GSEB Class 12 Accounts Solutions Chapter 1 Accounting for Share Capital

Select The Correct Option For Each Question

 

Question 1. At what minimum price per share company can issue shares according to current provisions of Companies Act?
(A) Rs. 100
(B) Rs. 1000
(C) Rs. 1
(D) Rs. 0.50
Answer: (C) Rs. 1
In simple words: As per company regulations, the lowest price at which a company can issue shares is Rs. 1.

🎯 Exam Tip: Remember the minimum issue price for shares as per the Companies Act, as this is a fundamental regulation frequently tested.

 

Question 2. For public issue of shares company has to take a permission from whom?
(C) State government
(D) Reserve Bank
Answer: (B) SEBI
In simple words: A company seeking to make a public issue of shares must obtain approval from SEBI, the market regulator.

🎯 Exam Tip: Knowledge of regulatory bodies like SEBI and their functions related to capital markets is essential for scoring well.

 

Question 3. As per SEBI guidelines, the minimum amount on each share called by company on application must be at least ............ % of the issue price.
(A) 25.
(B) 30
(C) 5
(D) 20
Answer: (A) 25.
In simple words: SEBI mandates that companies must collect at least 25% of the issue price per share with the application itself.

🎯 Exam Tip: Be precise about the percentage required on application as per SEBI guidelines, as it's a key detail in share issue accounting.

 

Question 4. If the company does not receive subscription for at least ............ of the public issue, then share issue would be cancelled.
(A) 50%
(B) 75%
(C) 90%
(D) 100%
Answer: (C) 90%
In simple words: If a company fails to secure applications for at least 90% of its public share issue, the entire issue will be withdrawn.

🎯 Exam Tip: The minimum subscription requirement (90%) is a critical condition for a successful public issue; its failure leads to cancellation and refund.

 

Question 5. At what maximum rate of percentage for premium on the face value of shares can be declared by the company on their issue shares?
(A) 10%
(B)100%
(C) 25%
(D) No limit
Answer: (D) No limit
In simple words: There is no legal upper limit on the premium percentage a company can charge when issuing shares above their face value.

🎯 Exam Tip: Understand that while there are rules for the minimum issue price and application money, there's no cap on the premium amount, which reflects market demand.

 

Question 6. When shares are forfeited then amount called up on forfeited shares is ................
(A) debited to share forfeiture A/c
(B) credited to share forfeiture A/c
(C) credited to share capital A/c
(D) debited to share capital A/c
Answer: (D) debited to share capital A/c
In simple words: When shares are forfeited, the called-up amount on those shares is debited from the share capital account to reverse the initial credit.

🎯 Exam Tip: Accurately identifying the debit and credit accounts during share forfeiture is crucial for correct journal entries.

 

Question 7. What is the maximum rate of interest charged by company on calls-in-arrears as per schedule I of Table F?
(A) at 15% p.a.
(B) at 10% p.a.
(C) at 2% p.m.
(D) at 1% p.m.
Answer: (B) at 10% p.a.
In simple words: According to Table F, a company can charge a maximum of 10% annual interest on unpaid call money from shareholders.

🎯 Exam Tip: Remember the prescribed interest rate for calls-in-arrears (10% p.a.) as per Schedule I of Table F, as this is a direct factual question.

 

Question 8. When all the forfeited shares are reissued then balance of share forfeiture account is transferred to ............ account.
(A) share capital
(B) profit-loss
(C) capital reserve
(D) general reserve
Answer: (C) capital reserve.
In simple words: Any remaining credit balance in the share forfeiture account after reissuing all forfeited shares is moved to the capital reserve account.

🎯 Exam Tip: The transfer of forfeiture balance to capital reserve upon reissue signifies a capital gain for the company and is a key accounting adjustment.

 

Question 9. If premium amount has not been received on forfeited shares then proportionate amount of premium is ....................
(A) debited to securities premium account
(B) credited to securities premium account
(C) credited to capital reserve account
(D) debited to share capital account.
Answer: (A) debited to securities premium account.
In simple words: If the premium amount for forfeited shares was not collected, the proportionate amount of that premium is debited to the securities premium account during forfeiture.

🎯 Exam Tip: Distinguish between premium received and unreceived. Unreceived premium is reversed (debited) from the Securities Premium Account during forfeiture, while received premium is not affected.

 

Question 10. Which of the following is not shown under the heading ‘Share Capital' in a balance sheet?
(A) Authorised capital
(B) Issued capital
(C) Reserve capital
(D) Subscribed capital
Answer: (C) Reserve capital
In simple words: Reserve capital, representing uncalled capital that will only be called upon liquidation, is not typically displayed under 'Share Capital' in a company's balance sheet.

🎯 Exam Tip: Understand the different classifications of share capital and how they are presented in a balance sheet; Reserve Capital is distinct from Capital Reserve.

 

Answer In Two Or Three Sentences

 

Question 1. What is share and share capital?
Answer: Capital that is divisible into small, transferable units is known as shares. This form of asset is both transferable and movable, and collectively, this entire fund constitutes share capital.
In simple words: Shares are small, transferable units of a company's capital, and the total amount of such capital is called share capital.

🎯 Exam Tip: Define both terms clearly and highlight the transferability aspect of shares for a comprehensive answer.

 

Question 2. What is Securities premium?
Answer: When a company issues its shares at a price exceeding their nominal (face) value, these shares are considered to be issued at a premium. The additional sum collected above the face value is designated as securities premium.
In simple words: Securities premium is the extra money a company receives when it sells its shares for more than their original face value.

🎯 Exam Tip: Clearly explain that securities premium is the excess amount received over the face value of shares during issuance.

 

Question 3. What is meant by share forfeiture?
Answer: If a shareholder fails to remit the amounts due on allotment or any subsequent calls within the stipulated period, the company, after adhering to prescribed formalities, can cancel or forfeit those shares. This entire process of cancellation or forfeiture of shares by the company's directors is termed share forfeiture.
In simple words: Share forfeiture is when a company cancels a shareholder's shares due to their failure to pay required installment amounts like allotment or call money.

🎯 Exam Tip: Emphasize that forfeiture occurs due to non-payment and involves the cancellation of shares after specific legal procedures.

 

Question 4. Under what circumstances do companies issue shares for consideration other than cash?
Answer: Companies can issue shares for consideration other than cash in the following scenarios:
- To acquire assets or an existing business, where the company issues shares instead of making a cash payment.
- To compensate promoters for their services by issuing shares as remuneration.
- To existing shareholders by issuing bonus shares.
- To underwriters as commission for their services, by allotting shares.
In simple words: Companies can issue shares without cash payment when buying assets, paying promoters, issuing bonus shares, or compensating underwriters.

🎯 Exam Tip: List a minimum of two to three common situations where shares are issued for non-cash consideration to score well.

 

Question 5. Under which circumstances do companies re-issued forfeited shares Here, (Que. 4 and Que. 5 are same so we answered Q.5 as per Gujarati book)
Answer: If the company's articles of association permit the reissue of forfeited shares, the directors have the authority to re-offer these shares at a discount, at par, or at a premium. When reissuing forfeited shares at a discount, the maximum discount offered to new shareholders cannot exceed the amount originally received and forfeited on those shares.
In simple words: Forfeited shares can be reissued at a discount, par, or premium if allowed by company rules, with the maximum discount limited to the amount previously forfeited.

🎯 Exam Tip: Focus on the conditions for reissue, particularly the maximum permissible discount, which is constrained by the forfeited amount.

 

Question 6. What is under-subscription and over-subscription of shares?
Answer: Under-subscription occurs when a company receives applications for fewer shares than the number it offered for public subscription. Conversely, over-subscription happens when the company receives applications for more shares than it originally issued for public subscription.
In simple words: Under-subscription means fewer applications than shares offered, while over-subscription means more applications than shares offered.

🎯 Exam Tip: Provide clear definitions for both terms by comparing the number of shares applied for with the number of shares offered.

 

Question 7. What is pro-rata allotment of shares?
Answer: Pro-rata allotment refers to a situation where shares are allocated to applicants in a certain proportion, rather than allotting all applied shares or rejecting some entirely. In such cases, any surplus application money received is first applied towards the share allotment account. If there is still an excess amount, it is then credited to the share calls account, and any remaining balance is refunded to the applicants.
In simple words: Pro-rata allotment means distributing shares proportionally to applicants, adjusting excess application money towards allotment and calls, and refunding any leftover amount.

🎯 Exam Tip: Explain that pro-rata allotment involves proportional distribution and describe the process of adjusting and refunding excess application money.

 

Question 8. Give any two uses of amount of securities premium reserve.
Answer: The funds held in the securities premium reserve can exclusively be utilized for the following purposes:
1. To write off the preliminary expenses incurred by the company.
2. To issue fully paid bonus shares to the existing shareholders of the company.
3. To facilitate the buyback of the company's own shares.
4. To write off expenses incurred at the time of issuing shares or debentures.
In simple words: Securities premium reserve can be used for specific capital purposes like writing off preliminary expenses, issuing bonus shares, or share buyback.

🎯 Exam Tip: List at least two or three authorized uses of the securities premium reserve, highlighting its capital nature and restrictions.

 

Give Differences

 

Question 1. Over-subscription and Under subscription :
Answer: The key distinctions between over-subscription and under-subscription are outlined below:

Oversubscription	Under subscription
(1) Occurs when applications are received for a greater number of shares than those offered for public subscription.	(1) Occurs when applications are received for a fewer number of shares than those offered for public subscription.
(2) Since the company cannot allot more shares than issued, it must refund the excess application money to applicants.	(2) If the company fails to meet the minimum subscription (90% of the total issue), the entire issue is deemed unsuccessful, and all received money must be returned.
(3) In this scenario, the company may allot shares fully, partially, or reject some applications based on the share application.	(3) Typically, in most cases, the company allots all shares applied for by applicants.
(4) Situations like minimum subscription failures do not happen in oversubscription.	(4) If the company fails to obtain the minimum subscription, it must refund the received amount within 15 days, or pay interest at 15% p.a. for each day of delay.

In simple words: Over-subscription happens when a company receives too many share applications, leading to refunds or pro-rata allotment, whereas under-subscription means too few applications, which can lead to issue cancellation if minimum subscription isn't met.

🎯 Exam Tip: Clearly differentiate between the number of applications received versus shares offered, and highlight the implications for refunds or issue cancellation in each case.

 

Question 2. Preference share and Equity share :
Answer: The principal differences between Preference shares and Equity shares are detailed as follows:

Preference Share	Equity Share
(1) Dividends on preference shares are paid at a predetermined fixed rate.	(1) The dividend rate on equity shares is variable and not fixed.
(2) Arrears of dividend on preference shares are paid out of the company's future profits.	(2) Arrears of dividend on equity shares cannot accumulate and are therefore not paid from future profits.
(3) Preference shareholders generally do not possess voting rights.	(3) Equity shareholders are vested with voting rights.
(4) Preference shareholders typically lack any rights in the management of the company.	(4) Equity shareholders hold full rights to participate in the company's management.
(5) Preference shareholders are entitled to receive dividends before any dividend is distributed to equity shareholders.	(5) Dividends on equity shares are paid only after preference shareholders have received their dividends.
(6) In the event of business winding up, preference shareholders have the right to receive their capital amount before equity shareholders.	(6) Equity share capital is repaid only after preference share capital has been settled during the winding up of the business.

In simple words: Preference shares offer fixed dividends and priority in payment but usually no voting rights, while equity shares have variable dividends, voting rights, and are paid after preference shares during liquidation.

🎯 Exam Tip: Clearly list distinguishing features such as dividend payment priority, fixed vs. variable rates, voting rights, and repayment order during liquidation.

 

Question 3. Reserved Capital and Capital Reserve :
Answer: The distinctions between Reserved Capital and Capital Reserve are presented as follows:

Reserved Capital	Capital Reserve
(1) This is a portion of uncalled capital that the board of directors, by passing a special resolution in a shareholders' meeting, decides not to call up except in the event of the company's winding up.	(1) This reserve is created from capital profits, not from the company's regular business transactions.
(2) This capital amount can only be called from shareholders when the company is being liquidated or wound up.	(2) This is not possible in capital reserve, as it represents accumulated capital profits.
(3) Reserved capital can only be created at the commencement of the company's liquidation proceedings.	(3) Capital reserve can be created at any time during the business operations.
(4) Reserved capital can only be established if there is sufficient uncalled capital.	(4) Capital reserve can only be created if there is a capital profit.

In simple words: Reserved capital is uncalled share capital set aside for liquidation, while capital reserve is a fund created from capital profits, available for specific capital purposes during the company's life.

🎯 Exam Tip: Focus on the source (uncalled capital vs. capital profit), purpose (liquidation vs. general capital use), and timing of creation for both reserves.

 

Give Answer Of The Following Questions In Detail

 

Question 1. What do you mean by share capital? State the types of share capital.
Answer: Share capital refers to the total amount of capital raised by a company through the issuance of shares, typically collected via an initial public offer. It represents the ownership stake in the company.

The various types of share capital are:
- **Authorized Share Capital:** This is the maximum capital a company is legally permitted to raise through shares throughout its existence, as stated in its Memorandum of Association.
- **Issued Share Capital:** This represents the portion of the authorized capital that the company has offered to the public for subscription, either fully or partially, based on its capital requirements.
- **Subscribed Share Capital:** This is the part of the issued share capital for which applications have been received from the public.
- **Called-up Capital:** This refers to the portion of the subscribed capital that the company has formally requested shareholders to pay.
- **Uncalled Capital:** This is the remaining portion of the subscribed capital that the company's board of directors has not yet asked shareholders to pay.
- **Paid-up Capital:** This is the actual amount of money received by the company from shareholders against the called-up capital.
- **Reserve Capital:** This is a segment of the uncalled capital that the directors decide will not be required for future operations and is specifically earmarked to be called only in the event of the company's winding up, by passing a special resolution.
In simple words: Share capital is the total money collected by issuing shares. Its types include authorized, issued, subscribed, called-up, uncalled, paid-up, and reserve capital, each representing different stages or classifications of the company's capital.

🎯 Exam Tip: Define share capital concisely and then clearly elaborate on each type of share capital, explaining their distinct characteristics and stages of realization for full marks.

 

Question 2. What is a share? State the types of shares.
Answer: A share is a small, transferable denomination into which the capital of a company is divided. These units represent a portion of ownership in the company and are movable assets. According to the Companies Act, a company can issue two primary types of shares:

(i) **Equity Shares:** These are shares that are not preference shares. Equity share capital is considered the primary capital of the company. Equity shareholders possess voting rights and the right to participate in the company's management. In the event of liquidation, equity shareholders receive their capital only after preference shareholders have been fully paid. Companies distribute dividends on equity shares annually based on the current year's profits.

(ii) **Preference Shares:** A preference share provides its holder with a preferential right to receive dividends at a specified rate before any dividend is paid to equity shareholders. Additionally, in the case of company winding up, preference shareholders have a priority claim over equity shareholders for the return of their capital.

Types of preference shares include:
1. **Cumulative Preference Shares:** If a dividend cannot be paid in a particular year, the arrears accumulate and are paid along with the current year's dividend in a future year when sufficient profit is available.
2. **Non-cumulative Preference Shares:** In this type, any dividend arrears do not accumulate and are not paid in subsequent years.
3. **Redeemable and Irredeemable Preference Shares:** Redeemable preference shares are those whose amount can be repaid by the company after a stipulated period. Irredeemable preference shares are repayable only upon the company's liquidation.
4. **Participating and Non-participating Preference Shares:** Holders of participating preference shares receive a fixed dividend and also have a right to share in surplus profits with equity shareholders, subject to participation terms. Non-participating preference shareholders receive only their fixed dividend and do not share in surplus profits or capital.
5. **Convertible and Non-convertible Preference Shares:** Convertible preference shares can be partially or fully converted into equity shares at the time of issue, according to agreed terms. Non-convertible preference shares, however, cannot be converted into equity shares.
In simple words: A share is a unit of company capital. The main types are equity shares, offering voting rights and variable dividends, and preference shares, providing fixed dividends and priority in payments but usually no voting rights. Preference shares also have various sub-types based on dividend accumulation, redemption, profit sharing, and convertibility.

🎯 Exam Tip: Begin by defining 'share' and then clearly explain the two main types: equity and preference shares, detailing their features. Also, briefly describe the various sub-categories of preference shares.

 

Question 3. Explain in detail, the method of issuing shares by private placement.
Answer: Private placement is a method of issuing shares where a public company raises capital without inviting the general public to subscribe. This approach is adopted when promoters are confident of securing capital through private channels and contacts. Instead of a public offer, shares are directly placed with promoters, their friends, relatives, or other select individuals.

When shares are not offered to the public through a prospectus, the company is not required to issue one. Instead, it must prepare a 'statement in lieu of prospectus' and file it with the registrar at least three days before the first allotment of shares or debentures. A significant characteristic of private placement is the 'Lock-in period,' during which shareholders are restricted from selling their shares.
In simple words: Private placement involves a company selling shares directly to a select group of people like promoters or friends, rather than to the general public, and requires a 'statement in lieu of prospectus' with a lock-in period for shares.

🎯 Exam Tip: Describe the process of private placement, noting that it avoids a public offer and requires a 'statement in lieu of prospectus' with a mandatory lock-in period.

 

Question 4. Write a short note on calls-in-arrears.
Answer: Calls-in-arrears refer to the unpaid amount when a shareholder fails to pay the allotment money or call money on the due date after the company has made a formal call for payment. There are two primary accounting methods to handle calls-in-arrears:

(i) **Without Opening a Calls-in-Arrears Account:** Under this method, when the company makes a call for an installment amount, the actual cash received from shareholders is debited to the bank account and credited to the respective call account. The unpaid amount is not separately recorded in a distinct calls-in-arrears account. When the outstanding amount is eventually received from the shareholder, the bank account is debited, and the relevant call account is credited.

(ii) **By Opening a Calls-in-Arrears Account:** In this approach, a dedicated 'Calls-in-Arrears Account' is opened. When a call is made, the amount received from shareholders is debited to the bank account. The unreceived portion (arrears) is debited to the Calls-in-Arrears Account. Later, upon receipt of the arrears, the bank account is debited, and the Calls-in-Arrears Account is credited, thereby closing the arrears account.
In simple words: Calls-in-arrears are unpaid amounts from shareholders on calls or allotments. They can be accounted for either by directly crediting the call account upon receipt or by opening a separate 'Calls-in-Arrears Account' to track the unpaid sums.

🎯 Exam Tip: Define calls-in-arrears and clearly explain both accounting methods, providing a brief description of the journal entries involved for each.

 

Question 5. What is meant by calls-in-advance? State the provisions of it under Companies Act.
Answer: Calls-in-advance refers to a situation where a company receives a part or the whole of the uncalled amount from its shareholders, provided such a provision exists in its Articles of Association. Since this uncalled amount is received prematurely from shareholders, it is credited to a 'Calls-in-Advance' account.

**Provisions under the Companies Act for Calls-in-Advance:**
- Calls-in-advance do not constitute share capital of the company. Consequently, dividends cannot be paid on these amounts.
- It is mandatory for the company to pay interest on calls-in-advance until the respective call money becomes due for payment.
- The interest rate is specified in the company's Articles of Association. If the Articles are silent on this matter, the maximum payable interest rate is 12% per annum.
- Interest on calls-in-advance must be paid compulsorily, even if the company does not generate a profit.
In simple words: Calls-in-advance is money shareholders pay before a call is made. It's not share capital, doesn't earn dividends, but the company must pay interest on it, usually up to 12% p.a., even without profit.

🎯 Exam Tip: Define calls-in-advance and clearly state the legal provisions, especially concerning its non-capital nature and the mandatory payment of interest (even in loss).

 

Question 6. What is meant by securities premium? State the points to be kept in mind relating to securities premium.
Answer: Securities premium is the additional amount a company receives when it issues its shares at a price higher than their face value. For instance, if a company issues a share for Rs. 120 with a face value of Rs. 100, the extra Rs. 20 is recognized as securities premium. According to the Companies Act, this amount must be transferred to a 'Security Premium Account' or 'Securities Premium Reserve Account'.

**Key points to consider regarding securities premium:**
- There are no legal restrictions on issuing shares at a premium.
- The premium earned on the issue of shares is considered a capital profit, not a revenue profit.
- The amount of premium cannot be utilized for the distribution of cash dividends.
- Companies have the flexibility to collect the premium amount with the application, with any of the calls, or collectively with all installments.
In simple words: Securities premium is the extra money earned when shares are sold above face value, treated as a capital profit with no issuance limit, but it cannot be used for cash dividends and must be recorded in a dedicated premium account.

🎯 Exam Tip: Define securities premium with an example and then list its crucial characteristics, such as its capital nature, usage restrictions, and flexibility in collection.

 

Question 5. Vaidya Limited of Nadiad company issued 7,50,000 equity shares of Rs. 10 each and the amount thereon was payable as under: Rs. 3 per share on application, Rs. 4 per share on allotment, Rs. 3 per share on first and final call Company received applications for 7,50,000 shares and all the applicants were allotted shares. Amounts due on allotment and calls were called at appropriate time and were all received on due dates. Pass journal entries for above transactions in the books of company.
Answer:
**Necessary Calculation :**
(1) At the time of Application: 7,50,000 shares × Rs. 3 = Rs. 22,50,000
(2) At the time of Allotment: 7,50,000 shares × Rs. 4 = Rs. 30,00,000
(3) At the time of First & Final Call: 7,50,000 shares × Rs. 3 = Rs. 22,50,000

**Journal entries in the books of Vaidya Limited Company**

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
1.	Bank A/c To Equity share application A/c (Being money received on application for 7,50,000 shares at Rs. 3 per share)	Dr.	22,50,000	22,50,000
2.	Equity share application A/c To Equity share capital A/c (Being transfer of share application money to share capital account)	Dr.	22,50,000	22,50,000
3.	Equity share allotment A/c To Equity share capital A/c (Being allotment money due on 7,50,000 equity shares at Rs. 4 per share)	Dr.	30,00,000	30,00,000
4.	Bank A/c To Equity share allotment A/c (Being allotment money received)	Dr.	30,00,000	30,00,000
5.	Equity share first and final call A/c To Equity share capital A/c (Being first and final call money is due on 7,50,000 equity shares at Rs. 3 per share)	Dr.	22,50,000	22,50,000
6.	Bank A/c To Equity share first and final call A/c (Being money received on first and final call)	Dr.	22,50,000	22,50,000
Total			1,50,00,000	1,50,00,000

In simple words: This problem involves preparing journal entries for a company issuing shares, receiving all application, allotment, and call money without any defaults. The entries will show the receipt and transfer of funds for each stage.

🎯 Exam Tip: Ensure all journal entries are correctly dated, debited, and credited for each stage of the share issue (application, allotment, calls). Pay attention to exact amounts and narrations.

 

Question 6. Authorised capital of Mewada Ltd. of Himatnagar was divided into 4,00,000 equity shares of Rs. 10 each. Out of this, company-issued 3,00,000 equity shares. Amount called up per share was as under :
Rs. 4 on application,
Rs. 3 on allotment,
Rs. 3 on final call
Company received applications for 3,60,000 shares. Excess applications were rejected and money paid thereon was refunded to applicants. All the sums due on allotment and final call were received in full except final call on 2,000 equity shares held by Aasha. Pass journal entries in the books of company to record above transactions. Also prepare equity share capital account, equity share application account, equity share allotment account and equity share final call account.
Answer:
**Necessary Calculation :**
(1) At the time of Application :
 3,60,000 shares × Rs. 4 = Rs. 14,40,000
 Less: Rejected Application 60,000 shares × Rs. 4 = Rs. 2,40,000
 Share Capital A/c Rs. 12,00,000
(2) At the time of Allotment : 3,00,000 shares × Rs. 3 = Rs. 9,00,000
(3) At the time of Final Call : 3,00,000 shares × Rs. 3 = Rs. 9,00,000
 Less: Call in arrears (Aasha) 2,000 shares × Rs. 3 = Rs. 6,000
 Bank A/c Rs. 8,94,000

**Journal entries in the books of Mevada Limited**

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
1.	Bank A/c To Equity share application A/c (Being money received on application for 3,60,000 shares at Rs. 4 per share)	Dr.	14,40,000	14,40,000
2.	Equity share application A/c To Equity share capital A/c To Bank A/c (Being transfer of share application money to share capital account and refund of rejected application money)	Dr.	14,40,000	12,00,000 2,40,000
3.	Equity share allotment A/c To Equity share capital A/c (Being allotment money due on 3,00,000 equity shares at Rs. 3 per share)	Dr.	9,00,000	9,00,000
4.	Bank A/c To Equity share allotment A/c (Being money received of allotted shares application)	Dr.	9,00,000	9,00,000
5.	Equity share final call A/c To Equity share capital A/c (Being the amount due on final call at Rs. 3 per share on 3,00,000 shares)	Dr.	9,00,000	9,00,000
6.	Bank A/c (2,98,000 × Rs. 3) Calls in arrears A/c To Equity share final call A/c (Being full amount is received on final call except on 2,000 shares held by Asha)	Dr. Dr.	8,94,000 6,000	9,00,000
Total			64,80,000	64,80,000

**In the ledger of Mevada Limited**
**Equity Share Capital Account**

Dr. Date	Particulars	L.F.	Amt. (Rs.)	Cr. Date	Particulars	L.F.	Amt. (Rs.)
	By Balance c/d		30,00,000	2	By Equity share application A/c		12,00,000
				3	By Equity share allotment A/c		9,00,000
				5	By Equity share final call A/c		9,00,000
			30,00,000				30,00,000

**Equity Share Application Account**

Dr. Date	Particulars	L.F.	Amt. (Rs.)	Cr. Date	Particulars	L.F.	Amt. (Rs.)
2	To Equity share capital A/c		12,00,000	1	By Bank A/c		14,40,000
2	To Bank A/c		2,40,000
			14,40,000				14,40,000

**Equity Share Allotment Account**

Dr. Date	Particulars	L.F.	Amt. (Rs.)	Cr. Date	Particulars	L.F.	Amt. (Rs.)
4	To Equity share allotment A/c		9,00,000	3	By Bank A/c		9,00,000
			9,00,000				9,00,000

**Equity Share Final Call Account**

Dr. Date	Particulars	L.F.	Amt. (Rs.)	Cr. Date	Particulars	L.F.	Amt. (Rs.)
5	To Equity share capital A/c		9,00,000	6	By Bank A/c		8,94,000
				6	By Calls in arrears A/c		6,000
			9,00,000				9,00,000

In simple words: This problem involves recording share issuance with oversubscription, requiring refunds for rejected applications, and accounting for calls-in-arrears from a defaulting shareholder on the final call. Journal entries and ledger accounts must reflect these transactions.

🎯 Exam Tip: Accurately calculate refunds for oversubscription and ensure that calls-in-arrears are correctly accounted for. Practice preparing all specified ledger accounts precisely.

Question 7. Pagedar Sugar Limited of Nagpur issued 12,00,000 equity shares in the public of Rs. 10 each. Company received applications for 13,50,000 shares. Shares were allotted at a meeting of board of directors. Excess share applications were rejected and amount received thereon was refunded. Amount called up against shares was as under : On application Rs. 2.50 per share, On allotment Rs. 2.50 per share, On first call Rs. 2 per share, On final call Rs. 3 per share. Aishwarya, who was allotted 960 shares, could not pay first call and final call money. Vinay, who was allotted 1,200 shares, could not pay final call money. Except this, all sums due from other shareholders were received. Aishwarya and Vinay had paid their arrears amount to company otherwards. Pass necessary journal entries to record above transactions in the books of company without giving effect of interest.
Answer:

Necessary Calculation : (1) At the time of Application :
13,50,000 share × 2.50 = Rs. 33,75,000
Less : Rejected Application 1,50,000 share × 2.50 = Rs. 3,75,000
Share Capital A/c = Rs. 30,00,000
(2) At the time of Allotment :
12,00,000 share × 2.50 = Rs. 30,00,000
(3) At the time of First call :
12,00,000 share × 2.00 = Rs. 24,00,000
Less : Call in arrears (Aishwarya) 960 share × 2.00 = Rs. 1,920
Bank A/c = Rs. 23,98,080
(4) At the time of Final call :
12,00,000 share × 3.00 = Rs. 36,00,000
Less : Calls arrears (Aishwarya 960 share + Vinay 1200 share = 2,160 share) × 3.00 = Rs. 6,480
Bank A/c = Rs. 35,93,520

Journal entries in the books of Pagedar Sugar Limited

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
1.	Bank A/c     To Equity share application A/c (Being receipt of application money on 13,50,000 equity shares at Rs. 2.50 per share)	Dr.	33,75,000	33,75,000
2.	Equity share application A/c     To Equity share capital A/c     To Bank A/c (Being transfer of application money to share capital account and money refunded on rejected shares)	Dr.	33,75,000	30,00,000 3,75,000
3.	Equity share allotment A/c     To Equity share capital A/c (Being allotment money due on 12,00,000 equity share at Rs. 2.50 per share)	Dr.	30,00,000	30,00,000
4.	Bank A/c     To Equity share allotment A/c (Being receipt of full amount of share allotment)	Dr.	30,00,000	30,00,000
5.	Equity share first call A/c     To Equity share capital A/c (Being first call of Rs. 2 per share is due on 12,00,000 shares)	Dr.	24,00,000	24,00,000
6.	Bank A/c (11,99,040 share × Rs. 2) Calls in arrears A/c (960 share × Rs. 2)     To Equity share first call A/c (Being receipt of share final call amount on all shares except 960 shares held by Aishwarya)	Dr. Dr.	23,98,080 1,920	24,00,000
7.	Equity share final call A/c     To Equity share capital A/c (Being final call of Rs. 3 per share is due on 12,00,000 shares)	Dr.	36,00,000	36,00,000
8.	Bank A/c (11,97,840 shares × Rs. 3) Calls in arrears A/c (2,160 shares × Rs. 3)     To Equity share final call A/c (Being amount received on all shares except 960 shares held by Aishwarya and 1200 shares held by Vinay)	Dr. Dr.	35,93,520 6,480	36,00,000
9.	Bank A/c     To Call in arrears A/c (Being arrears amount on shares received from Aishwarya and Vinay)	Dr.	8,400	8,400
Total			2,47,58,400	2,47,58,400

In simple words: This question involves a company issuing equity shares, receiving applications, rejecting excess applications, and collecting money in installments. It also includes scenarios where some shareholders failed to pay their calls on time, but later cleared their outstanding amounts.

🎯 Exam Tip: Pay close attention to calls-in-arrears and subsequent receipts, ensuring correct debit and credit to the respective accounts. Accurate calculation of application, allotment, and call money, along with any arrears, is crucial for full marks.

Question 8. Chaudhari Agro Company of Vyara issued 5,00,000 equity shares of Rs. 10 each to public. Company called Rs. 3 per share on application, Rs. 4 per share on allotment and Rs. 3 per share on first and final call. Company received application for 5,75,000 equity shares from public. Excess applications were rejected and money paid on them was refunded. Viral, who had applied for 2,000 shares, had paid full amount Rs. 10 per share along with application. Company had allotted him all the shares applied for. Yagnesh, who was allotted 2,500 shares, had paid amount due on first and final call along with share allotment money. Except this, amount due on allotment and calls were duly received from time to time. Pass necessary journal entries in the books of company for above transactions.
Answer:

Necessary Calculation : Calculation of amount for different instalments: (1) At the time of Application :
5,75,000 × Rs. 3 = Rs. 17,25,000
+ Additional amount at the time of application - Bank A/c (Viral) 2,000 × Rs. 7 = Rs. 14,000
Total received with application: Rs. 17,39,000
- Application rejected (refund) = Rs. 2,25,000
Net amount = Rs. 15,14,000
(2) At the time of Allotment :
5,00,000 × Rs. 4 = Rs. 20,00,000
+ Additional amount at the time of allotment (Yagnesh) 2,500 × Rs. 3 = Rs. 7,500
- Amount received of allotment at the time of application (Viral) 2,000 × Rs. 4 = Rs. 8,000
Net amount received for allotment = Rs. 19,99,500
(3) At the time of First and Final call :
5,00,000 × Rs. 3 = Rs. 15,00,000
- Amount received in advance at the time of application (Viral) 2,000 × Rs. 3 = Rs. 6,000
- Amount received in advance at the time of allotment (Yagnesh) 2,500 × Rs. 3 = Rs. 7,500
Net amount received for final call = Rs. 14,86,500

Journal entries in the books of Chaudhari Agro Company

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
1.	Bank A/c     To Equity share application A/c (Being receipt of share application money for 5,75,000 equity shares at Rs. 3 per share and advance payment from Viral at Rs. 7 per share on 2,000 shares.)	Dr.	17,39,000	17,39,000
2.	Equity share application A/c     To Equity share capital A/c     To Equity share allotment A/c     To Call in advance A/c     To Bank A/c (Being transfer of application money to share capital account, received 800 shares amount in advance and refunded rejected shares' money)	Dr.	17,39,000	15,00,000 8,000 6,000 2,25,000
3.	Equity share allotment A/c     To Equity share capital A/c (Being amount due on allotted shares)	Dr.	20,00,000	20,00,000
4.	Bank A/c (20,00,000 + 7,500 - 8,000)     To Equity share allotment A/c     To Calls in advance A/c (Being due amount received on after deducting Viral Rs. 8,000 allotment plus Yagnesh's Rs. 7,500 for calls in advance.)	Dr.	19,99,500	19,92,000 7,500
5.	Equity share first and final call A/c     To Equity share capital A/c (Being first and final call money is due on allotted shares)	Dr.	15,00,000	15,00,000
6.	Bank A/c (15,00,000 - 13,500) Calls in advance A/c     To Equity share first and final call A/c (Being due amount received on first and final call in due time)	Dr. Dr.	14,86,500 13,500	15,00,000
Total			1,04,85,500	1,04,85,500

In simple words: This problem involves a public issue of shares with oversubscription, requiring refunds for excess applications. It also features shareholders making advance payments for future calls, necessitating careful accounting for calls-in-advance and their adjustment against subsequent demands.

🎯 Exam Tip: When dealing with calls-in-advance, ensure the advance amount is correctly adjusted against the relevant future calls. Clearly identify and separate the capital and premium components of each installment for accurate accounting.

Question 9. Nanavati Limited of Junagadh issued 3,00,000 equity shares of Rs. 10 each at a premium of Rs. 5 per share. Amount was called up as under : On application Rs. 4 per share, On allotment Rs. 8 per share (including premium), On final call Rs. 3 per share. Company received application for 3,50,000 shares. Excess applications were rejected and money paid thereon was refunded to applicants. All the sums due were received in full except 3,000 equity shares held by Ishira. Pass journal entries in books of company.
Answer:

Necessary Calculation : (1) At the time of Application :
3,50,000 shares × Rs. 4 = Rs. 14,00,000
Less : Rejected Application 50,000 shares × Rs. 4 = Rs. 2,00,000
Share capital A/c = Rs. 12,00,000
(2) At the time of Allotment:
Share capital 3,00,000 shares × Rs. 3 = Rs. 9,00,000
+ Premium 3,00,000 shares × Rs. 5 = Rs. 15,00,000
Total due: Rs. 24,00,000
Less : Call in arrears (Ishira) 3,000 shares × Rs. 8 = Rs. 24,000
Bank A/c = Rs. 23,76,000
(3) At the time of Final calls :
Share capital 3,00,000 shares × Rs. 3 = Rs. 9,00,000
Less : Calls in arrears (Ishira) 3,000 shares × Rs. 3 = Rs. 9,000
Bank A/c = Rs. 8,91,000

Journal entries in the books of Nanavati Limited

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
1.	Bank A/c     To Equity share application A/c (Being money received on 3,50,000 equity shares at Rs. 4 per share at the time of application)	Dr.	14,00,000	14,00,000
2.	Equity share application A/c     To Equity share capital A/c (3,00,000 shares × Rs. 4)     To Bank A/c (50,000 × Rs. 4) (Being transfer share application money to share capital account and excess share money refunded)	Dr.	14,00,000	12,00,000 2,00,000
3.	Equity share allotment A/c     To Equity share capital A/c     To Securities premium A/c (Being amount due on 3,00,000 shares at Rs. 8 per share - including Rs. 5 for premium)	Dr.	24,00,000	9,00,000 15,00,000
4.	Bank A/c     To Equity share allotment A/c (Being due amount received on allotment of 2,97,000 shares at Rs. 8 per share)	Dr.	23,76,000	23,76,000
5.	Equity share final call A/c     To Equity share capital A/c (Being amount due for final call on 3,00,000 shares at Rs. 3 per share)	Dr.	9,00,000	9,00,000
6.	Bank A/c Calls in arrears A/c     To Equity share final call A/c (Being due amount received on final call of 2,97,000 shares at Rs. 3 per share)	Dr. Dr.	8,91,000 9,000	9,00,000
Total			94,00,000	94,00,000

In simple words: This problem illustrates share issuance with a premium and oversubscription, leading to the rejection of excess applications. It also includes a scenario where a shareholder defaulted on allotment and final call payments, which impacts the bank receipts for those installments.

🎯 Exam Tip: Differentiate between the face value and premium components of shares, especially for allotment and call amounts. Correctly account for calls-in-arrears by reducing the amount received in the bank and separately noting the unpaid portion.

Question 10. Vala Manuf. Limited of Dhandhuka issued 4,00,000 equity shares of Rs. 10 each at a premium of Rs. 60 per share. Amount was called up per share as under : On application Rs. 23 (including premium Rs. 20), On allotment Rs. 34 (including premium Rs. 30), On final call Rs. 13 (including premium Rs. 10). Company received applications for 6,00,000 shares. Excess applications were rejected and money paid thereon was refunded. Amount due on allotment and final call were called up in time. All amounts due on allotment and call were received except allotment and final call money on 500 shares held by Himmatbhai and final call money on 300 shares held by Heema. Pass necessary journal entries in books of company for above transactions.
Answer:

Necessary Calculation: (1) At the time of Application :
6,00,000 shares × Rs. 23 = Rs. 1,38,00,000
Less : Rejected Application 2,00,000 shares × Rs. 23 = Rs. 46,00,000
Less : Share capital 4,00,000 shares × Rs. 3 = Rs. 12,00,000
Premium 4,00,000 shares × Rs. 20 = Rs. 80,00,000
(2) At the time of Allotment:
Share capital 4,00,000 shares × Rs. 4 = Rs. 16,00,000
+ Premium 4,00,000 shares × Rs. 30 = Rs. 1,20,00,000
Total due: Rs. 1,36,00,000
Less : Calls in arrears (Himmatbhai) 500 shares × Rs. 34 = Rs. 17,000
Bank A/c = Rs. 1,35,83,000
(3) At the time of Final calls :
Share capital 4,00,000 shares × Rs. 3 = Rs. 12,00,000
+ Premium 4,00,000 shares × Rs. 10 = Rs. 40,00,000
Total due: Rs. 52,00,000
Less : Call in arrears: (Himmatbhai 500 shares + Heema 300 shares = 800 shares) × Rs. 13 = Rs. 10,400
Bank A/c = Rs. 51,89,600

Journal entries in the books of Vala Mfg. Limited

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
1.	Bank A/c     To Equity share application A/c (Being money received on 6,00,000 equity shares at Rs. 23 per share)	Dr.	1,38,00,000	1,38,00,000
2.	Equity share application A/c     To Equity share capital A/c     To Securities premium A/c     To Bank A/c (Being transfer application money to share capital account of sanctioned 4,00,000 shares and refunded excess money)	Dr.	1,38,00,000	12,00,000 80,00,000 46,00,000
3.	Equity share allotment A/c     To Equity share capital A/c     To Securities premium A/c (Being amount due on 4,00,000 shares for allotment)	Dr.	1,36,00,000	16,00,000 1,20,00,000
4.	Bank A/c Calls in arrears A/c     To Equity share allotment A/c (Being amount received on allotment except on 500 shares held by Himmatbhai)	Dr. Dr.	1,35,83,000 17,000	1,36,00,000
5.	Equity share final call A/c     To Equity share capital A/c     To Securities premium A/c (Being amount due on 4,00,000 shares)	Dr.	52,00,000	12,00,000 40,00,000
6.	Bank A/c Calls in arrears A/c     To Equity share final call A/c (Being amount received of final call except on shares held by Himmatbhai and Heema)	Dr. Dr.	51,89,600 10,400	52,00,000
Total			6,52,00,000	6,52,00,000

In simple words: This problem involves issuing shares at a substantial premium with oversubscription, requiring refunds. It also details multiple shareholders defaulting on allotment and final call payments, which need to be recorded as calls-in-arrears.

🎯 Exam Tip: When shares are issued at a premium, correctly segregate the face value and premium components for each installment. Accurately account for calls-in-arrears from multiple shareholders by summing up the defaulted amounts for each call.

Question 11. Authorised capital of Mansuri Limited of Dahod was 7,00,000 equity shares of Rs. 10 each. On 4th- July, 2017, company issued 4,50,000 equity shares at a premium of Rs. 16 per share for public subscription. Amount was called up for share as under. On 4th July, 2017 Rs. 10 per share (including premium of Rs. 6 per share) with application. On 4th August, 2017 Rs. 14 per share (including premium of Rs. 10 per share) with allotment. On 4th September, 2017 Rs. 2 per share with first and final call. The subscription was closed on 6th July, 2017 as it was fully subscribed. Board of directors allotted all the shares of share application. The sums due were received by the following dates. Share allotment money by 7th August, 2017. Share first and final call money by 7th September, 2017. Pass necessary journal entries except for cash in the books of company for above transactions and also prepare bank account.
Answer:

Necessary Calculation : (1) At the time of Application :
Share capital 4,50,000 shares × Rs. 4 = Rs. 18,00,000
Premium 4,50,000 shares × Rs. 6 = Rs. 27,00,000
Bank A/c = Rs. 45,00,000
(2) At the time of Allotment :
Share capital 4,50,000 shares × Rs. 4 = Rs. 18,00,000
Premium 4,50,000 shares × Rs. 10 = Rs. 45,00,000
Total due: Rs. 63,00,000
Less : Calls in Arrears (Abdul) 600 shares × Rs. 14 = Rs. 8,400
Bank A/c = Rs. 62,91,600
(3) At the time of First & Final Calls :
Share capital 4,50,000 shares × Rs. 2 = Rs. 9,00,000
Less : Calls in Arrears: (Abdul 600 shares + Harun 400 shares = 1,000 shares) × Rs. 2 = Rs. 2,000
Bank A/c = Rs. 8,98,000

Journal entries in the books of Mansuri Limited

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
2017 July 6	Equity share application A/c     To Equity share capital A/c     To Securities premium A/c (Being transfer allotment money 4 per share and securities premium at 6 per share to share capital account)	Dr.	45,00,000	18,00,000 27,00,000
Aug. 4	Equity share allotment A/c     To Equity share capital A/c     To Securities premium A/c (Being amount due on allotment at Rs. 4 per share and Rs. 10 for premium per share)	Dr.	63,00,000	18,00,000 45,00,000
Aug. 7	Call in arrears A/c     To Equity share allotment A/c (Being amount not received on 600 shares at Rs. 14 per share on allotment)	Dr.	8,400	8,400
Sept. 4	Equity share final call A/c     To Equity share capital A/c (Being amount due on final call at Rs. 2 per share on allotted 4,50,000 shares)	Dr.	9,00,000	9,00,000
Sept. 7	Calls in arrears A/c     To Equity share final call A/c (Being amount not received on 1,000 shares at Rs. 2 of final call)	Dr.	2,000	2,000
Total			1,17,10,400	1,17,10,400

In the ledger of Mansuri Limited Company
Bank Account

Date	Particulars	L.F.	Amt. (Rs.)	Date	Particulars	L.F.	Amt. (Rs.)
2017 July 4	To Equity share application A/c (Recd. money at Rs. 10 per share on 4,50,000 shares)		45,00,000
Aug. 7	To Equity share allotment A/c (Recd. money on 4,49,400 shares at Rs. 14 per share)		62,91,600
Sept. 7	To Equity share final call A/c (Recd. money on 4,49,000 shares at Rs. 2 per share)		8,98,000
Total			1,16,89,600	Total			1,16,89,600

In simple words: This question deals with issuing shares at a premium, where the calls are structured to include both capital and premium components across application, allotment, and final call. It also highlights situations where shareholders default on payments, impacting the company's cash receipts.

🎯 Exam Tip: Accurately tracking dates for calls and receipts is crucial. Ensure that for each stage (application, allotment, call), the share capital and securities premium portions are correctly allocated and any calls-in-arrears are precisely calculated.

Question 12. Write journal entries in the books of company for forfeiture and reissue of forfeited shares from the following information :
(i) Company forfeited 800 equity shares of Rs. 10 each of a shareholder for non-payment of allotment money of Rs. 4 per share and call money of Rs. 3 per share. This shareholder had paid Rs. 3 per share with application. Forfeited shares were reissued at Rs. 8 per share.
(ii) R. K. Company Limited forfeited 600 shares of Rs. 10 each of Sunil. Sunil had paid application and allotment money of Rs. 5 per share, but had not paid Rs. 3 per share and Rs. 2 per share on first call and second call respectively. Out of the forfeited shares, 400 shares were reissued at Rs. 6 per share to Mittal.
(iii) A shareholder holding 3000 equity shares of Rs. 10 each has paid application money at Rs. 13 per share (including premium Rs. 10) and allotment money at Rs. 13 per share (including premium Rs. 10), his shares were forfeited for non-payment of call of Rs. 4 per share. Forfeited shares were reissued at Rs. 7 per share.
Answer:

Journal entries in the books of company

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
(i) 1.	Equity share capital A/c (800 shares × Rs. 10)     To Share forfeiture A/c     To Share allotment A/c (800 shares × Rs. 4)     To Share final call A/c (800 shares × Rs. 3) (Being 800 shares forfeited for non-payment of allotment and final call money)	Dr.	8,000	2,400 3,200 2,400
(i) 2.	Bank A/c (800 shares × Rs. 8) Share forfeiture A/c     To Equity share capital A/c (Being reissued forfeited shares at Rs. 8 per share)	Dr. Dr.	6,400 1,600	8,000
(i) 3.	Share forfeiture A/c     To Capital reserve A/c (Being remaining amount of share forfeiture account transferred to capital reserve A/c)	Dr.	800	800
(ii) 1.	Equity share capital A/c (600 shares × Rs. 10)     To Share forfeiture A/c     To Share first call A/c (600 shares × Rs. 3)     To Share second call A/c (600 shares × Rs. 2) (Being 600 share forfeited for non-payment of first and second call money)	Dr.	6,000	3,000 1,800 1,200
(ii) 2.	Bank A/c (400 shares × Rs. 6) Share forfeiture A/c     To Equity share capital A/c (400 shares × Rs. 10) (Being out of forfeited shares, 400 shares reissued at Rs. 6 per share)	Dr. Dr.	2,400 1,600	4,000
(ii) 3.	Share forfeiture A/c     To Capital reserve A/c (Being remaining amount of share forfeiture account transferred to capital reserve A/c)	Dr.	400	400
(iii) 1.	Equity share capital A/c (3000 shares × Rs. 10)     To Share forfeiture A/c     To Share instalments A/c (3,000 shares x 4) (Being forfeited 3,000 shares for non-payment of instalment of Rs. 4 per share)	Dr.	30,000	18,000 12,000
(iii) 2.	Bank A/c (3,000 shares × Rs. 7) Share forfeiture A/c     To Equity share capital A/c (Being reissued forfeited shares at Rs. 7 per share)	Dr. Dr.	21,000 9,000	30,000
(iii) 3.	Share forfeiture A/c     To Capital reserve A/c (Being remaining amount of share forfeiture account transferred to capital reserve A/c)	Dr.	9,000	9,000

In simple words: This problem covers various scenarios of share forfeiture due to non-payment of calls and subsequent reissue of these forfeited shares. It demonstrates how to record the forfeiture of shares, their reissue at a discount or premium, and the transfer of any remaining forfeiture balance to capital reserve.

🎯 Exam Tip: Accurately calculate the amount to be debited to Share Capital Account (called-up capital) and credited to Share Forfeiture Account (amount received) at the time of forfeiture. For reissue, ensure the discount allowed does not exceed the forfeited amount and the balance is transferred to Capital Reserve.

Question 13. Write journal entries in the books of company for forfeiture and reissue of forfeited shares from the following information :
(i) Company forfeited 1200 equity shares of Rs. 10 each held by Katara for non-payment of allotment money of Rs. 14 per share (including premium Rs. 10) and first and final call money of Rs. 3 per share. Company reissued all the forfeited shares after giving maximum permissible discount. These shares were purchased by Kanu.
(ii) Ramesh holds 600 equity shares of Rs. 10 each in company. He had paid application money at Rs. 3 per share and allotment money at Rs. 2.50 per share but could not pay first call money of Rs. 2 per share. Company forfeited above shares before making final call after necessary formalities. Company reissued all these shares at a discount of Rs. 4 per share.
(iii) Company forfeited 400 equity shares of Rs. 100 each, issued at a premium of 20 % on face value. Rs. 80 per share (including premium) are called up on these shares. For non-payment of allotment money at Rs. 50 (including premium) these shares were forfeited before making share first and final call. These shares reissued before first and final call at Rs. 36,000 as fully paid up. Pass journal entries in the books of company.
Answer:

Journal entries in the books of company

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
(i) 1.	Equity share capital A/c (1,200 shares × Rs. 10) Securities premium A/c (1,200 shares × Rs. 10)     To Share forfeiture A/c     To Share allotment A/c (1,200 shares x 14)     To Share final call A/c (1,200 shares × 3) (Being forfeited 1,200 shares for being non-payment of allotment and final call money)	Dr. Dr.	12,000 12,000	3,600 16,800 3,600
(i) 2.	Bank A/c (1,200 shares × Rs. 7) Share forfeiture A/c     To Equity share capital A/c (1,200 shares × Rs. 10) (Being forfeited shares reissued by allowing maximum discount)	Dr. Dr.	8,400 3,600	12,000
(i) 3.	Share forfeiture A/c     To Capital reserve A/c (Being balance of share forfeiture account is transferred to capital reserve A/c)	Dr.	900	900
(ii) 1.	Equity share capital A/c (600 shares × 7.50)     To Share forfeiture A/c     To Share first call A/c (600 shares × 2) (Being forfeited 600 shares for being non-payment of first call money)	Dr.	4,500	3,300 1,200
(ii) 2.	Bank A/c (600 shares x 3.50) Share forfeiture A/c     To Equity share capital A/c (600 shares × 7.50) (Being forfeited shares reissued at a discount of Rs. 4)	Dr. Dr.	2,100 2,400	4,500
(ii) 3.	Share forfeiture A/c     To Capital reserve A/c (Being balance of share forfeiture account is transferred to capital reserve A/c)	Dr.	900	900
(iii) 1.	Equity share capital A/c (400 shares × 60) Securities premium A/c (400 shares × Rs. 20)     To Share forfeiture A/c     To Share allotment A/c (400 shares × 50) (Being forfeited 400 shares for being non-payment of allotment money)	Dr. Dr.	24,000 8,000	12,000 20,000
(iii) 2.	Bank A/c Share forfeiture A/c     To Equity share capital A/c     To Calls in advance A/c (Being reissued 400 shares for Rs. 36,000 as fully paid up shares.)	Dr. Dr.	36,000 4,000	24,000 16,000
(iii) 3.	Share forfeiture A/c     To Capital reserve A/c (Being remaining amount of share forfeiture account transferred to capital reserve A/C)	Dr.	8,000	8,000

In simple words: This question presents three distinct scenarios involving share forfeiture and their subsequent reissue, including cases where premium was unpaid or partially paid, and shares were reissued as fully paid-up at a discount. Each scenario requires specific journal entries to correctly record the forfeiture, reissue, and transfer to capital reserve.

🎯 Exam Tip: For forfeiture, debit Securities Premium Account only if the premium was not received. When reissuing shares as 'fully paid-up', credit Equity Share Capital for the full nominal value. Carefully calculate the discount on reissue and the final transfer to Capital Reserve for each distinct transaction.

Question 13. Write journal entries in the books of company for forfeiture and reissue of forfeited shares from the following information:
(i) Company forfeited 1200 equity shares of Rs. 10 each held by Katara for non-payment of allotment money of Rs. 14 per share (including premium Rs. 10) and first and final call money of Rs. 3 per share. Company reissued all the forfeited shares after giving maximum permissible discount. These shares were purchased by Kanu.
(ii) Ramesh holds 600 equity shares of Rs. 10 each in company. He had paid application money at Rs. 3 per share and allotment money at Rs. 2.50 per share but could not pay first call money of Rs. 2 per share. Company forfeited above shares before making final call after necessary formalities. Company reissued all these shares at a discount of Rs. 4 per share.
(iii) Company forfeited 400 equity shares of Rs. 100 each, issued at a premium of 20 % on face value. Rs. 80 per share (including premium) are called up on these shares. For non-payment of allotment money at Rs. 50 (including premium) these shares were forfeited before making share first and final call. These shares reissued before first and final call at Rs. 36,000 as fully paid up.
Answer: Journal entries in the books of company

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
(i) Katara's Forfeiture and Reissue
1.	Equity share capital A/c (1,200 shares × Rs. 10) Dr.		12,000
	Securities premium A/c (1,200 shares × Rs. 10) Dr.		12,000
	To Share forfeiture A/c			3,600
	To Share allotment A/c (1,200 shares × Rs. 14)			16,800
	To Share final call A/c (1,200 shares × Rs. 3)			3,600
	(Being 1,200 shares forfeited for non-payment of allotment and final call money)
2.	Bank A/c (1,200 shares × Rs. 7) Dr.		8,400
	Share forfeiture A/c Dr.		3,600
	To Equity share capital A/c (1,200 shares × Rs. 10)			12,000
	(Being forfeited shares reissued by allowing maximum discount)
3.	Share forfeiture A/c Dr.		800
	To Capital reserve A/c			800
	(Being remaining amount of share forfeiture account transferred to capital reserve A/c)
(ii) Ramesh's Forfeiture and Reissue
1.	Equity share capital A/c (600 shares × Rs. 10) Dr.		6,000
	To Share forfeiture A/c			3,000
	To Share first call A/c (600 shares × Rs. 3)			1,800
	To Share second call A/c (600 shares × Rs. 2)			1,200
	(Being 600 shares forfeited for non-payment of first and second call money)
2.	Bank A/c (400 shares × Rs. 6) Dr.		2,400
	Share forfeiture A/c Dr.		1,600
	To Equity share capital A/c (400 shares × Rs. 10)			4,000
	(Being 400 forfeited shares reissued at a discount of Rs. 4)
3.	Share forfeiture A/c Dr.		400
	To Capital reserve A/c			400
	(Being remaining amount of share forfeiture account transferred to capital reserve A/c)
(iii) Shares forfeited for non-payment of call
1.	Equity share capital A/c (3,000 shares × Rs. 10) Dr.		30,000
	To Share forfeiture A/c			18,000
	To Share instalments A/c (3,000 shares × Rs. 4)			12,000
	(Being 3,000 shares forfeited for non-payment of installment of Rs. 4 per share)
2.	Bank A/c (3,000 shares × Rs. 7) Dr.		21,000
	Share forfeiture A/c Dr.		9,000
	To Equity share capital A/c			30,000
	(Being reissued forfeited shares at Rs. 7 per share)
3.	Share forfeiture A/c Dr.		9,000
	To Capital reserve A/c			9,000
	(Being remaining amount of share forfeiture account transferred to capital reserve A/c)

In simple words: This question demonstrates how to record the forfeiture of shares when shareholders fail to pay calls and how to account for their subsequent reissue, including transferring any profit on reissue to capital reserve. It covers scenarios with and without premium on forfeiture.

🎯 Exam Tip: Pay close attention to the amounts called up, paid, and unpaid for each installment. Also, correctly identify whether the premium was received or not before forfeiture, as it affects the journal entries. For reissue, ensure the discount allowed doesn't exceed the forfeited amount per share and that any surplus goes to capital reserve.

Question 14. Raj Machine Limited issues 12,00,000 equity shares of Rs. 10 each on which amount was payable as under: Rs. 3 per share on application, Rs. 4 per share on allotment, Rs. 3 per share on first and final call. Company received application for 14,70,000 shares from public. Excess applications were rejected and money paid on them was refunded. Aakash, who was allotted 2,000 shares, did not pay allotment and final call money. Sunny, who was allotted 1,200 shares, did not pay final call money. Company forfeited all the shares on which calls were unpaid and reissued all forfeited shares at Rs. 7 per share as fully paid up. Pass necessary journal entries in the books of company for above transactions.
Answer: Necessary Calculation :

(1) At the time of Application :
14,70,000 shares × Rs. 3 \( = \) Rs. 44,10,000
Less: Rejected Application 2,70,000 shares × Rs. 3 \( = \) Rs. 8,10,000
Share capital A/c Rs. 36,00,000
(2) At the time of Allotment :
12,00,000 shares × Rs. 4 \( = \) Rs. 48,00,000
Less: Calls in Arrears (Aakash) 2,000 shares x Rs. 4 \( = \) Rs. 8,000
Bank A/c Rs. 47,92,000
(3) At the time of First and Final calls: 12,00,000 shares × Rs. 3 \( = \) Rs. 36,00,000
Less: Calls in Arrears (Aakash 2,000 shares + Sunny 1,200 shares)
3,200 shares × Rs. 3 \( = \) Rs. 9,600
Bank A/c Rs. 35,90,400
(4) Share Forfeiture :
Aakash: 2,000 shares × Rs. 3 at the time of application \( = \) Rs. 6,000
Sunny: 1,200 shares × Rs. 3 at the time of application
+ Rs. 4 at the time of allotment \( = \) Rs. 8,400
Share forfeiture A/c Rs. 14,400

Journal entries in the books of Raj Machine Limited

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
1.	Bank A/c Dr.		44,10,000
	To Equity share application A/c			44,10,000
	(Being received application money on 14,70,000 shares at Rs. 3 per share)
2.	Equity share application A/c Dr.		44,10,000
	To Equity share capital A/c			36,00,000
	To Bank A/c			8,10,000
	(Being transfer of 12,00,000 shares amount at Rs. 3 per share to share capital account and refunded excess amount of 2,70,000 shares)
3.	Equity share allotment A/c Dr.		48,00,000
	To Equity share capital A/c			48,00,000
	(Being amount due on 12,00,000 shares at Rs. 4 per share on allotment)
4.	Bank A/c Dr.		47,92,000
	Calls in arrears A/c Dr.		8,000
	To Equity share allotment A/c			48,00,000
	(Being received allotment money on all shares except 2,000 shares held by Akash)
5.	Equity share first and final call A/c Dr.		36,00,000
	To Equity share capital A/c			36,00,000
	(Being amount due on 12,00,000 shares at Rs. 3 per share on first and final call)
6.	Bank A/c Dr.		35,90,400
	Calls in arrears A/c Dr.		9,600
	To Equity share first and final call A/c			36,00,000
	(Being received first and final call amount except on 2,000 and 1,200 shares held by Akash and Sunny respectively)

In simple words: This problem involves recording initial share issuance, handling oversubscription and refunds, managing calls-in-arrears from multiple shareholders, then forfeiting those shares, and finally reissuing them.

🎯 Exam Tip: Carefully track calls-in-arrears for each shareholder and ensure their respective shares are forfeited and reissued correctly. When reissuing, remember that the maximum discount allowed is typically up to the forfeited amount.

Question 15. Rustom Limited of Valsad issued 2,40,000 equity shares of Rs. 10 each at a premium of 70 per share. Amount called up per share was as under : Rs. 38 on application (including premium of Rs. 35), Rs. 28 on allotment (including premium of Rs. 25) Rs. 14 on final call (including premium of Rs. 10) All the sums due were duly received except money due on allotment and final call on 2,000 shares held by Jahangir. After carrying out necessary formalities, company forfeited Jahangir's shares. These shares were reissued to Joshef at 40% premium as fully paid up. Pass journal entries in the books of company.
Answer: Necessary Calculation:

(1) At the time of Application :
Share capital 2,40,000 shares × Rs. 3 \( = \) Rs. 7,20,000
Premium 2,40,000 shares × Rs. 35 \( = \) Rs. 84,00,000
Bank A/c Rs. 91,20,000
(2) At the time of Allotment :
Share capital 2,40,000 shares × Rs. 3 \( = \) Rs. 7,20,000
Premium 2,40,000 shares × Rs. 25 \( = \) Rs. 60,00,000
Rs. 67,20,000
Less: Calls in arrears 2,000 shares × Rs. 28 \( = \) Rs. 56,000
Bank A/c Rs. 66,64,000
(3) At the time of Final call :
Share capital 2,40,000 shares × Rs. 4 \( = \) Rs. 9,60,000
premium 2,40,000 shares × Rs. 10 \( = \) Rs. 24,00,000
Rs. 33,60,000
Less: Calls in Arrears (Jahangir) 2,000 shares × Rs. 14 \( = \) Rs. 28,000
Bank A/c Rs. 33,32,000
(4) Share Forfeiture :
Jahangir: 2,000 shares × Rs. 3 Application money \( = \) Rs. 6,000

Journal entries in the books of Rustom Limited Company

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
1.	Bank A/c Dr.		91,20,000
	To Equity share application A/c			91,20,000
	(Being received amount on 2,40,000 shares at Rs. 38 per share)
2.	Equity share application A/c Dr.		91,20,000
	To Equity share capital A/c			7,20,000
	To Securities premium A/c			84,00,000
	(Being on allotted 2,40,000 shares, Rs. 3 per share and Rs. 35 per share transferred to share capital and premium A/c)
3.	Equity share allotment A/c Dr.		67,20,000
	To Equity share capital A/c			7,20,000
	To Securities premium A/c			60,00,000
	(Being amount due on shares allotted)
4.	Bank A/c Dr.		66,64,000
	To Equity share allotment A/c			66,64,000
	(Being received full amount of allotment money except on 2,000 shares held by Jahangir)
5.	Equity share final call A/c Dr.		33,60,000
	To Equity share capital A/c			9,60,000
	To Securities premium A/c			24,00,000
	(Being amount due on 2,40,000 shares for final call on allotted shares)
6.	Bank A/c Dr.		33,32,000
	To Equity share final call A/c			33,32,000
	(Being received full amount on final call money except on 2,000 shares held by Jahangir)
7.	Equity share capital A/c Dr.		20,000
	Securities premium A/c Dr.		70,000
	To Share forfeiture A/c			6,000
	To Share allotment A/c			56,000
	To Share final call A/c			28,000
	(Being forfeited 2,000 shares of Jahangir's after due formalities)
8.	Bank A/c (2,000 shares × 14) Dr.		28,000
	To Equity share capital A/c			20,000
	To Securities premium A/c			8,000
	(Being 2,000 shares of Jahangir's reissued at 40% premium)
9.	Share forfeiture A/c Dr.		6,000
	To Capital reserve A/c			6,000
	(Being share forfeiture account balance is transferred to capital reserve account)
Total				3,84,40,000	3,84,40,000

In simple words: This problem illustrates the accounting for share issuance at a significant premium, managing unpaid calls, forfeiting shares where both capital and premium amounts were due, and then reissuing those forfeited shares at a further premium.

🎯 Exam Tip: When shares are forfeited, always ensure that the premium amount is debited to the Securities Premium A/c only if it was *not* received. If the premium was already received, it should not be reversed. For reissue, any premium received on reissue is credited to Securities Premium A/c.

Question 16. Dharam Metals Ltd. of Jamnagar issued 8,00,000 equity shares of Rs. 10 each at a premium of Rs. 30 per share. The amount was payable as under : Rs. 13 (including premium of Rs. 10) per share on application; Rs. 23 (including premium of Rs. 20) on allotment; Rs. 4 per share on final call. Company received share application for 8,00,000 shares and all the applications were allotted shares. Vipul, who was allotted 1,500 shares, did not pay money due on allotment and hence his shares were forfeited by company after allotment. Company reissued all these 1,500 shares before final call at Rs. 5 per share. Hema, who was allotted 500 shares, did not pay money due on final call and therefore her shares were forfeited by company. Company reissued these 500 shares at maximum permissible discount. Pass journal entries for above transactions in the books of company.
Answer: Necessary Calculation:

(1) At the time of Application :
Share capital 8,00,000 shares × Rs. 3 \( = \) Rs. 24,00,000
Premium 8,00,000 shares × Rs. 10 \( = \) Rs. 80,00,000
Bank A/c Rs. 1,04,00,000
(2) At the time of Allotment :
Share capital 8,00,000 shares × Rs. 3 \( = \) Rs. 24,00,000
Premium 8,00,000 shares × Rs. 20 \( = \) Rs. 1,60,00,000
Rs. 1,84,00,000
Less: Calls in Arrears (Vipul) 1,500 shares x Rs. 23 \( = \) Rs. 34,500
Bank A/c Rs. 1,83,65,500
(3) Share Forfeiture :
Vipul: 1,500 shares × Application money Rs. 3 \( = \) Rs. 4,500
(4) At the time of Final call :
8,00,000 shares × Rs. 4 \( = \) Rs. 32,00,000
Less: Calls in Arrears (Hema) 500 shares × Rs. 4 \( = \) Rs. 2,000
Bank A/c Rs. 31,98,000
(5) Share Forfeiture :
Hema: 500 shares × Application Rs. 3 and allotment money \( = \) Rs. 6,000

Journal entries in the books of Dharam Metals Ltd.

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
1.	Bank A/c Dr.		1,04,00,000
	To Equity share application A/c			1,04,00,000
	(Being application money received on 8,00,000 shares at Rs. 13 per share)
2.	Equity share application A/c Dr.		1,04,00,000
	To Equity share capital A/c			24,00,000
	To Securities premium A/c			80,00,000
	(Being received amount transferred to share capital and securities premium account)
3.	Equity share allotment A/c Dr.		1,84,00,000
	To Equity share capital A/c			24,00,000
	To Securities premium A/c			1,60,00,000
	(Being amount due on allotment on 8,00,000 shares at Rs. 23 per share)
4.	Bank A/c Dr.		23,76,000
	To Equity share allotment A/c			23,76,000
	(Being received amount on all shares except 6,000 shares held by Siddhraj)
5.	Equity share capital A/c (6,000 shares × Rs. 7) Dr.		42,000
	To Share forfeiture A/c			18,000
	To Share allotment A/c (6,000 shares × Rs. 4)			24,000
	(Being company forfeited 6,000 shares of Siddhraj after due formalities)
6.	Equity share final call A/c Dr.		17,82,000
	To Equity share capital A/c			17,82,000
	(Being amount due on 5,94,000 shares for final call of Rs. 3)
7.	Bank A/c Dr.		17,70,000
	To Equity share final call A/c			17,70,000
	(Being received amount on all shares except 4,000 shares held by Jaysinh)
8.	Equity share capital A/c Dr.		40,000
	To Share forfeiture A/c			28,000
	To Share final call A/c			12,000
	(Being company forfeited 4,000 shares of Jaysinh's shares after due formalities)
9.	Bank A/c (6,000 × Rs. 7) Dr.		42,000
	Share forfeiture A/c Dr.		18,000
	To Equity share capital A/c (6,000 shares × Rs. 10)			60,000
	(Being reissued Siddhraj's shares at Rs. 7 per share)
10.	Bank A/c (4000 shares × Rs. 6) Dr.		24,000
	Share forfeiture A/c Dr.		16,000
	To Equity share capital A/c (4,000 shares x Rs. 10)			40,000
	(Being reissued 4000 shares of Jaysinh's share at Rs. 6 per share)
11.	Share forfeiture A/c Dr.		12,000
	To Capital reserve A/c			12,000
	(Being remaining amount of share forfeiture account to capital reserve account)
Total				2,65,22,000	2,65,22,000

In simple words: This question demonstrates how to handle share applications, allotments, and calls, including scenarios of calls in arrears, forfeiture of shares at different stages (after allotment or final call), and subsequent reissue of those forfeited shares.

🎯 Exam Tip: When dealing with multiple forfeitures and reissues, carefully calculate the forfeited amount for each shareholder based on what they have paid. Ensure that the reissuance price and any premium/discount are correctly recorded, and the profit on reissue is transferred to Capital Reserve.

Question 17. Siddhpur Isabgul Limited issued 6,00,000 equity shares of Rs. 10 each at a premium of Rs. 7 per share. The amount was payable as under: Rs. 10 per share on application (including premium); Rs. 4 per share on allotment; Rs. 3 per share on final call. Applications were received for 9,00,000 shares. Excess applications were rejected and money paid thereon was refunded. Siddharaj, who was allotted 6000 shares, did not pay money due on allotment and hence his shares were forfeited after allotment. Jaysinh, who was allotted 4,000 shares, did not pay money due on final call and hence his shares were forfeited after final call. Allotment and final call amount was received on remaining shares. Company reissued 6000 shares of Siddharaj at Rs. 7 per share to Minal and 4000 shares of Jaysinh at Rs. 6 per share to Rudra. Pass necessary journal entries in the books of company to record above transactions and also prepare shares forfeiture account.
Answer: Necessary Calculation :

(1) At the time of Application :
9,00,000 shares × Rs. 10 \( = \) Rs. 90,00,000
Less: Rejected Application 3,00,000 shares × Rs. 10 \( = \) Rs. 30,00,000
Rs. 60,00,000
Less: Share capital 6,00,000 shares × Rs. 3 \( = \) Rs. 18,00,000
Premium 6,00,000 shares × Rs. 7 \( = \) Rs. 42,00,000
(2) At the time of Allotment :
6,00,000 shares × Rs. 4 \( = \) Rs. 24,00,000
Less: Calls in Arrears (Siddharaj) 6,000 shares × Rs. 4 \( = \) Rs. 24,000
Bank A/c Rs. 23,76,000
(3) Share Forfeiture :
Shiddharaj: 6,000 shares x Application money Rs. 3 \( = \) Rs. 18,000
(4) At the time of Final call :
5,94,000 shares × Rs. 3 \( = \) Rs. 17,82,000
Less: Calls in Arrears (Jaysinh) 4,000 shares x Rs. 3 \( = \) Rs. 12,000
Bank A/c Rs. 17,70,000
(5) Share Forfeiture :
Jaysinh: 4,000 shares × Application money Rs. 3
and allotment money Rs. 4 \( = \) Rs. 28,000

Journal entries in the books of Siddhpur Isabgul Limited

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
1.	Bank A/c Dr.		90,00,000
	To Equity share application A/c			90,00,000
	(Being received amount on 9,00,000 shares at Rs. 10 per share)
2.	Equity share application A/c Dr.		90,00,000
	To Equity share capital A/c			18,00,000
	To Securities premium A/c			42,00,000
	To Bank A/c			30,00,000
	(Being transferred application amount Rs. 3 per share to share capital and Rs. 7 per share to securities premium accounts and refunded excess share application money)
3.	Equity share allotment A/c Dr.		24,00,000
	To Equity share capital A/c			24,00,000
	(Being amount due on allotted 6,00,000 shares at Rs. 4 per share)
4.	Bank A/c Dr.		23,76,000
	To Equity share allotment A/c			23,76,000
	(Being received amount on all shares except 6,000 shares held by Siddhraj)
5.	Equity share capital A/c (6,000 shares × Rs. 7) Dr.		42,000
	To Share forfeiture A/c			18,000
	To Share allotment A/c (6,000 shares × Rs. 4)			24,000
	(Being company forfeited 6,000 shares of Siddhraj after due formalities)
6.	Equity share final call A/c Dr.		17,82,000
	To Equity share capital A/c			17,82,000
	(Being amount due on 5,94,000 shares for final call of Rs. 3)
7.	Bank A/c Dr.		17,70,000
	To Equity share final call A/c			17,70,000
	(Being received amount on all shares except 4,000 shares held by Jaysinh)
8.	Equity share capital A/c Dr.		40,000
	To Share forfeiture A/c			28,000
	To Share final call A/c			12,000
	(Being company forfeited 4,000 shares of Jaysinh's shares after due formalities)
9.	Bank A/c (6,000 shares × Rs. 7) Dr.		42,000
	Share forfeiture A/c Dr.		18,000
	To Equity share capital A/c (6,000 shares × Rs. 10)			60,000
	(Being reissued Siddharaj's shares at Rs. 7 per share)
10.	Bank A/c (4,000 shares × Rs. 6) Dr.		24,000
	Share forfeiture A/c Dr.		16,000
	To Equity share capital A/c (4,000 shares × Rs. 10)			40,000
	(Being reissued 4,000 shares of Jaysinh's share at Rs. 6 per share)
11.	Share forfeiture A/c Dr.		12,000
	To Capital reserve A/c			12,000
	(Being remaining amount of share forfeiture account to capital reserve account)
Total				2,65,22,000	2,65,22,000

Dr.	Share Forfeiture Account	Cr.
Date	Particulars	L.F.	Amt. (Rs.)	Date	Particulars	L.F.	Amt. (Rs.)
9	To Equity share capital A/c		18,000	5	By Equity share capital A/c		18,000
10	To Equity share capital A/c		16,000	8	By Equity share capital A/c		28,000
11	To Capital reserve A/c		12,000
				Total				46,000	46,000

In simple words: This comprehensive problem covers the full cycle of share accounting, including receiving applications, managing oversubscription and refunds, recording calls, handling multiple shareholder defaults (Siddharaj and Jaysinh), forfeiting their shares at different stages, and finally reissuing these shares, ensuring all premiums and discounts are correctly accounted for and the forfeiture account is properly balanced.

🎯 Exam Tip: When dealing with multiple forfeitures and reissues, calculate each separately to avoid confusion. For the forfeiture account, debit it when reissuing shares at a discount and credit it with the amount received on forfeited shares. The final balance of the forfeiture account is always transferred to the Capital Reserve A/c.

Question 18. Kapoor Media Limited issued 1,20,000 equity shares of Rs. 10 each at a premium of Rs. 80 per share for public subscription. Company called up the amount including share premium in four equal instalments it means on application, on allotment, on first call and on final call. Company received application for 1,60,000 equity shares. Excess applications were rejected and money paid thereon was refunded. Shahid, who was holding 4000 shares, failed to pay first call and final call on shares held by him. His shares were forfeited after due formalities. These forfeited shares were issued to Ranbir at a premium of Rs. 70 per share and the amount on this was received by the company. Write necessary journal entries in the books of company to record above transactions and also prepare securities premium account.
Answer: Necessary Calculation:

(1) At the time of Application :
1,60,000 shares × Rs. 22.50 \( = \) Rs. 36,00,000
Less: Rejected Application 40,000 shares × Rs. 22.50 \( = \) Rs. 9,00,000
Rs. 27,00,000
Less: Share capital 1,20,000 shares × Rs. 2.50 \( = \) Rs. 3,00,000
Premium 1,20,000 shares × Rs. 20.00 \( = \) Rs. 24,00,000
(2) At the time of Allotment :
Share capital 1,20,000 Rs. 3,00,000
Premium 1,20,000 shares × Rs. 20.00 \( = \) Rs. 24,00,000
Rs. 27,00,000
(3) At the time of First & Final call :
Share capital 1,20,000 shares × Rs. 2.50 \( = \) Rs. 3,00,000
Premium 1,20,000 shares × Rs. 20.00 \( = \) Rs. 24,00,000
Rs. 27,00,000
Less: Calls in Arrears (Shahid) 4,000 shares × Rs. 22.50 \( = \) Rs. 90,000
Bank A/c Rs. 26,10,000

Journal entries in the books of Kapoor Media Ltd.

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
1.	Bank A/c Dr.		36,00,000
	To Equity share application A/c			36,00,000
	(Being received amount on 1,60,000 shares at Rs. 22.50 per share)
2.	Equity share application A/c Dr.		36,00,000
	To Equity share capital A/c			3,00,000
	To Securities premium A/c			24,00,000
	To Bank A/c			9,00,000
	(Being amount of sanctioned 1,20,000 shares transferred to share capital at Rs. 2.50 per share and Rs. 20 per share to securities premium account and excess share application money refunded)
3.	Equity share application A/c Dr.		27,00,000
	To Equity share capital A/c			3,00,000
	To Securities premium A/c			24,00,000
	(Being amount due on 1,20,000 shares at Rs. 22.50 per share)
4.	Bank A/c Dr.		27,00,000
	To Equity share allotment A/c			27,00,000
	(Being received amount of allotment call)
5.	Equity share first call A/c Dr.		27,00,000
	To Equity share capital A/c			3,00,000
	To Securities premium A/c			24,00,000
	(Being amount due on 1,20,000 shares at Rs. 22.50 per share)
6.	Bank A/c Dr.		26,10,000
	To Equity share first call A/c			26,10,000
	(Being received amount on all shares except 4,000 shares held by Shahid)
7.	Equity share final call A/c Dr.		27,00,000
	To Equity share capital A/c			3,00,000
	To Securities premium A/c			24,00,000
	(Being amount due on 1,20,000 shares at Rs. 22.50 per share)
8.	Bank A/c Dr.		26,10,000
	To Equity share final call A/c			26,10,000
	(Being received amount on all shares except 4,000 shares held by Shahid)
9.	Equity share capital A/c (4000 shares × Rs. 10) Dr.		40,000
	Securities premium A/c (4000 shares × Rs. 40) Dr.		1,60,000
	To Share forfeiture A/c			20,000
	To Share first call A/c			90,000
	To Share final call A/c			90,000
	(Being forfeited 4000 shares of Shahid's after due formalities)
10.	Bank A/c (4000 shares × Rs. 80) Dr.		3,20,000
	To Equity share capital A/c			40,000
	To Securities premium A/c (4000 shares × Rs. 70)			2,80,000
	(Being forfeited shares of shares reissued at Rs. 70 (4,000 shares))
11.	Share forfeiture A/c Dr.		20,000
	To Capital reserve A/c			20,000
	(Being balance of share forfeiture account is transferred to capital reserve A/c)
Total				2,37,60,000	2,37,60,000

Dr.	Securities Premium Account	Cr.
Date	Particulars	L.F.	Amt. (Rs.)	Date	Particulars	L.F.	Amt. (Rs.)
9	To Equity share first call A/c		80,000	2	By Equity share application A/c		24,00,000
9	To Equity share final call A/c		80,000	3	By Equity share allotment A/c		24,00,000
	To Balance c/d		97,20,000	5	By Equity share first A/c		24,00,000
				7	By Equity share final A/c		24,00,000
				10	By Bank A/c		2,80,000
Total				98,80,000	Total				98,80,000

In simple words: This question involves issuing shares at a significant premium, managing oversubscription and refunds, handling calls-in-arrears, forfeiting shares where the premium on calls was not received, and then reissuing those forfeited shares at another premium, all while maintaining the Securities Premium Account.

🎯 Exam Tip: Remember that Securities Premium is a capital receipt and should generally not be used for dividend distribution. When shares are forfeited, reverse the premium only if it was *not* received. On reissue, any new premium is credited to the Securities Premium A/c, and any discount is first set off against the forfeited amount.

Question 19. Sheetal Electronics Limited issued 1,20,000 equity shares to the public at Rs. 10 per share. Company called up the amount as under: On application Rs. 3 per share, on allotment Rs. 3 per share and on final call Rs. 4 per share. Applications were received from public for 1,80,000 shares, in this reference allocation was made by company as under: Full allotment was made to applicants of 48,000 shares. Not a single share was allotted to applicants of 36,000 shares. 72,000 shares were allotted to applicants of 96,000 shares. All amounts were received in time. From the above information, pass necessary journal entries in the books of the company.
Answer: Necessary Calculation :

Number of share Application	Amount on Application (Rs.)	Alloted (Rs.)	Transfer to Share Application (Rs.)	Transfer to Share Allotment (Rs.)	Transfer to Share Final Call (Rs.)	Amount Refunded (Rs.)
48,000	1,44,000	48,000	1,44,000	-	-	-
36,000	1,08,000	-	-	-	-	1,08,000
96,000	2,88,000	72,000	2,16,000	72,000	-	-
1,80,000	5,40,000	1,20,000	3,60,000	72,000	-	1,08,000

Journal entries in the books of Sheetal Electronics Limited

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
1.	Bank A/c Dr.		5,40,000
	To Equity share application A/c			5,40,000
	(Being received amount on 1,80,000 shares at Rs. 3 per share)
2.	Equity share application A/c Dr.		5,40,000
	To Equity share capital A/c (1,20,000 shares × Rs. 3)			3,60,000
	To Equity share allotment A/c (24,000 shares × Rs. 3)			72,000
	To Bank A/c (36,000 shares x Rs. 3)			1,08,000
	(Being transferred 1,20,000 shares amount to share capital A/c, refunded excess share application amount and adjusted additional amount received to share allotment account)
3.	Equity share allotment A/c Dr.		3,60,000
	To Equity share capital A/c			3,60,000
	(Being amount due on 1,20,000 shares at Rs. 3 per share)
4.	Bank A/c Dr.		2,88,000
	To Equity share allotment A/c			2,88,000
	(Being received remaining amount (after deducting 72,000 received earlier) on allotment call)
5.	Equity share final call A/c Dr.		4,80,000
	To Equity share capital A/c			4,80,000
	(Being amount due on 1,20,000 at Rs. 4 per share on sanctioned shares)
6.	Bank A/c Dr.		4,80,000
	To Equity share final call A/c			4,80,000
	(Being received final call amount)
Total				26,88,000	26,88,000

In simple words: This question demonstrates how to record share issuance with oversubscription, where some applications are fully allotted, some are rejected, and others receive pro-rata allotment, with excess application money adjusted towards subsequent calls or refunded.

🎯 Exam Tip: For oversubscription with pro-rata allotment, meticulously track the application money received, the amount transferred to share capital, the amount adjusted towards allotment and calls, and the final amount refunded. Each category of applicants needs careful handling.

 

Question 20. Gujarat Fertilizers Ltd. of Bharuch issued 4,50,000 shares of Rs 10 each to the public. The amount was called up as follows: Rs 3 per share on application, Rs 3 per share on allotment, Rs 2 per share on first call, and Rs 2 per share on final call. Applications were received for 6,20,000 shares from the public. Allotment of 4,50,000 shares was made on a pro-rata basis to applicants for 5,40,000 shares. The amounts paid on applications by the remaining applicants were refunded by the company. Mahesh, who was allotted 1,000 shares, failed to pay the final call; consequently, his shares were forfeited and subsequently reissued at Rs 5 per share. Pass the necessary journal entries for these transactions in the company's books.
Answer:Necessary Calculation: (1) At the time of Application: \(6,20,000 \text{ shares} \times \text{Rs } 3 = \text{Rs } 18,60,000\) Less: Rejected Application \(80,000 \text{ shares} \times \text{Rs } 3 = \text{Rs } 2,40,000\)
\( \implies \text{Rs } 16,20,000\) Less: Share capital \(4,50,000 \text{ shares} \times \text{Rs } 3 = \text{Rs } 13,50,000\) Credited towards Allotment \(90,000 \text{ shares} \times \text{Rs } 3 = \text{Rs } 2,70,000\) (2) At the time of Allotment: \(4,50,000 \text{ shares} \times \text{Rs } 3 = \text{Rs } 13,50,000\) Less: Credited toward Allotment at the time of application \(90,000 \text{ shares} \times \text{Rs } 3 = \text{Rs } 2,70,000\)
\( \implies \text{Bank A/c Rs } 10,80,000\) (3) At the time of First call: \(4,50,000 \text{ shares} \times \text{Rs } 2 = \text{Rs } 9,00,000\) (4) At the time of Final Call: \(4,50,000 \text{ shares} \times \text{Rs } 2 = \text{Rs } 9,00,000\) Less: Calls in Arrears (Mahesh) \(1,000 \text{ shares} \times \text{Rs } 2 = \text{Rs } 2,000\)
\( \implies \text{Bank A/c Rs } 8,98,000\) (5) Share Forfeiture: Mahesh \(1,000 \text{ shares} \times \text{ (Application Rs } 3 + \text{ Allotment Rs } 3 + \text{ First Call Rs } 2) = \text{Rs } 8,000\) Journal entries in the books of Gujarat Fertilizers Ltd.

Date	Particulars	L.F.	Debit (Rs)	Credit (Rs)
1.	Bank A/c Dr. To Equity share application A/c (Being amount received on 6,20,000 shares at Rs 3 per share)		18,60,000	18,60,000
2.	Equity share application A/c Dr. To Equity share capital A/c To Equity share capital A/c To Bank A/c (Being sanctioned share amount transferred to share capital A/c, excess share application adjusted to allotment A/c and rejected 80,000 shares amount is refunded)		18,60,000	13,50,000 2,70,000 2,40,000
3.	Equity share allotment A/c Dr. To Equity share capital A/c (Being amount due on allotted 4,50,000 shares at Rs 3 per share)		13,50,000	13,50,000
4.	Bank A/c Dr. To Equity share allotment A/c (Being received share allotment amount)		10,80,000	10,80,000
5.	Equity share first call A/c Dr. To Equity share capital A/c (Being amount due for first call on allotted 4,50,000 shares at Rs 2 per share)		9,00,000	9,00,000
6.	Bank A/c Dr. To Equity share first call A/c (Being received full amount on first call)		9,00,000	9,00,000
7.	Equity share final call A/c Dr. To Equity share capital A/c (Being amount due for final call on 4,50,000 shares at Rs 2 per share)		9,00,000	9,00,000
8.	Bank A/c Dr. To Equity share final call A/c (Being due amount received of final call except 1,000 shares held by Mahesh)		8,98,000	8,98,000
9.	Equity share capital A/c (1,000 shares \( \times \) Rs 10) Dr. To Share forfeiture A/c To Share final call A/c (Being 1,000 shares of Mahesh forfeited after due formalities)		10,000	8,000 2,000
10.	Bank A/c Dr. Share forfeiture A/c Dr. To Equity share capital A/c (Being reissued forfeited 1,000 shares at Rs 5 per share)		5,000 5,000	10,000
11.	Share forfeiture A/c Dr. To Capital reserve A/c (Being balance of share forfeiture account is transferred to capital reserve A/c)		3,000	3,000
	Total		97,71,000	97,71,000

In simple words: This question demonstrates the complete cycle of share issuance, including oversubscription, pro-rata allotment, calls, forfeiture for non-payment, and subsequent reissue of those forfeited shares. It highlights how a company records each stage, from receiving applications to transferring profits from reissued shares to capital reserve.

🎯 Exam Tip: When preparing journal entries for share transactions, always pay close attention to the terms of issue (premium/discount), allotment basis (pro-rata/rejection), and details of calls-in-arrears and forfeiture. Ensure the transfer to capital reserve for reissued shares is correctly calculated, as this is a common area for errors and a key scoring point.

 

Question 21. Sharda Limited issued 6,00,000 equity shares of Rs 10 each at a premium of Rs 4 per share. The amount was called up as follows: Rs 4 on application, Rs 3 (including premium) on allotment, and Rs 3 on the first and final call. Applications were received for 3.5 times the issued shares. Out of these, 4/7th of the share applications were rejected, and a pro-rata allotment was made to the remaining applicants. Excess application money was adjusted towards share allotment and share calls. Write the necessary journal entries in the books of Sharda Limited.
Answer:Necessary Calculation: (1) Application Received: \(6,00,000 \text{ shares} \times 3.5 \text{ times (subscription)} = 21,00,000 \text{ share applications}\)
Rejected share application \( = 21,00,000 \text{ shares application} \times \frac{4}{7} = 12,00,000 \text{ share applications}\)
Remaining share application \( = 21,00,000 - 12,00,000 = 9,00,000\)
\( \implies \text{Pro-rata allotment to } 9,00,000 \text{ share applicants} = 6,00,000 \text{ shares}\) (2) At the time of share application: \(21,00,000 \text{ shares} \times \text{Rs } 4 = \text{Rs } 84,00,000\) Less: Rejected Application \(12,00,000 \text{ shares} \times \text{Rs } 4 = \text{Rs } 48,00,000\)
\( \implies \text{Rs } 36,00,000\) Less: Share capital \(6,00,000 \text{ shares} \times \text{Rs } 4 = \text{Rs } 24,00,000\) Credited towards allotment \(3,00,000 \text{ shares} \times \text{Rs } 4 = \text{Rs } 12,00,000\) (3) At the time of Allotment: \(6,00,000 \text{ shares} \times \text{Rs } 7 = \text{Rs } 42,00,000\) Less: Credited at the time of App. \(3,00,000 \text{ shares} \times \text{Rs } 4 = \text{Rs } 12,00,000\)
\( \implies \text{Bank A/c Rs } 30,00,000\) (4) At the time of First & Final call: \(6,00,000 \text{ shares} \times \text{Rs } 3 = \text{Rs } 18,00,000\) Journal entries in the books of Sheetal Electronics Limited

Date	Particulars	L.F.	Debit (Rs)	Credit (Rs)
1.	Bank A/c Dr. To Equity share application A/c (Being received amount on 21,00,000 shares (subscribed 3.5 times) at Rs 4 per share)		84,00,000	84,00,000
2.	Equity share application A/c Dr. To Equity share capital A/c (6,00,000 shares \( \times \) Rs 4) To Equity share allotment A/c To Bank A/c (12,00,000 shares \( \times \) Rs 4) (Being received amount on sanctioned 6,00,000 shares transferred to share capital A/c, additional amount received is adjusted and rejected application money refunded)		84,00,000	24,00,000 12,00,000 48,00,000
3.	Equity share allotment A/c Dr. To Equity share capital A/c To Securities premium A/c (Being amount due on 6,00,000 shares at Rs 7 per share (including premium @ Rs 4))		42,00,000	18,00,000 24,00,000
4.	Bank A/c Dr. To Equity share allotment A/c (Being received difference of amount of share allotment call)		30,00,000	30,00,000
5.	Equity share first and final call A/c Dr. To Equity share capital A/c (Being amount due on share first and final call at Rs 3 per share)		18,00,000	18,00,000
6.	Bank A/c Dr. To Equity share first and final call A/c (Being received amount on first and final call)		18,00,000	18,00,000
	Total		2,76,00,000	2,76,00,000

In simple words: This problem illustrates the accounting for an oversubscribed share issue with pro-rata allotment. It shows how application money is managed, including transfers to share capital, adjustments for allotment, and refunds for rejected applications, ultimately leading to the receipt of all due amounts.

🎯 Exam Tip: When dealing with oversubscription and pro-rata allotment, meticulously track the movement of application money, especially how excess funds are adjusted against future calls. Correctly segregating share capital and premium amounts is crucial for accuracy.

 

Question 22. The authorised capital of Shubha Limited of Mumbai is 18,00,000 shares of Rs 1 each. The company issued 12,00,000 shares at a premium of Rs 580 per share to the public. The amount payable was structured as follows: Rs 290.50 per share (including premium of Rs 290) on application, and Rs 290.50 per share (including premium of Rs 290) on allotment. The company received applications for 16,50,000 shares from the public. Out of these, applications for 1,50,000 shares were rejected, and the remaining 12,00,000 shares were allotted. All called-up amounts were received in due time. The company maintains a combined 'Share Application and Allotment Account'. Pass the journal entries in the books of the company for the above transactions.
Answer:Necessary Calculation: (1) At the time of Application: \(16,50,000 \text{ shares} \times \text{Rs } 290.50 = \text{Rs } 47,93,25,000\) Less: Rejected Application \(1,50,000 \text{ shares} \times \text{Rs } 290.50 = \text{Rs } 4,35,75,000\)
\( \implies \text{Rs } 43,57,50,000\) Less: Allotted shares on Application \(12,00,000 \text{ shares} \times \text{Rs } 290.50 = \text{Rs } 34,86,00,000\) Credited towards Allotment \(3,00,000 \text{ shares} \times \text{Rs } 290.50 = \text{Rs } 8,71,50,000\) (2) At the time of Allotment: \(12,00,000 \text{ shares} \times \text{Rs } 290.50 = \text{Rs } 34,86,00,000\) Less: Credited amount at time of Application \(3,00,000 \text{ shares} \times \text{Rs } 290.50 = \text{Rs } 8,71,50,000\)
\( \implies \text{Amount received at the time of Allotment Rs } 26,14,50,000\) Journal entries in the books of Sharda Limited

Date	Particulars	L.F.	Debit (Rs)	Credit (Rs)
1.	Bank A/c Dr. To Equity share application A/c (Being application money received on 16,50,000 shares at Rs 290.50 per share)		47,93,25,000	47,93,25,000
2.	Share application and allotment A/c Dr. To Share capital A/c (12,00,000 shares \( \times \) Rs 1) To Securities premium A/c (12,00,000 \( \times \) Rs 580) (Being sanctioned share amount called for application money at Re. 1 and securities premium at Rs 580 transferred to share capital and securities premium account respectively)		69,72,00,000	12,00,000 69,60,00,000
3.	Share application and allotment A/c Dr. To Bank A/c (Being returned amount on 1,50,000 shares (which were rejected) at Rs 290.50 per share)		4,35,75,000	4,35,75,000
4.	Bank A/c Dr. To Share application and allotment A/c (Being received remaining amount at the time of application)		26,14,50,000	26,14,50,000
	Total		148,15,50,000	148,15,50,000

In simple words: This problem outlines the accounting for a large share issue involving significant oversubscription and premium. It demonstrates how application money, including premium, is processed, with rejected applications refunded and excess amounts adjusted against allotment, using a combined application and allotment account.

🎯 Exam Tip: When a combined Share Application and Allotment Account is used, it simplifies entries by consolidating related stages. Be cautious with large figures and ensure accurate segregation of share capital and premium, as well as proper handling of refunds and adjustments for oversubscription.

 

Question 23. Panchvilla Manuf. Limited issued 7,50,000 equity shares of Rs 10 each at a premium of 20% for public subscription. The amount called up per share was: Rs 5 on application, Rs 4 (including premium) on allotment, and Rs 3 on the final call. Applications were received for 11,25,000 shares. Applications for 75,000 shares were rejected, and the money received thereon was refunded. A pro-rata allotment was made for 7,50,000 shares to the remaining applicants, and excess application money was adjusted against the amount due on allotment. A shareholder, Vishal, could not pay the final call money on his 7,500 allotted shares. Vishal's shares were forfeited by the company and reissued at a 10% discount. Pass necessary journal entries for the above transactions, or write journal entries in the books of the company for the following: (i) For share forfeiture, (ii) For reissue of shares, (iii) For close of the share forfeiture account.
Answer:Necessary Calculation: (1) At the time of Application: \(11,25,000 \text{ shares} \times \text{Rs } 5 = \text{Rs } 56,25,000\) Less: Rejected Application \(75,000 \text{ shares} \times \text{Rs } 5 = \text{Rs } 3,75,000\)
\( \implies \text{Rs } 52,50,000\) Less: Allotted shares Application \(75,000 \text{ shares} \times \text{Rs } 5 = \text{Rs } 37,00,000\) Credited towards Allotment \(3,00,000 \text{ shares} \times \text{Rs } 5 = \text{Rs } 15,00,000\) (2) At the time of Allotment: \(7,50,000 \text{ shares} \times \text{Rs } 4 = \text{Rs } 30,00,000\) Less: Credited at the time of Application \(3,00,000 \text{ shares} \times \text{Rs } 5 = \text{Rs } 15,00,000\)
\( \implies \text{Amount received at the time of Allotment Rs } 15,00,000\) (3) At the time of Final call: \(7,50,000 \text{ shares} \times \text{Rs } 3 = \text{Rs } 22,50,000\) Less: Calls in Arrears (Vishal) \(7,500 \text{ shares} \times \text{Rs } 3 = \text{Rs } 22,500\)
\( \implies \text{Amount received at the time of final call Rs } 22,27,500\) (4) Share Forfeiture: Vishal \(7,500 \text{ shares} \times \text{ (Application Rs } 5 + \text{ Allotment Rs } 2 \text{ (capital portion))} = \text{Rs } 52,500\) Journal entries in the books of Panchvilla Manuf. Limited

Date	Particulars	L.F.	Debit (Rs)	Credit (Rs)
1.	Bank A/c Dr. To Equity share application A/c (Being received amount on 11,25,000 shares at Rs 5 per share)		56,25,000	56,25,000
2.	Equity share application A/c Dr. To Equity share capital A/c To Equity share allotment A/c To Bank A/c (Being transferred amount of 7,50,000 at Rs 5 to share capital A/c, returned amount of rejected shares 1,50,000 and remaining amount transferred to allotment A/c.)		56,25,000	37,50,000 15,00,000 3,75,000
3.	Equity share allotment A/c Dr. To Equity share capital A/c To Securities premium A/c (Being amount due on 7,50,000 shares at Rs 4 (including premium)) (Note: Due amount on share allotment is received at the time of application only. So, entry for bank is not required)		30,00,000	15,00,000 15,00,000
4.	Bank A/c Dr. To Equity share allotment A/c (Being balance amount received for share allotment)		15,00,000	15,00,000
5.	Equity share final call A/c Dr. To Equity share capital A/c (Being amount due on 7,50,000 shares at Rs 3 per share)		22,50,000	22,50,000
6.	Bank A/c Dr. Calls-in-arrears A/c Dr. To Equity share final call A/c (Being received full amount except 7,500 shares held by Vishal)		22,27,500 22,500	22,50,000
7.	Equity share capital A/c Dr. To Share forfeiture A/c To Share final call A/c (Being forfeited Vishal's shares after due formalities)		75,000	52,500 22,500
8.	Bank A/c Dr. Share forfeiture A/c Dr. To Equity share capital A/c (Being reissued Vishal's forfeited shares at 10% discount)		67,500 7,500	75,000
9.	Share forfeiture A/c Dr. To Capital reserve A/c (Being excess amount of share forfeiture account is transferred to capital reserve account)		45,000	45,000
	Total		1,89,45,000	1,89,45,000

In simple words: This problem covers a comprehensive scenario of share issuance, including oversubscription, pro-rata allotment, forfeiture of shares for non-payment of call money, and their subsequent reissue at a discount. It illustrates the accounting treatment for each stage, culminating in the transfer of profit on reissue to capital reserve.

🎯 Exam Tip: When shares are reissued at a discount, ensure that the discount amount does not exceed the amount originally forfeited on those shares. The balance of the forfeiture account after reissue, representing the profit, must always be transferred to Capital Reserve, as it is a capital profit.

 

Question 24. Ahmedabad Chemical Limited issued 1,50,000 equity shares of Rs 100 each at a premium of Rs 30 per share. The amount payable was structured as follows: Rs 85 per share (including premium) on share application and allotment, and the balance amount on first and final call. Applications were received for 2,55,000 shares. Applications for 55,000 shares were rejected, and allotment was made on a pro-rata basis to the remaining applicants. The excess share application and allotment money was to be credited to the share first and final call. The amount for calls was duly received. The entire called-up amount was received in time. Pass necessary journal entries for recording the above transactions in the books of Ahmedabad Chemical Ltd.
Answer:Necessary Calculation: (1) At the time of share Application and Share Allotment: \(2,55,000 \text{ shares} \times \text{Rs } 85 = \text{Rs } 2,16,75,000\) Less: Rejected Application \(55,000 \text{ shares} \times \text{Rs } 85 = \text{Rs } 46,75,000\)
\( \implies \text{Rs } 1,70,00,000\) Less: Amount received on Allotment shares \(1,50,000 \text{ shares} \times \text{Rs } 85 = \text{Rs } 1,27,50,000\) Amount of first and final call \(50,000 \text{ shares} \times \text{Rs } 85 = \text{Rs } 42,50,000\) (2) At the time of First and Final call: \(1,50,000 \text{ shares} \times \text{Rs } 45 = \text{Rs } 67,50,000\) Less: Amount received at the time of Application and Allotment \(50,000 \text{ shares} \times \text{Rs } 85 = \text{Rs } 42,50,000\)
\( \implies \text{Bank A/c Rs } 25,00,000\) Journal entries in the books of Ahmedabad Chemical Limited

Date	Particulars	L.F.	Debit (Rs)	Credit (Rs)
1.	Bank A/c Dr. To Equity share application and share allotment A/c (Being received amount on 2,55,000 shares at Rs 85 per share)		2,16,75,000	2,16,75,000
2.	Share application and share allotment A/c Dr. To Share capital A/c (1,50,000 shares \( \times \) Rs 55) To Bank A/c (55,000 shares \( \times \) Rs 85) To Securities premium A/c (1,50,000 shares \( \times \) Rs 30) To Share first and final call A/c (50,000 shares \( \times \) Rs 85) (Being transferred amount of allotted 1,50,000 shares to share capital account at Rs 55 per share and at Rs 30 per share to securities premium account, returned amount on rejected shares and excess amount received at the time of application is adjusted against first and final call money)		2,16,75,000	82,50,000 46,75,000 45,00,000 42,50,000
3.	Share first and final call A/c Dr. To Share capital A/c (Being amount due on allotted 1,50,000 shares at Rs 45 per share)		67,50,000	67,50,000
4.	Bank A/c Dr. To Share first and final call A/c (Being balance amount received on first and final call)		25,00,000	25,00,000
	Total		5,26,00,000	5,26,00,000

In simple words: This problem details the accounting process for issuing shares with oversubscription, including a combined application and allotment stage, and then a final call. It illustrates how rejected application money is refunded, and excess application money from allotted shares is adjusted towards future calls, with all due amounts being received in full.

🎯 Exam Tip: When application and allotment amounts are combined, careful calculation of the portion attributable to share capital and securities premium is essential. Ensure excess application money is correctly allocated first to allotment, and then to subsequent calls, before any refunds for rejected applications are made.