium money received), therefore maximum permissible discount at the time of reissue will be ₹5.

Teacher's Note:
1. Premium received is not part of the forfeited amount, so leave it out when finding the maximum discount.

Question 9. Give any one purpose for which the amount received as securities premium may be utilised. [CBSE Delhi 2014]
Answer:
According to Section 52(2) of the Companies Act, 2013, the amount of securities premium can be used to issue fully paid-up bonus shares to the shareholders.

Teacher's Note:
1. Securities premium cannot be used to pay dividend.

Question 10. What is meant by 'Preferential Allotment of Shares'?
Answer:
Preferential Allotment means an allotment of shares made at a pre-determined price to the pre-identified people having strategic stake in the company such as promoters, venturers, capitalists, financial institutions, suppliers, etc.

Teacher's Note:
1. Preferential allotment is governed by Section 62(1)(c) and needs a special resolution.

Question 11. What is meant by 'Issue of shares for consideration other than cash'. Give an example.
Answer:
Sometimes company issue fully paid shares to the vendor from whom it buys asset. Such type of issue of shares to the vendor is called 'Issue of shares for consideration other than cash'.

Teacher's Note:
1. Example: shares issued to a vendor for machinery, or to promoters for their services.

Question 12. How does 'Preliminary expenses' appear in Balance Sheet?
Answer:
Preliminary expenses are not shown in Balance Sheet. As per AS–26 they are written off in the same year in which they are incurred.

Teacher's Note:
1. They are written off first against Securities Premium (if any) and the balance against the Statement of Profit and Loss.

Question 13. What is meant by surrender of shares?
Answer:
It is voluntary return of shares by a shareholder for the purpose of cancellation.

Teacher's Note:
1. Surrendered shares are treated in the same way as forfeited shares.

Question 14. What is meant by 'forfeiture of shares'. When does gain on forfeited share arise and when is it transferred to Capital Reserve? [CBSE 2019]
Answer:
Cancellation of shares for the non payment of called up amount is termed as Forfeiture of shares. Gain on Forfeited shares arises on reissue. It is transferred immediately on the reissue of forfeited shares.

Teacher's Note:
1. Only the gain on shares actually reissued is transferred; the forfeited amount on shares not yet reissued stays in Share Forfeited A/c.

Question 15. Z Ltd. forfeited 1,000 equity shares of ₹10 each for the non-payment of the first call of ₹2 per share. The final call of ₹3 per share was yet to be made. Calculate the maximum amount of discount at which these shares can be reissued. [CBSE (AI) 2017]
Answer:
Ans. The maximum amount of discount at which these shares can be reissued is ₹5 per share or ₹5,000.
Amount received per share = ₹10 − ₹3 (final call not made) − ₹2 (first call unpaid) = ₹5.

Teacher's Note:
1. The maximum discount on reissue can never exceed the amount forfeited on those shares.

Teacher's Note:
1. Calls-in-Arrears is debited and Calls-in-Advance credited in the same receipt entry; the call account is credited with the full amount due.

Short Answer Questions (2 Marks)

Question 17. Pass necessary journal entries for the following transactions in the books of Sewak Ltd.:
Purchased furniture of ₹5,00,000 from Ramprastha Ltd. The payment to Ramprastha Ltd. was made by issuing equity shares of ₹10 each at a premium of 25%. [CBSE (F) 2014]
Answer:
Ans. No. of shares issued 40,000
Number of shares = 5,00,000 ÷ ₹12.50 = 40,000; Share Capital ₹4,00,000 and Securities Premium Reserve ₹1,00,000.

Teacher's Note:
1. Divide the amount payable by the issue price (face value + premium), not by the face value.

Question 18. Z Ltd. purchased machinery from K Ltd. Z Ltd. paid to K Ltd. as follows:
(i) By issuing 5,000, Equity shares of ₹10 each at a premium of 30%.
(ii) By issuing 1,000, 8% Debentures of ₹100 each at a discount of 10%.
(iii) Balance by giving a promissory note of ₹48,000 payable after two months.
Pass necessary journal entries for the purchase of machinery and payment to K Ltd. in the books of Z Ltd. [CBSE (F) 2017]
Answer:
Ans. Purchase Consideration ₹2,03,000
= 5,000 × ₹13 + 1,000 × ₹90 + ₹48,000 = 65,000 + 90,000 + 48,000 = ₹2,03,000.

Teacher's Note:
1. Shares and debentures are counted at their issue price; the discount on debentures is debited to Discount on Issue of Debentures A/c.

Question 19. X Ltd. purchased machinery for ₹5,00,000 from Y Ltd. Half of the amount was paid by accepting a Bill of Exchange drawn by Y Ltd. payable after three months. The balance was paid by issue of Equity Shares of ₹10 each at a premium of 25%.
Pass necessary Journal Entries in the books of X Ltd. for these transactions. [CBSE (F) 2012]
Answer:
Ans. No. of shares to be issued 20,000
Balance = ₹2,50,000; number of shares = 2,50,000 ÷ ₹12.50 = 20,000.

Teacher's Note:
1. The acceptance is credited to Bills Payable A/c; only the balance ₹2,50,000 is settled by shares.

Question 20. The Directors of a Company forfeited 300 shares of ₹10 each issued at a premium of ₹3 per share, for the non-payment of the first call money of ₹3 per share. The final call of ₹2 per share has not been made. Half of the shares forfeited were reissued at ₹1,500 fully paid. Record the journal entries for the forfeiture and reissue of shares. [CBSE Delhi 2009]
Answer:
Ans. Capital Reserve A/c ₹750
Forfeited per share = ₹8 called − ₹3 unpaid = ₹5; 150 shares reissued at ₹10 each (no discount), so Capital Reserve = 150 × ₹5 = ₹750.

Teacher's Note:
1. ₹1,500 for 150 shares is exactly ₹10 per share, so the reissue is at par and no forfeited amount is used up.

Question 21. L Ltd. forfeited 470 equity shares of ₹20 each issued at a premium of ₹3 per share for the non-payment of allotment money of ₹8 (including premium ₹3) and first call of ₹5 per share. Final call of ₹5 per share was not made. Out of these, 235 shares were reissued at ₹19 each fully paid.
Pass necessary Journal entries for the above transactions in the books of L Ltd. [CBSE Delhi 2014(C)]
Answer:
Ans. Amount transferred to Capital Reserve ₹940
Amount forfeited = 470 × ₹5 = ₹2,350; on 235 shares ₹1,175; Less: discount 235 × ₹1 = ₹235; Capital Reserve = ₹940.

Teacher's Note:
1. Only the application money (₹5 of capital) had been received, so ₹5 per share is forfeited; premium unpaid on allotment is debited to Securities Premium Reserve.

Short Answer Questions (3 Marks)

Teacher's Note:
1. The premium was already received, so Securities Premium is not touched on forfeiture.
2. Reissue at ₹10 means no discount, so the whole forfeited amount on the 250 shares goes to Capital Reserve.

Teacher's Note:
1. Reissue above face value (₹130 per share) credits the excess ₹30 per share to Securities Premium, and the whole forfeited amount goes to Capital Reserve.

Teacher's Note:
1. Shares whose final call is unpaid are shown under 'Subscribed but not fully paid', with Calls-in-Arrears deducted from their called-up value.
2. Issued capital is what was offered (80,000 shares), not what was subscribed (75,000).

Teacher's Note:
1. Shares issued to promoters for their services are a non-cash issue: debit Incorporation Costs A/c (2,000 × ₹10) and credit Share Capital; no Bank A/c is involved.
2. Check: ₹2 + ₹2 + ₹3 + ₹3 = ₹10, the full face value of each share.

Question 26. Sun Pharma Ltd. is registered with an authorized capital of ₹1,00,00,000 divided into 1,00,000 equity shares of ₹100 each. The company issued 50,000 shares at a premium of ₹40 per share. A shareholder holding 500 shares did not pay the final call of ₹20 per share. His 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 Delhi 2015]
Answer:
Ans. Share Capital ₹49,90,000
Subscribed and fully paid: 49,500 shares × ₹100 = ₹49,50,000; Add: Share Forfeited A/c 500 × ₹80 = ₹40,000; Total = ₹49,90,000.

Teacher's Note:
1. After forfeiture the forfeited shares are no longer subscribed; the amount received on them (Share Forfeited A/c) is added to subscribed capital in the Note.
2. Securities premium is not part of Share Capital; it goes under Reserves and Surplus.

Question 27. On 1st April, 2012, Kamya Ltd. was formed with an authorised capital of ₹40,00,000 divided into 4,00,000 equity shares of ₹10 each. The company issued prospectus inviting applications for 3,80,000 equity shares. The company received applications for 3,60,000 equity shares. During the first year, ₹8 per share were called. Deepti holding 3,000 shares and Divya holding 6,000 shares did not pay first call of ₹2 per share. Divya's shares were forfeited after the first call and later on 5,000 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’. [CBSE (F) 2014]
Answer:
Ans. Share Capital ₹28,72,000; Total of Balance Sheet ₹28,92,000 (including Capital Reserve ₹20,000).
Subscribed but not fully paid: 3,59,000 shares × ₹8 = ₹28,72,000; Less: Calls-in-Arrears (3,000 × ₹2) ₹6,000 = ₹28,66,000; Add: Share Forfeited A/c (1,000 × ₹6) ₹6,000 = ₹28,72,000.
Capital Reserve = 5,000 × ₹6 forfeited − 5,000 × ₹2 discount = ₹20,000. Cash at Bank = 28,80,000 − 6,000 − 12,000 + 30,000 = ₹28,92,000.

Teacher's Note:
1. Shares now in issue = 3,60,000 − 6,000 forfeited + 5,000 reissued = 3,59,000, all ₹8 called up.
2. Only the forfeited amount on the 1,000 shares not yet reissued stays in Share Forfeited A/c and is added to share capital.

Teacher's Note:
1. Under-subscription: issued capital is 12,000 shares but only the 11,000 shares applied for are subscribed.

Question 29. To provide employment to the youth and to develop Baramula district of Jammu and Kashmir, Jyoti Power Ltd. decided to set-up a power plant. For raising funds, the company decided to issue 8,50,000 equity shares of ₹10 each at a premium of ₹3 per share. The whole amount was payable on application. Applications for 20,00,000 shares were received. Applications for 3,00,000 shares were rejected and shares were allotted to the remaining applicants on pro-rata basis.
Pass necessary journal entries for the above transactions in the books of the company. [CBSE (AI) 2016]
Answer:
Ans. Securities Premium Reserve ₹25,50,000 (8,50,000 × ₹3).
Application money received = 20,00,000 × ₹13 = ₹2,60,00,000; Share Capital ₹85,00,000; refund = (20,00,000 − 8,50,000) × ₹13 = ₹1,49,50,000, as the whole amount was payable on application.

Teacher's Note:
1. When the whole amount is payable on application, excess money of pro-rata applicants cannot be adjusted and must be refunded too.

Question 30. Sandesh Ltd. took over the assets of ₹7,00,000 and liabilities of ₹2,00,000 from Sanchar Ltd. for a purchase consideration of ₹4,59,500. ₹8,500 were paid by accepting a draft in favour of Sanchar Ltd. payable after three months and the balance was paid by issue of equity shares of ₹10 each at a premium of 10% in favour of Sanchar Ltd.
Pass necessary journal entries for the above transactions in the books of Sandesh Ltd. [CBSE Delhi 2016]
Answer:
Ans. Capital Reserve ₹40,500, No. of Shares issued 41,000
Net assets = 7,00,000 − 2,00,000 = ₹5,00,000; Capital Reserve = 5,00,000 − 4,59,500 = ₹40,500. Shares = (4,59,500 − 8,500) ÷ ₹11 = 41,000.

Teacher's Note:
1. Purchase consideration below net assets gives Capital Reserve; above it gives Goodwill.

Long Answer Questions (5 Marks)

Teacher's Note:
1. Find the call per share first (₹10 − ₹3 − ₹4 = ₹3); the arrears of ₹1,500 then tell you that 500 shares were forfeited.
2. Capital Reserve = ₹3,500 forfeited − ₹1,000 discount on reissue = ₹2,500.

Question 32. X Ltd. invited applications for issuing 50,000 equity shares of ₹10 each. The amount was payable as follows:
On Application: ₹2 per share
On Allotment: ₹2 per share
On First Call: ₹3 per share
On Second and Final Call: Balance Amount
Applications for 70,000 shares were received. Applications for 10,000 shares were rejected and the application money was refunded.
Shares were allotted to the remaining applicants on a pro-rata basis and excess money received with applications was transferred towards sums due on allotment and calls, if any.
Gopal, who applied for 600 shares, paid his entire share money with application. Ghosh, who had applied for 6,000 shares, failed to pay the allotment money and his shares were immediately forfeited. These forfeited shares were re-issued to Sultan for ₹20,000; ₹4 per share paid up. The first call money and the second and final call money was called and duly received.
Pass necessary journal entries for the above transactions in the books of X Ltd. Open Calls-in-Advance Account and Calls-in-Arrears Account wherever necessary. [CBSE Delhi 2018]
Answer:
Ans. Amount received on allotment ₹71,200
Allotment due 50,000 × ₹2 = ₹1,00,000; Less: excess application money adjusted ₹20,800 (₹19,800 of other applicants + ₹1,000 of Gopal); Less: unpaid by Ghosh (5,000 × ₹2 − ₹2,000 excess) ₹8,000; Received = ₹71,200.

Teacher's Note:
1. Pro-rata ratio is 60,000 : 50,000 = 6 : 5, so Gopal gets 500 shares and Ghosh 5,000 shares.
2. Gopal's money beyond allotment (500 × ₹6 = ₹3,000) is credited to Calls-in-Advance A/c.

Question 33. Sargam Ltd. invited applications for issuing 80,000 equity shares of ₹100 each at a premium. The amount was payable as follows:
On Application – ₹20 per share;
On Allotment – ₹60 (including premium) per share;
On First and Final Call – ₹40 per share.
Applications for 1,20,000 shares were received. Allotment was made on pro rata basis to all the applicants. Excess money received on applications was adjusted on sums due on allotment. Sitaram, who had applied for 6,000 shares, failed to pay the allotment money and Harnam did not pay first and final call on 800 shares allotted to him. The shares of Sitaram and Harnam were forfeited. 4,200 of these shares were reissued for ₹100 per share as fully paid-up. The reissued shares included all the forfeited shares of Harnam.
Pass necessary Journal entries for the above transactions in the books of Sargam Ltd. [CBSE Delhi 2016 (C)]
Answer:
Ans. Amount received on allotment ₹38,00,000, Capital Reserve ₹1,50,000.
Allotment received = 48,00,000 − 8,00,000 excess − 2,00,000 unpaid by Sitaram (4,000 × ₹60 − ₹40,000) = ₹38,00,000.
Capital Reserve = Harnam 800 × ₹60 + Sitaram 3,400 × ₹30 = 48,000 + 1,02,000 = ₹1,50,000.

Teacher's Note:
1. Premium = ₹20 + ₹60 + ₹40 − ₹100 = ₹20 per share, all collected on allotment.
2. Sitaram's forfeited amount is his application money ₹1,20,000 on 4,000 shares, i.e. ₹30 per share.

Question 34. ‘Sulabh Ltd.’ invited applications for issuing 1,50,000 equity shares of ₹10 each at a premium of ₹3 per share. The amount was payable as follows:
On application – ₹2 per share.
On allotment – ₹6 per share (including premium)
On first and final call – the balance.
Applications for 2,00,000 shares were received and shares were allotted on pro-rata basis to all the applicants. Excess money received with applications was adjusted towards sums due on allotment. Suman who had applied for 2,000 shares failed to pay the allotment and call money. Raman failed to pay first and final call on his 500 shares. Shares of both Suman and Raman were forfeited after the final call was made. The forfeited shares were reissued for ₹12 per share as fully paid up.
Pass necessary Journal Entries for the above transactions in the books of the company. [CBSE Delhi 2015]
Answer:
Ans. Amount received on allotment ₹7,92,000; Capital Reserve ₹6,500
Allotment received = 9,00,000 − 1,00,000 excess − 8,000 unpaid by Suman (1,500 × ₹6 − ₹1,000) = ₹7,92,000.
Capital Reserve = Suman ₹4,000 + Raman 500 × ₹5 = ₹6,500 (reissue at ₹12 is at a premium, so nothing is deducted).

Teacher's Note:
1. Ratio 2,00,000 : 1,50,000 = 4 : 3, so Suman was allotted 1,500 shares.
2. First and final call = ₹13 − ₹8 = ₹5 per share.

Question 35. ‘Software Ltd.’ invited applications for issuing 70,000 equity shares of ₹10 each on which ₹7 per share were called up, which were payable as follows:
On application – ₹2 per share
On allotment – ₹3 per share
On first call – The balance
The amount was received as follows:
On 40,000 shares – ₹7 per share
On 20,000 shares – ₹5 per share
On 10,000 shares – ₹2 per share
The directors forfeited 30,000 shares on which less than ₹7 per share were received. Later on the forfeited shares were reissued at ₹5 per share, as ₹7 per share paid up.
Pass necessary journal entries for the above transactions in the books of the company. [CBSE (AI) 2015]
Answer:
Ans. Amount received on allotment ₹1,80,000; Capital Reserve ₹60,000
Allotment received = 60,000 × ₹3 = ₹1,80,000. Forfeited = 20,000 × ₹5 + 10,000 × ₹2 = ₹1,20,000; Less: discount 30,000 × ₹2 = ₹60,000; Capital Reserve = ₹60,000.

Teacher's Note:
1. The 20,000 shares paid ₹5 (application + allotment); only the 40,000 shares paid the first call.

Question 36. Moti Ltd. invited applications for issuing 10,00,000 equity shares of ₹10 each at a premium of ₹2 per share. The amount was payable as follows:
On Application – ₹5 (including premium)
On Allotment – ₹4
On First and Final Call – ₹3
Applications for 15,00,000 shares were received. Applications for 3,00,000 shares were rejected and pro rata allotment was made to the remaining applicants. Excess application money was utilised towards sum due on allotment. Giri who had applied for 24,000 shares failed to pay the allotment and call money. His shares were forfeited. Out of the forfeited shares 10,000 shares were reissued for ₹8 per share fully paid up. Pass necessary journal entries in the books of Moti Ltd. [CBSE (AI) 2011]
Answer:
Ans. Amount Received on Allotment ₹29,40,000, Capital Reserve ₹20,000
Allotment received = 40,00,000 − 10,00,000 excess − 60,000 unpaid by Giri (20,000 × ₹4 − ₹20,000) = ₹29,40,000.
Giri forfeited = 1,20,000 − 40,000 premium = ₹80,000 (₹4 per share); on 10,000 shares ₹40,000 − discount ₹20,000 = ₹20,000.

Teacher's Note:
1. Giri's premium was received with application, so Securities Premium Reserve is not debited on forfeiture.

Teacher's Note:
1. Ramesh applied 900 in category A (3 : 2) so got 600 shares; Suresh got 600 in category B (5 : 4) so applied for 750.

Question 38. Record the journal entries for forfeiture and reissue of shares in the following cases:
(i) X Ltd. forfeited 20 shares of ₹10 each, ₹7 called up on which the shareholder had paid application and allotment money of ₹5 per share. Out of these, 15 shares were reissued to Naresh as ₹7 per share paid up for ₹8 per share.
(ii) Y Ltd. forfeited 90 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, 80 shares were reissued to Sanjay as ₹8 called up for ₹10 per share. [CBSE Delhi 2013]
Answer:
Ans. Capital Reserve (i) ₹75, (ii) ₹400
(i) 15 × ₹5 = ₹75; (ii) amount paid per share = ₹10 − ₹5 = ₹5; 80 × ₹5 = ₹400.

Teacher's Note:
1. Both reissues are at a premium, so the whole forfeited amount on the reissued shares goes to Capital Reserve.

Question 39. SK Ltd. invited applications for issuing 3,20,000 equity shares of ₹10 each at a premium of ₹5 per share. The amount was payable as follows:
On Application ₹3 per share (including premium ₹1 per share)
On Allotment ₹5 per share (including premium ₹2 per share)
On First and Final Call – Balance.
Applications for 4,00,000 shares were received. Applications for 40,000 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. Jeevan holding 800 shares failed to pay the allotment money and his shares were immediately forfeited. Afterwards final call was made, Ganesh who had applied for 2,700 shares failed to pay the final call. His shares were also forfeited. Out of the forfeited shares 1,500 shares were reissued at ₹8 per share fully paid up. The reissued shares included all the forfeited shares of Jeevan.
Pass necessary journal entries for the above transactions in the books of the company. [CBSE (AI) 2016]
Answer:
Ans. Amount transferred to Capital Reserve ₹2,400
Jeevan (applied 900): forfeited = 900 × ₹3 − 800 × ₹1 premium = ₹1,900. Ganesh: 2,400 shares, ₹5 capital paid each; on 700 reissued = ₹3,500. Total 5,400 − discount 1,500 × ₹2 = 3,000; Capital Reserve = ₹2,400.

Teacher's Note:
1. Ratio 3,60,000 : 3,20,000 = 9 : 8; Jeevan applied for 900 shares and Ganesh was allotted 2,400 shares.

Question 40. Bharat Ltd. invited applications for 40,000 Equity Shares of ₹100 each at a premium of ₹20 per share. The amount was payable as follows:
on application ₹30 per share
on allotment (including premium) ₹70 per share
on first and final call balance of the amount
Applications for 60,000 shares were received. Applications for 10,000 shares were rejected and the application money on these shares was refunded. Pro rata allotment was made to the remaining applicants and excess money received from them with applications was adjusted towards the sum due on allotment. All calls were made and were duly received except the first and final call on 500 shares allotted to Rajan. These shares were forfeited. The share forfeited were afterwards reissued for ₹51,000 fully paid-up.
Pass necessary Journal entries in the books of the company for the above transactions. [CBSE (AI) 2009]
Answer:
Ans. Amount transferred to Capital Reserve ₹40,000
First and final call = ₹120 − ₹100 = ₹20; Rajan paid ₹80 capital per share: 500 × ₹80 = ₹40,000. Reissue at ₹102 per share is at a premium of ₹2, so the full ₹40,000 goes to Capital Reserve.

Teacher's Note:
1. ₹51,000 for 500 shares is ₹102 per share; the extra ₹1,000 is Securities Premium, not Capital Reserve.

Question 41. S Ltd. invited applications for issuing 1,00,000 equity shares of ₹10 each. The shares were issued at a premium of ₹5 per share. The amount was payable as follows:
On Application and Allotment – ₹8 per share (including premium ₹3)
On the First and Final call – Balance including premium
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:
(i) Applicants for 80,000 shares were allotted 60,000 shares, and
(ii) Applicants for 60,000 shares were allotted 40,000 shares.
Excess amount received on application and allotment was to be adjusted against sums due on call. X, who belonged to the first category and was allotted 300 shares, failed to pay the first and final call money. Y, who belonged to the second category and was allotted 200 shares, also failed to pay the first and final call money. Their shares were forfeited. The forfeited shares were reissued @ ₹12 per share as fully paid-up.
Prepare cash book and pass necessary journal entries for the above transactions in the books of the company. [CBSE 2019 (67/4/1)]
Answer:
Ans. Capital Reserve: ₹4,100
X applied 400 shares: paid 3,200, of which ₹800 excess adjusted on call; unpaid = 300 × ₹7 − 800 = ₹1,300. Y applied 300 shares: excess ₹800; unpaid = 200 × ₹7 − 800 = ₹600.
Forfeited: X = 300 × ₹5 + ₹800 = ₹2,300; Y = 200 × ₹5 + ₹800 = ₹1,800; total ₹4,100 (reissue at ₹12 is at a premium, so nothing is deducted).

Teacher's Note:
1. First and final call = ₹15 − ₹8 = ₹7 per share, including ₹2 premium; the premium on the call not received is debited to Securities Premium Reserve on forfeiture.

Question 42. Jeevan Dhara Ltd. invited applications for issuing 1,20,000 equity shares of ₹10 each at a premium of ₹2 per share. The amount was payable as follows:
On application – ₹2 per share.
On allotment – ₹5 per share (including premium)
On first and final call – balance.
Applications for 1,50,000 shares were received. Shares were allotted to all the applicants on pro-rata basis. Excess money received on applications was adjusted towards sums due on allotment. All calls were made. Manu who had applied for 3,000 shares failed to pay the amount due on allotment and first and final call. Madhur who was allotted 2,400 shares failed to pay the first and final call. Shares of both Manu and Madhur were forfeited. The forfeited shares were reissued at ₹9 per share as fully paid up.
Pass necessary journal entries for the above transactions in the books of Jeevan Dhara Ltd. [CBSE Delhi 2015]
Answer:
Ans. Capital Reserve: ₹13,200
Manu: allotted 2,400 shares, paid 3,000 × ₹2 = ₹6,000; Madhur: 2,400 × ₹5 capital = ₹12,000; total forfeited ₹18,000; Less: discount 4,800 × ₹1 = ₹4,800; Capital Reserve = ₹13,200.

Teacher's Note:
1. Ratio 1,50,000 : 1,20,000 = 5 : 4, so Manu's 3,000 applied shares give 2,400 allotted.
2. Reissue at ₹9 for a ₹10 share is a ₹1 discount, which is met out of Share Forfeited A/c.