Maharashtra Board Class 12 Commerce BK Chapter 8 Company Accounts Issue of Shares Solutions

Company Accounts - Issue Of Shares 12th Bk Commerce Chapter 8 Solutions Maharashtra Board

Class 12 Commerce Bk Chapter 8 Exercise Solutions

Exercise 13(A)

1. Objective Questions:

A. Select the appropriate answer from the alternative given below and rewrite the sentence.

 

Question 1.The balance of Share Forfeiture A/c is transferred to __________ Account after re-issue of these share.
(a) Reserve Capital
(b) Capital Reserve
(c) Profit & Loss
(d) Share Capital
Answer: (b) Capital Reserve
In simple words: When forfeited shares are re-issued, any remaining balance in the Share Forfeiture Account, representing profit from the re-issue, is transferred to the Capital Reserve Account, which is a reserve for capital profits.

🎯 Exam Tip: Understanding the accounting treatment for share forfeiture and re-issue, especially the transfer to Capital Reserve, is crucial for accurate financial reporting.

 

Question 2.Premium received on issue of shares is shown to __________
(a) Liability side of Balance Sheet
(b) Asset side of Balance Sheet
(c) Profit & Loss A/c debit side
(d) Profit & Loss A/c credit side
Answer: (a) Liability side of Balance Sheet
In simple words: Share premium is an amount received over and above the face value of shares; it is a capital receipt and shown under the reserves and surplus head on the liability side of the Balance Sheet.

🎯 Exam Tip: Remember that share premium is a capital profit and does not form part of the distributable profits, hence its separate classification on the Balance Sheet.

 

Question 3.Shareholders get __________ on shares.
(a) interest
(b) commission
(c) rent
(d) dividends
Answer: (d) dividends
In simple words: Shareholders, as owners of the company, receive dividends as a share of the company's profits, representing their return on investment.

🎯 Exam Tip: Differentiate between interest (paid on debt) and dividends (paid on equity) as this is a fundamental concept in company accounts.

 

Question 4.The document inviting to subscribe the shares of a company is __________
(a) Prospectus
(b) Memorandum of Association
(c) Articles of Association
(d) Share certificate
Answer: (a) Prospectus
In simple words: A prospectus is a legal document that invites the public to subscribe to the shares or debentures of a company, providing essential information about the company and the offering.

🎯 Exam Tip: Know the different statutory documents required for company formation and operation, particularly the purpose of a prospectus.

 

Question 5.As per SEBI guidelines, minimum amount payable on share application should be __________ Nominal Value of shares.
(a) 10%
(b) 15%
(c) 2%
(d) 5%
Answer: (d) 5%
In simple words: SEBI regulations mandate that the minimum application money for shares must be at least 5% of the nominal (face) value of the shares to ensure a minimum commitment from applicants.

🎯 Exam Tip: Be aware of key regulatory guidelines such as SEBI's minimum application money rule, as these directly impact share issue procedures.

 

Question 6.When shares are forfeited the Share Capital Account is __________
(a) credited
(b) debited
(c) neither debited nor credited
(d) None of the given
Answer: (b) debited
In simple words: When shares are forfeited, the Share Capital Account is debited with the called-up amount per share to reduce the company's share capital by the amount of the forfeited shares.

🎯 Exam Tip: Understanding the journal entry for share forfeiture is crucial; debiting Share Capital reflects the cancellation of the called-up capital on those shares.

 

Question 7.The liability of shareholder in Joint Stock Company is __________
(a) joint and several
(b) limited
(c) unlimited
(d) huge
Answer: (b) limited
In simple words: In a joint stock company, a shareholder's liability is limited to the unpaid amount on the shares they hold, protecting their personal assets from company debts.

🎯 Exam Tip: The principle of limited liability is a defining characteristic of joint stock companies and a common question topic.

 

Question 8.The Share Capital which a company is authorized to issue by its Memorandum of Association is __________
(a) Nominal Capital/Authorised Capital
(b) Issued Capital
(c) Paid-up Capital
(d) Reserve Capital
Answer: (a) Nominal Capital/Authorised Capital
In simple words: Nominal or Authorised Capital is the maximum amount of share capital a company is permitted to issue as stated in its Memorandum of Association.

🎯 Exam Tip: Clearly distinguish between Authorised, Issued, Subscribed, Called-up, and Paid-up Capital as these terms describe different stages of a company's capital structure.

 

Question 9.The unpaid amount on allotment and calls may be transferred to __________ Account.
(a) Calls-in-Advance
(b) Calls
(c) Calls-in-Arrears
(d) Allotment
Answer: (c) Calls-in-Arrears
In simple words: When shareholders fail to pay the amounts due on allotment or calls, the unpaid sums are recorded in the Calls-in-Arrears Account.

🎯 Exam Tip: Calls-in-Arrears represents money due from shareholders but not yet received, and it is shown as a deduction from called-up capital in the balance sheet.

 

Question 10.There must be provision in __________ for forfeiture of shares.
(a) Articles of Association
(b) Memorandum of Association
(c) Prospectus
(d) Balance Sheet
Answer: (a) Articles of Association
In simple words: The power to forfeit shares, and the procedure for doing so, must be explicitly stated in a company's Articles of Association.

🎯 Exam Tip: The Articles of Association govern the internal management of a company, including specific powers like share forfeiture, making it a critical document.

 

B. Give one word/term/phrase for each of the following statements.

 

Question 1.Amount called up on shares by the company but not received.
Answer: Calls-in-Arrears
In simple words: This is the money that the company has requested from its shareholders for their shares, but which they have not yet paid.

🎯 Exam Tip: Remember Calls-in-Arrears indicates a shortfall in expected capital collection and is a current asset for the company.

 

Question 2.Issue of share at its face value.
Answer: Issue at par
In simple words: When a company issues shares to the public at the same price as their nominal or face value, it is known as issuing shares at par.

🎯 Exam Tip: Differentiate "issue at par" from "issue at premium" and "issue at discount" for clear understanding of share pricing.

 

Question 3.The person who purchases the shares of a company.
Answer: Shareholder
In simple words: A shareholder is an individual or entity that legally owns one or more shares of stock in a company, thereby having an ownership interest in the business.

🎯 Exam Tip: Shareholders are the owners of the company, and their rights and responsibilities are tied to the type and number of shares they hold.

 

Question 4.The form of business organisation where a huge amount of capital can be raised.
Answer: Joint-stock company
In simple words: A joint-stock company is a business entity where ownership is distributed among shareholders who invest capital, allowing for the pooling of large funds from many investors.

🎯 Exam Tip: Joint-stock companies are ideal for large-scale operations requiring substantial capital, distinguishing them from sole proprietorships or partnerships.

 

Question 5.The capital is subscribed by the public.
Answer: Subscribed capital
In simple words: Subscribed capital refers to the portion of the issued capital for which investors have applied and agreed to purchase.

🎯 Exam Tip: Subscribed capital indicates the extent to which the public has committed to buying the shares offered by the company.

 

Question 6.The shares having preferential rights at the time of winding up of the company.
Answer: Preference shares
In simple words: Preference shares are a type of equity that gives holders priority over equity shareholders in receiving dividends and repayment of capital upon liquidation.

🎯 Exam Tip: Highlight the "preferential rights" of preference shares, especially regarding dividend payment and capital repayment during winding up.

 

Question 7.The shares on which dividend is not fixed.
Answer: Equity shares
In simple words: Equity shares are ordinary shares of a company whose dividend rate fluctuates based on the company's profits and management's discretion, unlike preference shares.

🎯 Exam Tip: Equity shareholders bear more risk but also have potential for higher returns and voting rights, a key difference from preference shareholders.

 

Question 8.The part of subscribed capital is not called up by the company.
Answer: Uncalled capital
In simple words: Uncalled capital is the portion of subscribed capital that the company has not yet asked shareholders to pay.

🎯 Exam Tip: Uncalled capital can be a crucial reserve, especially if earmarked as "Reserve Capital" to be called only at the time of winding up.

 

C. State true or false with reasons.

 

Question 1.Directors can forfeit the shares for any reason.
Answer: This statement is False.
After paying money on share application, When share applicant fails to pay the call money or premium on shares in spite of repeated reminders and warnings directors/company can forfeit the shares.
In simple words: Shares can only be forfeited by directors if a shareholder fails to pay call money or premium after repeated notices, not for arbitrary reasons.

🎯 Exam Tip: Emphasize that share forfeiture is a serious action and must strictly adhere to the company's Articles of Association and legal provisions for non-payment.

 

Question 2.Once the application money is received, directors can immediately proceed with the allotment of shares.
Answer: This statement is False.
Directors can proceed for allotment of shares only after receiving the minimum subscription amount of the issued amount by cheque or other instrument complying with all legal requirements.
In simple words: Share allotment can only proceed after receiving the minimum subscription amount as specified by law and fulfilling all other legal prerequisites, not just the application money.

🎯 Exam Tip: The concept of "minimum subscription" is vital for the validity of share allotment and should be clearly understood along with other legal compliances.

 

Question 3.Joint-stock company forms of business organisations came into existence after the industrial revolution.
Answer: This statement is True.
As the volume and scale of trade and industry expanded, especially after the industrial revolution, a very large unit of the commercial organisation requiring large capital and greater managerial skill, called Joint-stock company came into existence.
In simple words: The Industrial Revolution's expansion of trade and industry necessitated larger capital and management, leading to the rise of joint-stock companies as a suitable organizational structure.

🎯 Exam Tip: Connect the historical evolution of business organizations with economic changes like the Industrial Revolution to understand the context of joint-stock companies.

 

Question 4.Equity shareholders get a guaranteed rate of dividend every year.
Answer: This statement is False.
One of the features of equity shares is the rate of dividend payable on equity shares keeps on changing from one year to another. So, there is no question of guaranteed dividend every year for equity shareholders.
In simple words: Equity shareholders do not receive a guaranteed dividend; their dividend rate varies annually based on the company's profitability and the board's decision.

🎯 Exam Tip: Emphasize that fluctuating dividends are a key characteristic of equity shares, reflecting their status as residual claimants on company profits.

 

Question 5.The face value of shares and market value of shares is always the same.
Answer: This statement is False.
Face value of shares means the issue price of shares while the market value of shares means the trading price of shares at the stock exchange. The face value of shares remains the same and fixed. However, market price changes as per the performance of the company. Hence face value and market value of shares is not the same.
In simple words: The face value is the fixed nominal value of a share, while the market value is its fluctuating trading price on the stock exchange, making them generally different.

🎯 Exam Tip: Differentiate between face value (nominal value) and market value (trading price) as their divergence is a fundamental concept in share valuation.

 

Question 6.Sweat shares are issued to the public.
Answer: This statement is False.
Sweat shares are issued by a company to its directors or employees at a discount or for consideration other than cash. Sweat shares are not issued to the public.
In simple words: Sweat equity shares are issued to employees or directors for their expertise or intellectual property, not offered to the general public.

🎯 Exam Tip: Know the specific purpose and limited recipient group of sweat equity shares to avoid common misconceptions about their issuance.

 

D. State whether you agree or disagree with the following statements.

 

Question 1.In the case of Pro-rata allotment the excess application money received must be refunded.
Answer: Disagree
In simple words: In a pro-rata allotment, excess application money is often adjusted against future call money rather than being immediately refunded.

🎯 Exam Tip: Understand that adjustment of excess application money is a common practice in pro-rata allotment, reducing the need for immediate refunds.

 

Question 2.Calls-in-Advance account is shown on the asset side of the Balance Sheet.
Answer: Disagree
In simple words: Calls-in-Advance represents money received from shareholders before it is due, thus it is a liability for the company, not an asset, and is shown on the liability side of the Balance Sheet.

🎯 Exam Tip: Calls-in-Advance is a current liability for the company, indicating money owed to shareholders if calls are not made or as part of shareholders' funds.

 

Question 3.The Authorised Capital is also known as Nominal Capital.
Answer: Agree
In simple words: Authorised Capital is indeed often referred to as Nominal Capital because it represents the maximum face value of shares a company is authorized to issue.

🎯 Exam Tip: These two terms are interchangeable and refer to the upper limit of capital a company can raise as per its Memorandum of Association.

 

Question 4.Paid-up capital can be more than Called-up Capital.
Answer: Disagree
In simple words: Paid-up capital is the amount actually received from shareholders, which cannot exceed the called-up capital (the amount demanded by the company).

🎯 Exam Tip: Paid-up capital is a subset of called-up capital; it can be equal to or less than called-up capital but never more.

 

Question 5.The joint-stock company can raise a huge amount of capital.
Answer: Agree
In simple words: Joint-stock companies, by issuing shares to a large number of investors, are uniquely structured to raise significant amounts of capital for large-scale operations.

🎯 Exam Tip: The ability to raise substantial capital from a wide investor base is one of the primary advantages of a joint-stock company.

 

Question 6.When shares are Forfeited Shares Capital Account is credited.
Answer: Disagree
In simple words: When shares are forfeited, the Share Capital Account is debited to reduce the company's share capital, not credited.

🎯 Exam Tip: Understand the accounting entry: Share Capital A/c is debited, while Calls-in-Arrears A/c and Share Forfeiture A/c are credited.

 

Question 7.Directors can re-issue forfeited shares.
Answer: Agree
In simple words: Directors have the authority to re-issue forfeited shares, typically at a price not less than the amount unpaid on them.

🎯 Exam Tip: Re-issue of forfeited shares is a mechanism for the company to recover unpaid call money and restore the capital base, often with specific legal provisions.

 

Question 8.When the issued price of a share is Rs. 12 and face value is Rs. 10, the share is said to be issued at a premium.
Answer: Agree
In simple words: Issuing shares at Rs. 12 when their face value is Rs. 10 means the shares are issued for more than their nominal value, which is considered issuing at a premium.

🎯 Exam Tip: A share is issued at a premium when the issue price is greater than its face value, reflecting the company's financial strength and market demand.

 

Question 9.A public limited company can issue its share without issuing its prospectus.
Answer: Disagree
In simple words: Generally, a public limited company offering shares to the public must issue a prospectus, or a statement in lieu of prospectus, unless it's a rights issue or a private placement.

🎯 Exam Tip: The prospectus acts as an invitation to the public and a disclosure document, crucial for investor protection, although exceptions exist for specific types of issues.

 

Question 10.Shares can be issued for consideration other than cash.
Answer: Agree
In simple words: Companies can issue shares in exchange for assets or services rendered, rather than just cash, often termed "shares for consideration other than cash."

🎯 Exam Tip: Issuing shares for non-cash consideration is common in scenarios like acquiring a business or compensating promoters, and its accounting treatment differs from cash issues.

 

E. Answer in one sentence only.

 

Question 1.What are Preference Shares?
Answer: Preference Shares are a type of share which enjoys priority or preference over equity share for the repayment of dividends at a predetermined fixed rate and for the repayment of capital.
In simple words: Preference shares give their holders priority in receiving fixed dividends and capital repayment over equity shareholders.

🎯 Exam Tip: Key features of preference shares are fixed dividends and priority in repayment, making them less risky than equity shares.

 

Question 2.What is Registered Capital?
Answer: Registered Capital or Authorised Capital means the maximum limit up to which a company is authorized to raise share capital.
In simple words: Registered Capital, also known as Authorized Capital, is the maximum amount of share capital a company is legally allowed to issue.

🎯 Exam Tip: Registered capital sets the upper limit for a company's share issuance and is stated in its Memorandum of Association.

 

Question 3.What is Reserve Capital?
Answer: Reserve Capital is that part of the subscribed capital which is reserved to be called up only at the time of winding up or liquidation of the company.
In simple words: Reserve Capital is a portion of a company's uncalled capital that can only be called upon during the company's winding up.

🎯 Exam Tip: Reserve Capital provides security for creditors during liquidation and is created by a special resolution.

 

Question 4.What is Over Subscription of Shares?
Answer: When a company received more applications of shares than those actually offered or issued to the public, known as Over Subscription of Shares.
In simple words: Over-subscription occurs when the number of share applications received by a company exceeds the number of shares it offered to the public.

🎯 Exam Tip: Over-subscription indicates high demand for the company's shares and requires allotment policies like pro-rata or rejection.

 

Question 5.Which account is debited when share first call money is received?
Answer: The bank account will be debited when share first call money is received.
In simple words: When the company receives money for the first call on shares, the Bank Account is debited as cash comes in.

🎯 Exam Tip: Always debit the Bank Account for cash receipts and credit the respective call account upon receipt of call money.

 

Question 6.When are shares allotted on a pro-rata basis?
Answer: Shares are said to be allotted on a pro-rata basis when the applications are received for more shares than the number of shares issued and shares are allotted in the proportion to the number of shares applied for.
In simple words: Shares are allotted pro-rata when applications exceed available shares, distributing them proportionally among applicants instead of rejecting some entirely.

🎯 Exam Tip: Pro-rata allotment is a common strategy in over-subscription to ensure fair distribution and manage excess application money by adjusting it against future calls.

 

Question 7.What is Forfeiture of Shares?
Answer: When a shareholder fails to pay the call money or premium on the shares in spite of repeated reminders and warnings, the company forfeits the shares of such defaulters known as forfeiture of shares.
In simple words: Forfeiture of shares is the cancellation of shares due to a shareholder's failure to pay call money or premium after due notice.

🎯 Exam Tip: Share forfeiture results in the shares being taken back by the company, and any money already paid on them is usually retained by the company.

 

Question 8.What is Calls-in-Arrears?
Answer: Non-payment of allotment or call money by the applicants in spite of repeated reminders are called Calls-in-Arrears.
In simple words: Calls-in-Arrears refers to the amount of share allotment or call money that shareholders have failed to pay by the due date.

🎯 Exam Tip: Calls-in-Arrears is a contra-equity item, reducing the amount of paid-up capital and can lead to share forfeiture.

 

Question 9.What do you mean by Shares Issued at Premium?
Answer: When shareholders are supposed to pay a price higher than the face value of the shares, their shares are said to be issued at a premium.
In simple words: Shares issued at a premium means the company sells its shares for a price higher than their nominal or face value.

🎯 Exam Tip: The premium amount is credited to the Securities Premium Account, which is a capital profit and can only be used for specific purposes as per the Companies Act.

 

Question 10.What is Paid-up Capital?
Answer: Part of the called-up capital which is actually paid by the shareholders is called Paid-up Share Capital.
In simple words: Paid-up capital is the portion of the called-up share capital that shareholders have actually paid to the company.

🎯 Exam Tip: Paid-up capital represents the actual cash or equivalent received by the company from its shareholders against the shares issued.

 

F. Complete the following sentences.

 

Question 1.When the face value of the share is Rs. 100 and the issued price is Rs. 120, then it is said that the shares are issued at __________
Answer: premium
In simple words: If shares are issued at a price higher than their face value, it means they are issued at a premium.

🎯 Exam Tip: A premium issue reflects market confidence and is beneficial for the company, increasing its reserves.

 

Question 2.__________ Capital is the capital which a company is authorized to issue by its Memorandum of Association.
Answer: Authorized
In simple words: The maximum capital a company is permitted to issue as per its founding documents is called Authorized Capital.

🎯 Exam Tip: The authorized capital is the legal limit, and a company cannot issue shares beyond this amount without amending its Memorandum.

 

Question 3.The difference between Called-up Capital and Paid-up Capital is known as __________
Answer: Calls-in-Arrears
In simple words: The unpaid portion of the called-up capital, which shareholders failed to provide, is accounted for as Calls-in-Arrears.

🎯 Exam Tip: This difference highlights the amount of capital that the company has demanded but not yet received from its shareholders.

 

Question 4.__________ shareholders get fixed rate of dividend.
Answer: Preference
In simple words: Preference shareholders are entitled to receive dividends at a fixed rate, irrespective of the company's varying profits.

🎯 Exam Tip: This fixed dividend rate is a key differentiating feature of preference shares compared to equity shares.

 

Question 5.__________ shareholders are the real owners of the company.
Answer: Equity
In simple words: Equity shareholders, having residual claim on profits and assets, are considered the true owners of the company.

🎯 Exam Tip: Equity shareholders possess voting rights and influence company management, reflecting their ownership status.

 

Question 6.__________ form of business organisation in which capital is raised through the issue of shares.
Answer: Joint-stock company
In simple words: A joint-stock company is a business structure that raises capital by issuing shares to the public.

🎯 Exam Tip: Share issuance is a hallmark of joint-stock companies, enabling them to amass substantial capital from numerous investors.

 

Question 7.__________ Capital is the part of Issued capital which is subscribed by the public.
Answer: Subscribed
In simple words: Subscribed Capital is the portion of issued capital that the public has applied for and agreed to buy.

🎯 Exam Tip: This indicates the public's commitment to investing in the company's shares from the total shares offered.

 

Question 8.The part of Authorised Capital which is not issued to the public is known as __________ Capital.
Answer: Unissued
In simple words: The portion of Authorised Capital that the company has chosen not to offer to the public is called Unissued Capital.

🎯 Exam Tip: Unissued capital represents the company's capacity to issue more shares in the future without increasing its authorized capital.

 

G. Calculate the following.

 

Question 1.One shareholder holding 500 equity shares paid share application money @ Rs. 3, Allotment money @ Rs. 4 per share and failed to pay a final call of Rs. 3 per share his share was forfeited calculate the amount of forfeiture.
Solution:
Amount of forfeiture = Amount received by the company (In case of non-payment of 'calls')
Here, shareholders paid Rs. 3 per share on application and Rs. 4 per share on the allotment on 500 shares.
So, total amount received by company = \(500 \times Rs. 3 + 500 \times Rs. 4\)
\( = 1,500 + 2,000\)
\( = Rs. 3,500\)
\( \implies \) Amount of share forfeiture = Rs. 3,500.
In simple words: The forfeited amount is the sum of money already paid by the shareholder on the shares before they were forfeited, which includes application and allotment money.

🎯 Exam Tip: To calculate the amount of forfeiture, always sum up the monies actually received by the company for the forfeited shares, excluding any unpaid calls.

 

Question 2.10,000 equity shares of Rs. 10 each issued at a 10% premium. Calculate the total amount of share premium.
Solution:
Equity shares = 10,000
Face value = Rs. 10 per share
Premium @ 10% = \(10,000 \times 10 \times \frac{10}{100} = Rs. 10,000\)
So, premium 10,000 shares of Rs. 10 each at 10% = Rs. 10,000
In simple words: The total share premium is calculated by multiplying the number of shares issued by the premium amount per share, which is a percentage of the face value.

🎯 Exam Tip: Remember that premium is calculated on the face value of shares, not the issue price, unless specified otherwise. This is a common point of error.

 

Question 3.The company received excess applications for 5000 shares @ Rs. 4 per share. The application of 1000 shares was rejected and a pro-rata allotment was made. Calculate the amount of application money adjusted with allotment.
Solution:
Excess application money received for 5000 shares @ Rs. 4 per share = Rs. 20,000
Less: Application of 1000 shares rejected and money refunded = Rs. 4,000
Excess money received to be adjusted with allotment = Rs. 16,000
In simple words: The amount to be adjusted against allotment is the total excess application money received minus the money refunded for rejected applications.

🎯 Exam Tip: In cases of over-subscription with pro-rata allotment, always identify money to be refunded first, then calculate the balance available for adjustment against subsequent calls like allotment.

 

Question 4.80,000 equity shares of Rs. 10 each issued and fully subscribed and called up at 20% premium. Calculate the amount of Equity Share capital.
Answer:
Equity Share capital = No. of equity shares × face value of each share
\( = 80,000 \times Rs. 10\)
\( = Rs. 8,00,000\)
Note: Equity Share capital has no concern with premium or discount amount.
In simple words: Equity Share Capital is calculated by multiplying the number of equity shares by their face value, disregarding any premium or discount on issue.

🎯 Exam Tip: Always calculate Share Capital based on the face value of shares. Premium is a separate account (Securities Premium A/c) and does not affect the Share Capital figure.

 

Question 5.Directors issued 20,000 equity shares of Rs. 100 each at par. These were fully subscribed and called up. All money was received except one shareholder holding 100 equity shares failed to pay a final call of Rs. 20 per share. Calculate the amount of Paid-up capital of the company.
Solution:
Fully subscribed and called-up amount = \(20,000 \text{ equity shares} \times Rs. 100 \text{ each share}\)
\( = Rs. 20,00,000\)
But one share holder failed to pay final call of Rs. 20 per share of 100 equity shares means
Non-payment of shares = \(100 \text{ equity shares} \times Rs. 20 \text{ per share} = 2,000\)
\( \implies \) Total Paid-up capital amount = \(20,00,000 - Rs. 2,000 = Rs. 19,98,000\)
In simple words: To find the paid-up capital, subtract the total unpaid final call amount from the total called-up capital for all shares.

🎯 Exam Tip: Paid-up capital is the called-up capital less calls-in-arrears. Ensure to only subtract the unpaid portion from the total called-up amount.

 

Question 6.The company sends a regret letter for 100 shares and an Allotment letter to 25,000 shareholders. Application money per Rs. 20 per share. Calculate the amount of application money that the company is refunding.
Solution:
The company sends a Regret letter for 100 shares for Rs. 20 per share application money received i.e. only that much amount the company will refund.
Amount of refund = No. of shares × Value of per share
\( = 100 \times 20\)
\( = Rs. 2,000\)
In simple words: The refunded amount is simply the application money for the shares for which regret letters were sent.

🎯 Exam Tip: When calculating refunds, only consider the shares for which applications are rejected, and multiply by the application money per share.

 

Practical Problems

 

Question 1.Vijay Ltd. was registered with an authorized capital of Rs. 15,00,000 divided into 1,50,000 equity shares of Rs. 10 each.
The company issued 1,00,000 equity shares of Rs. 10 each at a premium of Rs. 2 per share. The company received applications for 80,000 equity shares and was allotted the shares.
The company received application money Rs. 3 per share, allotment money Rs. 4 per share (Including premium) and first, call money Rs. 3 per share.
The Directors have not made the final call of Rs. 2 per share. All money was received except one shareholder holding 500 shares did not pay the first call.
Show Authorised Capital, Issued Capital, Subscribed Capital, Called-up Capital, Paid-up Capital, Calls in Arrears, and Share Premium amount in the company balance sheet.
Solution:
In the books of Vijay Ltd.
Balance Sheet as on

Liabilities	Amount (Rs.)	Assets	Amount (Rs.)
Authorised Capital:	15,00,000	Cash at Bank	7,98,500
1,50,000 equity shares of Rs. 10 each
Issued Capital :	10,00,000
1,00,000 equity shares of Rs. 10 each
Subscribed Capital:	8,00,000
80,000 equity shares of Rs. 10 each
Called-up Capital:	6,40,000
80,000 equity shares of Rs. 8 each
Paid-up Share Capital:
(80,000 equity shares at
8 per shares)	6,40,000
Less: Calls-in-Arrears
(500 shares at
3 per share)	1,500	6,38,500
Share Premium / Securities A/c	1,60,000
(80,000 shares at 2 per share)
Total	7,98,500	Total	7,98,500

Working Notes:
1. Bank balance at the end = Amount received on application + Amount received on allotment + Amount received on 1st call + Premium amount received
\( = 80,000 \times 3 + 80,000 \times 2 \times 79,500 \times 3 + 80,000 \times 2\)
\( = 2,40,000 + 1,60,000 + 2,38,500 + 1,60,000\)
\( = Rs. 7,98,500\)
2. Directors have not made the final call of Rs. 2 per share means total called-up amount = \(Rs. 10 - Rs. 2 = Rs. 8\)
3. Calls-in-Arrears on 500 shares at Rs. 3 = Rs. 1,500 of the first call
4. Share premium on 80,000 shares @ Rs. 2 received at allotment stage i.e. share premium amount = \(80,000 \times Rs. 2 = Rs. 1,60,000\)
In simple words: This balance sheet categorizes share capital and premium, showing the authorized, issued, subscribed, called-up, and paid-up capital, adjusted for calls-in-arrears, with the cash at bank reflecting total receipts.

🎯 Exam Tip: For balance sheet presentation of share capital, strictly adhere to the Companies Act hierarchy: Authorized, Issued, Subscribed, Called-up, and Paid-up capital, deducting Calls-in-Arrears from Called-up capital.

Question 2.Anand Company Limited issued 1,00,000 preference shares of Rs. 10 each payable as- On Application Rs. 4 On Allotment Rs. 3 On First call Rs. 2 On Second & Final call? The company received applications for all these shares and received all money. Pass Journal Entries in the books of Anand Company Ltd. Solution:

Date	Particulars	L.F.	Debit Amount (Rs.)	Credit Amount (Rs.)
1	Bank A/c To Preference Share Application A/c (Being application money on 1,00,000 preference shares @ Rs. 4 per share received)	Dr.	4,00,000	4,00,000
2	Preference Share Application A/c To Preference Share Capital A/c (Being application money received on 1,00,000 preference share @ Rs. 4 per share transferred to Preference Share Capital Account)	Dr.	4,00,000	4,00,000
3	Preference Share Allotment A/c To Preference Share Capital A/c (Being allotment money on 1,00,000 preference shares @ Rs. 3 per share due)	Dr.	3,00,000	3,00,000
4	Bank A/c To Preference Share Allotment A/c (Being allotment money on 1,00,000 preference share @ Rs. 3 per share received)	Dr.	3,00,000	3,00,000
5	Preference Share First Call A/c To Preference Share Capital A/c (Being first call money on 1,00,000 preference shares @ Rs. 2 per share due)	Dr.	2,00,000	2,00,000
6	Bank A/c To Preference Share First Call A/c (Being first call money on 1,00,000 preference share @ Rs. 2 per share received)	Dr.	2,00,000	2,00,000
7	Preference Share Second & Final Call A/c To Preference Share Capital A/c (Being second & final call money on 1,00,000 Preference Shares @ Rs. 1 per share due)	Dr.	1,00,000	1,00,000
8	Bank A/c To Preference Share Second & Final Call A/c (Being Second and final call money on 1,00,000 Preference Shares @ Rs. 1 per share received)	Dr.	1,00,000	1,00,000

In simple words: This solution details the journal entries required for a company issuing preference shares, covering all stages from application to final call and the receipt of all monies. Each entry records the movement of funds and their transfer to capital accounts.

🎯 Exam Tip: When preparing journal entries for share issues, ensure you clearly distinguish between money received (Bank A/c) and money due (e.g., Application, Allotment, Call A/c) before transferring to Share Capital. Proper narration is also crucial for full marks.

Question 3.Rohini Company Limited issued 25,000 equity shares of Rs. 100 each payable as follows: On Application Rs. 20 On Allotment Rs. 30 On First call Rs. 20 On the Second & Final call Rs. 30 The application was received for 22,000 equity shares and allotment of shares was made to them. All money was received by the company. Pass Journal Entries in the books of Rohini Co. Ltd. Solution:

Date	Particulars	L.F.	Debit Amount (Rs.)	Credit Amount (Rs.)
1	Bank A/c To Equity Share Application A/c (Being equity share application money on 22,000 shares @ Rs. 20 per share received)	Dr.	4,40,000	4,40,000
2	Equity Share Application A/c To Equity Share Capital A/c (Being equity share application money on 22,000 equity shares @ Rs. 20 per share transferred to Equity Share Capital Account)	Dr.	4,40,000	4,40,000
3	Equity Share Allotment A/c To Equity Share Capital A/c (Being allotment money on 22,000 equity shares @ Rs. 30 per share due)	Dr.	6,60,000	6,60,000
4	Bank A/c To Equity Share Allotment A/c (Being equity share allotment money on 22,000 shares @ Rs. 30 per share received)	Dr.	6,60,000	6,60,000
5	Equity Share First Call A/c To Eqity Share Capital A/c (Being equity share first call money on 22,000 shares @ Rs. 20 due)	Dr.	4,40,000	4,40,000
6	Bank A/c To Equity Share First Call A/c (Being equity share first call money on 22,000 shares @ Rs. 20 per share received)	Dr.	4,40,000	4,40,000
7	Equity Share Second & Final Call A/c To Equity Share Capital A/c (Being equity share second & final call money on 22,000 shares @ Rs. 30 due)	Dr.	6,60,000	6,60,000
8	Bank A/c To Equity Share Second & Final Call A/c (Being equity share second & final call money on 22,000 shares @ Rs. 30 per share received)	Dr.	6,60,000	6,60,000

In simple words: This solution demonstrates the journal entries for a company issuing equity shares, showing the collection of application, allotment, first, and final call money. Since the shares were undersubscribed but all applied shares were allotted and paid for, each stage involves receiving money into the bank and transferring it to the equity share capital account.

🎯 Exam Tip: For problems involving undersubscription where all applications are accepted, ensure that all journal entries for application, allotment, and calls are based on the actual number of shares applied for and allotted, not the originally issued number.

Question 4.Deepak Manufacturing Co. Ltd. issued a prospectus inviting applications for 1,00,000 equity shares of Rs. 10 each payable as follows : Rs. 2 on Application Rs. 4 on Allotment Rs. 2 on the First call Rs. 2 on Final call The application was received for 1,20,000 equity shares. The Directors decided to reject excess applications and refunded application money on that. The company received all money. Pass Journal Entries in the books of a company. Solution:

Date	Particulars	L.F.	Debit Amount (Rs.)	Credit Amount (Rs.)
1	Bank A/c To Equity Share Application A/c (Being equity share application money on 1,20,000 shares @ Rs. 2 per share received)	Dr.	2,40,000	2,40,000
2	Equity Share Application A/c To Equity Share Capital A/c (Being application money on 1,00,000 shares transferred to equity share capital account)	Dr.	2,00,000	2,00,000
3	Equity share Application A/c To Bank A/c (Being application money on excess 20,000 shares @ Rs. 2 per share refunded)	Dr.	40,000	40,000
4	Equity Share Allotment A/c To Equity Share Capital A/c (Being equity share allotment money on 1,00,000 shares @ Rs. 4 per share due)	Dr.	4,00,000	4,00,000
5	Bank A/c To Equity Share Allotment A/c (Being allotment money on 1,00,000 shares @ Rs. 4 per share received)	Dr.	4,00,000	4,00,000
6	Equity Share First Call A/c To Equity Share Capital A/c (Being equity share first call money on 1,00,000 shares @ Rs. 2 per share due)	Dr.	2,00,000	2,00,000
7	Bank A/c To Equity Share First Call A/c (Being equity first call money on 1,00,000 shares @ Rs. 2 per share received)	Dr.	2,00,000	2,00,000
8	Equity Share Final Call A/c To Equity Share Capital A/c (Being equity share final call money on 1,00,000 shares @ Rs. 2 per share due)	Dr.	2,00,000	2,00,000
9	Bank A/c To Equity Share Final Call A/c (Being equity share final call money on 1,00,000 shares @ Rs. 2 per share received)	Dr.	2,00,000	2,00,000

In simple words: This solution provides the journal entries for an oversubscribed share issue where excess applications are rejected and refunded. It shows the initial receipt of application money, the transfer of eligible application money to capital, the refund of excess money, and the subsequent collection and transfer of allotment and call monies for the actually issued shares.

🎯 Exam Tip: For oversubscription problems, always remember the crucial steps: (1) receive all application money, (2) transfer money for allotted shares to capital, and (3) refund or adjust excess application money. Clearly distinguish between these entries.

Question 5.Sucheta Company Limited issued Rs. 20,00,000 new capital divided into Rs. 100 equity shares at a premium of Rs. 20 per share payable as Rs. 10 on Application, Rs. 40 on Allotment and Rs. 10 premium Rs. 50 on Final call and Rs. 10 premium. The issue was oversubscribed to the extent of 26,000 equity shares. The applicants on 2,000 shares were sent a letter of regret and their application money was refunded. The remaining applicants were allotted shares on a Pro-rata basis. All the money due on Allotment and Final call was only received. Make necessary Journal Entries in the books of Sucheta Company Ltd. Answer: Solution:

Date	Particulars	L.F.	Debit Amount (Rs.)	Credit Amount (Rs.)
1	Bank A/c To Equity Share Application A/c (Being application money on 26,000 equity shares @ Rs. 10 per share received)	Dr.	2,60,000	2,60,000
2	Equity Share Application A/c To Bank A/c (Being application money on 2,000 equity shares @ Rs. 10 per share refunded)	Dr.	20,000	20,000
3	Equity Share Application A/c To Equity Share Capital A/c To Equity Share Allotment A/c (Being application money on 20,000 equity shares transferred to equity share capital and application money on 2,000 equity shares adjusted against Share Allotment A/c)	Dr.	2,40,000	2,00,000 40,000
4	Equity Share Allotment A/c To Equity Share Capital A/c To Share Premium A/c (Being allotment money (including premium) on 20,000 equity shares @ Rs. 50 per share due)	Dr.	10,00,000	8,00,000 2,00,000
5	Bank A/c To Equity Share Allotment A/c (Being allotment money on 20,000 equity shares, after adjusting excess application money received)	Dr.	9,60,000	9,60,000
6	Equity Share Final Call A/c To Equity Share Capital A/c To Share Premium A/c (Being share final call money (including premium) on 20,000 equity shares @ Rs. 60 per share due)	Dr.	12,00,000	10,00,000 2,00,000
7	Bank A/c To Equity Share Final Call A/c (Being share final call money on 20,000 equity shares @ Rs. 60 per share received)	Dr.	12,00,000	12,00,000

Working Note: Calculation of Application money transferred to Share Allotment: Application money received (26,000 × 10) = 2,60,000 Less: Application money refunded (2,000 × 10) = 20,000 Less: Application money transferred to Share Capital: (20,000 × 10) = 2,00,000 Excess money received on application transferred to Share Allotment = 40,000 Bifurcation of calls amount: Per share value Rs. 100 Premium amount Rs. 20)
On Application: Rs. 10 per share
\( \implies \) On Allotment: Rs. 40 per share for Capital + Rs. 10 per share for Premium
\( \implies \) On final call: Rs. 50 per share for Capital + Rs. 10 per share for PremiumIn simple words: This solution details the journal entries for an oversubscribed share issue with both refunds and pro-rata allotment, including premium. It meticulously records the receipt and allocation of application money, refunding excess, adjusting remaining excess against allotment, and then the collection of allotment and final call monies, distinguishing between capital and premium components.

🎯 Exam Tip: When dealing with oversubscription and pro-rata allotment, it's critical to correctly calculate the amount to be refunded and the amount to be adjusted against future calls (like allotment). Also, clearly separate the premium amount from the capital amount in journal entries.

Question 6.Suhas Limited issued 10,000 equity shares of Rs. 10 each at a premium of Rs. 2 per share payable Rs. 3 on application, Rs. 5 (including premium) on the allotment, and the balance in two calls of an equal amount. Applications were received for 11,000 equity shares and pro-rata allotment was made for all the applicants. The excess application money was adjusted towards allotment. Mrs. Shobha who was allowed 200 equity shares failed to pay F/F/C and her shares were forfeited after the final call. Show Journal Entries in the books of Suhas Ltd. and also show its presence in Balance Sheet. Solution:

Date	Particulars	L.F.	Debit Amount (Rs.)	Credit Amount (Rs.)
1	Bank A/c To Equity Share Application A/c (Being application money on 11,000 equity shares @ Rs. 3 per share received)	Dr.	33,000	33,000
2	Equity Share Application A/c To Equity Share Capital A/c To Equity Share Allotment A/c (Being application money on 10,000 shares transferred to Share Capital A/c and remaining amount adjusted against allotment)	Dr.	33,000	30,000 3,000
3	Equity Share Allotment A/c To Equity Share Capital A/c To Share Premium A/c (Being allotment money on 10,000 equity shares @ Rs. 5 per share, including premium of Rs. 2 per share, due)	Dr.	50,000	30,000 20,000
4	Bank A/c To Equity Share Allotment A/c (Being share allotment money received after adjusting excess application money received)	Dr.	47,000	47,000
5	Equity Share First Call A/c To Equity Share Capital A/c (Being equity share first call money on 10,000 shares @ Rs. 2 per share due)	Dr.	20,000	20,000
6	Bank A/c To Equity Share First Call A/c (Being share first call money received @ Rs. 2 per share except 200 shares of Mrs Shobha)	Dr.	19,600	19,600
7	Equity Share Final Call A/c To Equity Share Capital A/c (Being equity share final call money on 10,000 shares @ Rs. 2 per share due)	Dr.	20,000	20,000
8	Bank A/c To Equity Share Final Call A/c (Being share final call money received @ Rs. 2 per share except 200 shares of Mrs Shobha)	Dr.	19,600	19,600
9	Equity Share Capital A/c To Equity Share First Call A/c To Equity Share Final Call A/c To Equity Share Forfeiture A/c (Being 200 shares of Mrs. Shobha forfeited due to non-payment of first and final call @ Rs. 2 each i.e. paid amount Rs. 6 per share forfeited by company)	Dr.	2,000	400 400 1,200

Balance Sheet of Suhas Limited

Liabilities	Amount (Rs.)	Assets	Amount (Rs.)
Share Capital	98,000	Bank	1,19,200
Share Premium	20,000
Share Forfeiture	1,200
	1,19,200		1,19,200

Working Notes: 1. Excess amount received at the time of application Rs. 3,000 adjusted at allotment stage, so allotment amount received in the bank is 47,000. 2. Amount called-up per share: Rs. 3 on application, Rs. 5 (including premium) on allotment i.e. Rs. 2 premium + Rs. 3 capital and balance amount Rs. 4 in two calls of the equal amount i.e. Rs. 2 on the first call and Rs. 2 on final call. 3. Mrs. Shobha was not able to pay F/F/C i.e. first and final call means 200 × Rs. 2 first call money = Rs. 400 and 200 × Rs. 2 final call money = Rs. 400. Mrs. Shobha paid Rs. 6 per share towards capital which the company received and the company has the right to forfeit only paid amount means the company forfeited Rs. 1,200 of Mrs. Shobha.In simple words: This solution provides journal entries and a balance sheet for a share issue with oversubscription, pro-rata allotment, premium, and forfeiture. It demonstrates adjusting excess application money, recording calls and their receipt, and finally the forfeiture of shares for non-payment of calls, showing the impact on the balance sheet.

🎯 Exam Tip: For problems involving forfeiture, ensure the Equity Share Capital A/c is debited with the called-up amount per forfeited share, and the unpaid call amounts are credited. The Share Forfeiture A/c should be credited with the amount actually received on the forfeited shares.

Question 7.Subhash Company Limited issues 2000 Equity shares of Rs. 100 each payable as Rs. 30 on application, Rs. 30 on the allotment, Rs. 40 on first and final call. All the shares were subscribed and duly allotted. The company made all the calls. All cash was duly received except the first and final call on 100 equity shares. These shares were forfeited by the company and were re-issued as fully paid for Rs. 75 per share. Show the Journal Entries in the books of Subhash Company Ltd. Solution:

Date	Particulars	L.F.	Debit Amount (Rs.)	Credit Amount (Rs.)
1	Bank A/c To Equity Share Application A/c (Being application money on 2,000 equity shares @ Rs. 30 per share received)	Dr.	60,000	60,000
2	Equity Share Application A/c To Equity Share Capital A/c (Being application money received on 2,000 equity shares transferred to equity share capital)	Dr.	60,000	60,000
3	Equity Share Allotment A/c To Equity Share Capital A/c (Being equity share allotment money on 2,000 shares @ Rs. 30 per share due)	Dr.	60,000	60,000
4	Bank A/c To Equity Share Allotment A/c (Being equity share allotment money on 2,000 shares @ Rs. 30 per share received)	Dr.	60,000	60,000
5	Equity Share First and Final Calls A/c To Equity Share Capital A/c (Being equity share first and final call money on 2,000 shares @ Rs. 40 per share due)	Dr.	80,000	80,000
6	Bank A/c To Equity Share First and Final Call A/c (Being equity share first and final call money on 1900 shares @ Rs. 40 per share received)	Dr.	76,000	76,000
7	Equity Share Capital A/c To Equity Share First and Final Call A/c To Equity Share Forfeiture A/c (Being forfeiture of 100 shares due to non-payment of first and final call)	Dr.	10,000	4,000 6,000
8	Bank A/c Equity Share Forfeiture A/c To Equity Share Capital A/c (Being re-issue of 100 forfeited shares @ Rs. 75 per share)	Dr. Dr.	7,500 2,500	10,000
9	Equity Share Forfeiture A/c To Capital Reserve A/c (Being balance of Share Forfeiture A/c transferred to Capital Reserve A/c)	Dr.	3,500	3,500

Working Notes: 1. Amount forfeited by the company on 100 shares forfeited = 100 × (30 + 30) = 100 × 60 = Rs. 6,000 2. Calls-in-Arrears = 100 × 40 = Rs. 4,000. 3. Amount received on re-issue of 100 forfeited shares = 100 × 75 = Rs. 7,500. Balance of 2,500 (i.e. loss 25 × 100) is transferred to Share Forfeiture A/c. 4. Amount transfer from Share Forfeiture A/c to Capital Reserve is ascertained by preparing Share Forfeiture A/c.

Share Forfeiture A/c
Dr.	Date	Particulars	J.F.	Amount (Rs.)	Date	Particulars	J.F.	Amount (Rs.)	Cr.
	8	To Equity Share Capital A/c		2,500	7	By Equity Share Capital A/c		6,000
	9	To Capital Reserve A/c (Balancing figure)		3,500
				6,000				6,000

In simple words: This solution illustrates the entire lifecycle of share accounting, from initial issue and collection of funds through various calls, to the forfeiture of shares due to non-payment, their subsequent re-issue at a discount, and finally, the transfer of any forfeiture profit to capital reserve.

🎯 Exam Tip: When re-issuing forfeited shares, the discount allowed on re-issue cannot exceed the amount originally forfeited on those shares. Any excess forfeiture amount after adjusting the re-issue discount is transferred to Capital Reserve as a capital profit.

Question 8.Pass Journal Entries for the forfeiture and re-issue of shares in the following cases:
(A) Asha Ltd. forfeited 100 equity shares of Rs. 20 each fully called-up for non-payment of the first call of Rs. 3 per share and final call of Rs. 5 per share. 80 shares of these were re-issued at Rs. 15 per share as fully paid. Solution: Journal Entries [For Asha Ltd.]

Date	Particulars	L.F.	Debit Amount (Rs.)	Credit Amount (Rs.)
(A)(i)	Equity Share Capital A/c To Equity Share First Call A/c To Equity Share Final Call A/c To Equity Share Forfeiture A/c (Being forfeiture of 100 equity shares due to non-payment of first call @ Rs. 3 and final call @ Rs. 5 per share)	Dr.	2,000	300 500 1,200
(ii)	Bank A/c Equity Share Forfeiture A/c To Equity Share Capital A/c (Being re-issue of 80 forfeited shares @ Rs. 15 per share as fully paid-up)	Dr. Dr.	1,200 400	1,600
(iii)	Equity Share Forfeiture A/c To Capital Reserve A/c (Being proportion balance of Share Forfeiture A/c transferred to Capital Reserve A/c)	Dr.	560	560

Working Notes for A: 1. Out of 100 forfeited shares, 80 shares were re-issued accordingly Equity Share Capital A/c is debited and credited. 2. To find the proportionate amount for Forfeiture A/c: For 100 shares-share forfeiture amount = Rs. 1,200
\( \implies \) 80 shares – share forfeiture amount = Rs. 960 Now, out of this Rs. 960 we used Rs. 400 from Share Forfeiture A/c at the time of re-issue of shares. So, balance of Share Forfeiture A/c = Rs. 960 – Rs. 400 = Rs. 560
(B) Bhakti Ltd. forfeited 100 equity shares of Rs. 10 each, Rs. 6 called-upon which the shareholder paid application and allotment of Rs. 5 per share. Of these 80 shares were re-issued as fully paid-up for Rs. 16 per share. Journal Entries [For Bhakti Ltd.]

Date	Particulars	L.F.	Debit Amount (Rs.)	Credit Amount (Rs.)
(B)(i)	Equity Share Capital A/c (100×Rs. 6) To Calls-in-Arrears A/c To Equity Share Forteifure A/c (100×Rs. 5) (Being forfeiture of 100 equity shares due to non-payment of 100)	Dr.	600	100 500
(ii)	Bank A/c (80×6) To Equity Share Capital A/c (Being re-issue of 80 forfeited shares @ Rs. 6 per share as fully paid-up)	Dr.	480	480
(iii)	Equity Share Forfeiture A/c To Capital Reserve A/c (Being proportionate balance of Share Forfeiture A/c transferred to Capital Reserve A/c)	Dr.	400	400

Working Notes for B: 1. Out of 100 forfeited shares, 80 shares were re-issued accordingly Equity Share Capital A/c is debited for 600 and credited for 480. 2. The proportionate amount debited to Forfeiture A/c: For 100 shares-share forfeiture amount debited = Rs. 500 1 Qn
\( \implies \) 80 shares - share forfeiture amount = \( \frac{80}{100} \times \frac{500}{1} \) = Rs. 400 Now, shares were re-issued at Rs. 6 per share which is a called-up amount.
\( \implies \) The proportionate amount for Forfeiture A/c Rs. 400 will be transferred to Capital Reserve A/c.
(C) Konark Ltd. forfeited 50 shares of Rs. 10 each, Rs. 8 called-up. The shareholder failed to pay the first call of Rs. 3 per share. Later on, 30 shares of these were re-issued at Rs. 7 per share. Journal Entries (For Konark Ltd.)

Date	Particulars	L.F.	Debit Amount (Rs.)	Credit Amount (Rs.)
(C)(i)	Equity Share Capital A/c (50×Rs. 8) To Equity Share First Call A/c (50×3) To Equity Share Forteifure A/c (Being forfeiture of 50 equity shares due to non-payment of first call @ Rs. 3 per share)	Dr.	400	150 250
(ii)	Bank A/c (30×7) Equity Share Forfeiture A/c To Equity Share Capital A/c (30 × Rs. 8) (Being re-issue of 30 forfeited shares @ Rs. 7 per share)	Dr. Dr.	210 30	240
(iii)	Equity Share Forfeiture A/c To Capital Reserve A/c (Being proportionate balance of Share Forfeiture A/c transferred to Capital Reserve A/c)	Dr.	120	120

Working Note for C: The proportionate amount debited to Forfeiture A/c: For 50 shares – share forfeiture amount debited is Rs. 250
\( \implies \) 30 shares-share forfeiture amount = \( \frac{30}{50} \times 250 \) = 150 Out of this 30 used for re-issue of forfeited shares.
\( \implies \) Balance of Share Forfeiture A/c = Rs. 150 – Rs. 30 = Rs. 120.In simple words: This solution presents three distinct scenarios for share forfeiture and re-issue. Each sub-part illustrates the journal entries for recording the forfeiture of shares due to non-payment of calls, followed by the re-issue of a portion of those forfeited shares and the subsequent transfer of the net gain from forfeiture to Capital Reserve.

🎯 Exam Tip: When re-issuing only a portion of forfeited shares, only the proportionate amount of the original forfeiture related to the re-issued shares can be utilized to cover the discount on re-issue. Any remaining balance on these re-issued shares in the Forfeiture A/c is transferred to Capital Reserve.

Class 12 Commerce BK Textbook Solutions Digest

• 12th Bk Chapter 1 Practical Problems
• 12th Bk Chapter 2 Practical Problems
• 12th Bk Chapter 3 Practical Problems
• 12th Bk Chapter 4 Practical Problems
• 12th Bk Chapter 5 Practical Problems
• 12th Bk Chapter 6 Practical Problems
• 12th Bk Chapter 7 Practical Problems
• 12th Bk Chapter 8 Practical Problems
• 12th Bk Chapter 9 Practical Problems
• 12th Bk Chapter 10 Practical Problems

Class 12