TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital

Question 11. Differentiate between 'Called-up Share Capital' and 'Paid-up Share Capital.

Question 12. What is meant by Reserve Capital?

Reserve Capital is that part of the uncalled capital which the company, by passing a special resolution, may reserve to be called upon only on winding up of the company.

Question 13. Is 'Reserve Capital' a part of 'Unsubscribed Capital' or 'Uncalled Capital’?

Reserve Capital is included in uncalled Capital.

Question 14. What is meant by Capital Reserve?

Capital Reserve is a reserve created out of the profits of capital nature which are not available for distribution as dividend.

Question 15. What are Preliminary Expenses?

Preliminary expenses are those expenses which are incurred for incorporation of a company.

Question 16. What is the name given to the "part of capital" of a company which is called-up only on winding up?

"Part of capital" of a company which is called-up only on winding up of the company is known as “Reserve Capital”.

Question 17. What is meant by Allotment?

Share allotment is the creation and issuing of new shares, by a company. New shares can be issued to either new or existing shareholders. Share allotment can have implications for any existing shareholders share proportion. Typically, new shares are allotted to bring on new business partners.

Question 18. What is meant by pro rata allotment of shares?

Pro rata allotment of shares means allotment of shares in a fixed proportion. Pro rata allotment takes place only when the public issue of shares is oversubscribed.

Question 19. When does the need for a pro rata allotment arise?

Pro rata allotment of share means allotment of shares in a fixed proportion. Pro rata allotment takes place only when the public issue of share is oversubscribed.

Question 20. What is meant by Public subscription of shares?

Public issue of shares means an invitation by a company to public to subscribe the shares offered through a prospectus.

Question 21. What is meant by Private Placement of Shares?

Private Placement of Shares implies issue and allotment of shares to a select group of persons privately and not to public in general through public issue. In order to place the shares privately, a company must pass a special resolution to this effect.

Question 22. What is meant by Minimum Subscription?

Minimum Subscription (Section 39(1) of the Companies Act, 2013) means the amount which in the opinion of the Board of Directors of a company, must be received towards subscription of the issued share capital. As per the Guidelines of the Securities and Exchange Board of India (SEBI), a company must receive a minimum of 90% subscription of the Issued Share Capital before making, any allotment of shares or debentures to the public.

Question 23. What is meant by Securities Premium Reserve?

The excess of issue price over the nominal (face) value of a Share/Debenture is ‘Securities Premium’.

Question 24. State any one purpose for which Securities Premium Reserve Account can be utilised.

Purpose for Securities Premium Reserve Account can be utilised for issuing fully paid bonus shares to the members of the company.

Question 25. Name the head under which the Securities Premium Reserve Account will appear in the Balance Sheet.

Securities Premium Reserve Account and is shown in the Equity and Liabilities part of Balance Sheet under the head ‘Shareholders Funds’ and sub-head ‘Reserves and Surplus’ as Securities Premium Reserve.

Question 26. State the name of capital which refers to that amount which is stated in the Memorandum of Association as the share capital of the company.

‘Authorised Capital’ or ‘Nominal Capital’ is stated in the Memorandum of Association and is the maximum amount that a company can raise as share capital.

Question 27. What is meant by issue of shares for consideration other than cash?

When the company purchases some assets (including services) or purchases a running business, instead of making the payment to the vendor in cash, it issues its shares. Such issue of shares is termed as Issue of Shares of consideration other than cash.

Question 28. Give the meaning of oversubscription of shares.

Oversubscription of Shares means the number of shares applied for is more than the number of shares offered for subscription.

Question 29. Give any two alternatives available to a company for the allotment of shares in case of oversubscription.

(i)             To Make Pro-rata allotment to all the applicants.

(ii)            (a) Accepting some applications in full. (b) Allotting the remaining on pro rata basis.

Question 30. What is meant by under subscription of shares?

Under subscription of Shares means the number of shares applied for is less than the number of shares offered for subscription.

Question 31. What is meant by Call money?

After allotment of shares remaining part of share money, when called-up is called Call money. Call money may be called by the company to be paid by the shareholders in one or more instalments.

Question 32. Give the meaning of Calls-in-Arrears.

Calls-in-Arrears are that part of capital which has been called-up but has not yet been paid by the shareholders.

Question 33. How is Calls-in-Arrears shown in the Balance Sheet?

It is shown in the Note to Accounts on Share Capital under Subscribed Capital as follows:

Subscribed and fully paid-up:                                         Amount

1,40,000 Equity Shares of Rs. 10 each                             14,00,000

Subscribed but not fully paid-up:

10,000 Equity Shares of Rs. 10 each           1,00,000

Less: Calls-in-Arrears (10,000 × Rs. 2)          20,000             80,000

                                                                _____________________

                                                         Total                       14,80,000

                                                                                 ___________

Question 34. What is Calls-in-Advance?

Calls-in-Advance refers to the amount paid by shareholders in excess of the amount due from them.

Question 35. On 28th February, 2016 the first call of Rs. 2 per share became due on 50,000 Equity Shares allotted by Kumar Ltd. Komal, a holder of 1,000 shares, did not pay the first call money. Kovil, a holder of 750 shares, paid the second and final call of 4 per share along with the first call.

Pass the necessary Journal entry for the amount received by opening Calls-in-Arrears and Calls–in-Advance account in the books of the company.

Question 2. Distinguish between Equity Share and Preference Share.

Answer:

Question 3. Distinguish between Oversubscription and under subscription of shares issued by a company. How is Oversubscription dealt with?

Answer:

Question 4. What is securities premium reserve? State any three purposes for which securities premium reserve can be used.

Answer:

The Companies Act, 2013 (Section 52 (1)) prescribes that the amount of the premium received on securities be credited to Securities Premium Account, i.e., Securities Premium Reserve Account. Section 52(1) of the Companies Act, 2013 requires that the amount of premium received on securities to be credited to ‘Securities Premium Account’. Schedule III (Form of Balance Sheet) of the Companies Act, 2013 has given the head ‘Securities Premium Reserve’.

The use of the amount received as premium on securities for the following purposes:

1.)   Issuing fully paid bonus shares to the members.

2.)   Writing off Preliminary expenses of the company.

3.)   Writing off the expenses of, or the commission paid or discount allowed on any issue of securities or debentures of the company.

Question 5. State any three purposes other than 'Issue of bonus Shares' for which securities premium can be utilised.

Answer:

According to Section 52(2) of the Companies Act, 2013, Securities Premium can be applied for the following purposes:

(1)   Writing off preliminary expenses of the company,

(2)   Writing off the expenses or the commission paid on any issue of shares or debentures or discount allowed on issue of debentures of the company,

(3)   Providing for the premium payable on the redemption of redeemable preference shares or of debentures. 

Question 6. State any three purposes other than 'buy back of shares' for which securities premium can be utilised.

Answer:

According to Section 52(2) of the Companies Act, 2013, Securities Premium can be applied for the following purposes:

(1)   Issuing fully paid bonus to the shareholders.

(2)   Writing off preliminary expenses of the company.

(3)   Writing off the expenses or the commission paid on any issue of shares or debentures or discount allowed on issue of debentures of the company.

Question 7. Securities Premium can be utilised for three purposes besides (i) issuing fully paid bonus shares' and (ii) Buy back of shares! State those purposes.

Answer:

When shares are issued at a price higher than the nominal (face) value, it is called issue of shares at premium. Excess of issue price over the nominal (face) value is the amount of premium (Securities Premium). It is a capital profit for the company and the amount so received is credited to a separate account called Securities Premium Reserve Account.

According to Section 52(2) of the Companies Act, 2013, Securities Premium can be applied for the following purposes:

(1)   Writing off preliminary expenses of the company.

(2)   Writing off the expenses or the commission paid on any issue of shares or debentures or discount allowed on issue of debentures of the company.

(3)   Providing for the premium payable on the redemption of redeemable preference shares or of debentures.

Question 8. Can Securities Premium Reserve be utilised for the purchase of fixed assets? Give reasons.

Answer:

No, According to Section 52(2) of the Companies Act, 2013, Securities Premium can be applied for the following purposes:

(1)   Writing off preliminary expenses of the company.

(2)   Writing off the expenses or the commission paid on any issue of shares or debentures or discount allowed on issue of debentures of the company.

(3)   Providing for the premium payable on the redemption of redeemable preference shares or of debentures.

(4)   Issuing fully paid bonus shares to the members.

(5)   Purchasing its own shares.

Question 9. How is Share Capital shown in the Balance Sheet of a Company?

Answer:

Balance Sheet of a company is prepared in the form prescribed in Part I of Schedule III of the Companies Act, 2013. It required a Company to show

(i)  Authorised Capital

(ii)  Issued Capital

(iii)  Subscribed Capital

(i)   Authorised Capital or Nominal Capital:- ‘Authorised Capital’ or ‘Nominal Capital’ means such capital as is authorised by the Memorandum of a company to be maximum amount of share capital of a company.

‘Authorised Capital’ or ‘Nominal Capital’ is stated in the Memorandum of Association and is the maximum amount that a company can raise as share capital.

It is stated separately for each class or kind of shares, i.e., Preference Shares and Equity Shares and is the maximum amount of shares capital under each class or kind of shares which a company can issue for subscription. Authorised Share Capital under each class or kind (Equity or Preference) may be more or equal to the issued share capital, but cannot be less than the issued capital.

(ii) Issued Capital:- ‘Issued Capital’ means such capital as the company issues from time to time for subscription. Issued Capital is a part of Authorised Capital that is issued for subscription. It includes besides shares issued for subscription, shares allotted for consideration other than cash, shares subscribed by signatories to the Memorandum of Association and shares taken by directors as qualifying shares. It should be kept in mind that issued capital cannot exceed the company’s Authorised Share Capital.

(iii)  Subscribed Capital:- ‘Subscribed Capital’ means such part of the capital which is for the time being subscribed by the members of a company. Subscribed Capital is a part of issued capital which the company has issued for cash or for consideration other than cash. It includes shares issued for subscription and subscribed, shares subscribed by signatories to the Memorandum of Association, shares subscribed by the directors as qualifying shares and shares allotted for consideration other than cash.

Question 10. Can forfeited shares be reissued? If so, at what terms?

Answer:

Yes, forfeited shares are reissued. Reissue of forfeited shares means selling the shares that were cancelled by the company. These shares may be reissued or sold by the company on the terms as it may decide. Thus, forfeited shares may be reissued by the company at par, at premium or at discount. However, if forfeited shares are reissued at discount, the amount of discount allowed on reissued of forfeited shares should not exceed the amount forfeited on reissued shares.

Maximum Permissible Discount on Reissue of Forfeited Shares:- Maximum discount that can be allowed on reissued of forfeited shares is the amount forfeited, i.e. the amount credited to the forfeited shares. In other words, reissue price cannot be less than the amount unpaid on forfeited shares.

Transfer of Balance in Forfeited Shares Account

When forfeited shares are reissued, one of the following two situations arises:

(1)   All forfeited shares are reissued

(2)   All forfeited shares are not reissued.

Question 11. Distinguish between Calls-in-Arrears and Calls-in-Advance.

Answer:

Exercise  ::------>

Q1: Hari Aggarbatti was registered with capital of Rs. 50,00,000 divided into 5,00,000 Equity Shares of 10 each. It issued 1,00,000 Equity Shares to public for subscription. The shares were subscribed and calls made were received.
Prepare Balance Sheet of the company showing share capital.

Answer 1:

Balance Sheet of Hari Aggarbatti Ltd. as per Schedule VI part I of the Companies act 1956 as at date:

3.  ‘Authorised Capital’ or ‘Nominal Capital’ means such capital as is authorised by the Memorandum of a company to be maximum amount of share capital of a company.

About Solution:-
Unlimited Liability Company: As per Section 2(92) of the Companies Act, 2013, it is a company where the liability of its members is unlimited. Therefore, in the event of winding up of such company, debts of the company shall be met from private property of the members.

Thinks to Remember:-
Company Limited by Guarantee: As per Section 2(21) of the Companies Act, 2013, it is a company having the liability of its members limited by the memorandum to such amount as the members may respectively undertake to contribute to the assets of the company in the event of it being wound up.

Important Notes:-
Promotion: A person or a group of persons who agree to start a business in the form of a company are called Promoters. These promoters undertake the responsibility to bring the company into existence by promoting its objects and activities which is the first stage in incorporation of a company.

Q2: Farm Products Ltd. has authorised share capital of ₹ 50,00,000 divided into 5,00,000 Equity Shares of ₹ 10 each. It has existing issued and paid up capital of ₹ 5,00,000. It further issued to public 1,50,000 Equity Shares at par for Subscription payable as under:
On Application:      Rs. 3
On Allotment:         Rs. 4 and
On Call:                   Balance Amount
The issue was fully subscribed and allotment was made to all the applicants. Call was made during the year and was duly received.
Show share capital of the company in the Balance Sheet of the Company.

Answer 2:

About Solution:
After getting the name of the proposed company approved, the promoters have to submit Memorandum of Association, Articles of Association, consent of first directors to act as directors and a declaration that the requirements of the Companies Act have been complied with.

Things to Remember:
The directors do not file a declaration with the Registrar of Companies to the effect that every subscriber to the Memorandum of Association has paid the value if the shares, if any, agreed to be taken by him.

Important Notes:
It is the amount that a company receives towards Share Capital from issue of both Equity Share and Preference Shares. According to Section 43 of the Companies Act, 2013, Share Capital of the Company can be broadly of two types or classes namely: 
1. Equity Shares 
2. Preference Shares

Q3: Sunstar Ltd. has an authorised capital of ₹ 20,00,000 divided into equity shares of ₹ 10 each. The company invited applications for issuing of 60,000 shares. Applications were received for 58,000 shares.
All calls were made and were duly received except the final call of ₹ 3 per share on 2,000 shares. These shares were forfeited.
Present the ‘Share Capital’ in the Balance Sheet of the Company as per Schedule III, Part I of the Companies Act, 2013. Also prepare ‘Notes to Accounts’ for the same.

Answer 3:

About Solution:
Right to receive dividend before it is paid to Equity Shareholders. Such dividend is paid as a fixed amount or an amount calculated at a fixed rate which may either be free of or subject to income tax.

Things to Remember:
Right to receive dividend before it is paid to Equity Shareholders. Such dividend is paid as a fixed amount or an amount calculated at a fixed rate which may either be free of or subject to income tax.

Important Notes:
Dividend: With reference to dividend, Preference shares are classified as Cumulative and Non Cumulative Preference Shares.
1. Cumulative: This class carries the right to receive arrears dividend before dividend is paid to the Equity Shareholders.
2. Non-Cumulative: These classes do not carry the right to receive arrears of dividend.
Participation in Surplus Profit: With reference to participation, Preference shares are classified as Participating and Non-Participating Preference Shares.

Q 4: Global Trade Ltd. has authorised share capital of ₹ 1,00,00,000 divided into 1,00,000 Equity Shares of ₹ 100 each. It has existing issued and paid up capital of ₹ 25,00,000. It further issued to public 25,000 Equity Shares at a premium of 20% for subscription payable as under:
On Application:            Rs. 3
On Allotment:               Rs. 4 and
On Call:                         Balance Amount
The issue was fully subscribed and allotment was made to all the applicants. The company did not make the call during the year.
Show Share Capital in the Balance Sheet of the company.

Answer 4:

About Solution:
Authorised Capital: It is the amount stated in the Memorandum of Association and such amount is the maximum amount that a company can raise as share capital. It is stated separately for each class or kind of shares. As per Section 2 (8) of the Companies Act, 2013, such capital as authorized by the memorandum of a company to be maximum amount of share capital of the company is called as Authorised Capital or Nominal Capital.

Things to Remember:
Issued Capital: It is a part of the nominal value or Authorised Share Capital which is issued from time to time for subscription. Therefore, amount of Issued Capital cannot exceed the company's Authorised Share Capital. As per Section 2 (50) of the Companies Act, 2013,

Important Notes:
Subscribed Capital: It is a part of the capital which is for the time being subscribed by the members of a company. As defined by Section 2 (86) of the Companies Act 2013, such part of the capital which is for time being subscribed by the members of a company. This can further be divided into:
1 - Subscribed and fully paid-up: It is a situation where the company has called-up the total nominal value of the share and has received the same.
2 - Subscribed and not fully paid-up: It is a situation where the company has called-up the total nominal value of the share, but has not receive it or has not called-up the total nominal value of the share.

Q5: Star Ltd. is registered with capital of ₹ 50,00,000 divided into 50,000 equity shares of ₹ 100 each. The Company issued 25,000 equity shares for subscription. Subscription was received for 23,750 shares and all the due amount was duly received, except the first and final call of ₹ 20 per share on 600 shares. Show the ‘Share capital’ in the Balance Sheet of the company.

Answer 5:

About Solution:
Understanding the two terms, i.e., Called-up and Paid-up: Called-up Capital: According to section 2(15) of the Companies Act, 2013, Called-up Capital means such part of the capital which has been called for payment.
Paid-up Capital: According to section 2(64) of the Companies Act, 2013, Paid-up Share Capital or Share Capital Paid-up means the amount that the shareholder has paid and the company has received against the amount Called-up in respect of the shares towards share capital or has been credited to it as paid-up.

Things to Remember:
Reserve Capital: It is a part of Subscribed Capital remaining uncalled that a company resolves, by a Special Resolution, not to call except in the event of winding up of the company. Such number of shares are shown as "Subscribed but not fully paid-up".

Important Notes:
The one basic difference between is Reserve Capital is a part of uncalled capital which cannot be called-up except in the event of winding up and capital reserve is a part of reserves which cannot be used for distribution of dividends.

Q6: Grand Hotels Ltd. had authorised capital of ₹ 50,00,000 divided into 50,000 Equity Shares of ₹ 100 each. It issued 10,000 Equity Shares to public for subscription on the following terms:
On Application ₹ 40 per share
On Allotment ₹ 30 per share
Balance on First and Final Call.
Shares were fully subscribed and amounts called were duly received. First and Final call was not yet made.
 Prepare Balance Sheet of the company showing Share Capital.

Answer 6:

About Solution:
Meaning of Oversubscription:-Oversubscription means, the number of applications received are more than the number of shares offered. 

Things to Remember:
If the shares are allotted against the application, then there is no adjustment required as share capital is credited against the application money received. However, if the applications are rejected, the application money with respect to the rejected applications can be refunded or adjusted (in case of pro-rata allotment) against the allotment or calls on shares.

Important Notes:
Meaning of Pro-rata Allotment of Shares: This is one of the alternative available with the company for allotment of shares when the number of shares applied for are more than the number of shares offered for subscription.

Q7: Altaur Ltd. was registered with an authorised Capital of ₹ 4,00,00,000 divided in 25,00,000 Equity Shares of ₹ 10 each and 1,50,000, 9% Preference Shares of ₹ 100 each. The company issued 8,00,000 Equity Shares for public subscription at 20% premium, payable ₹ 3 on application; ₹ 7 on allotment (including premium) and balance on call. Public had applied for 10,00,000 shares. Excess Applications were sent letters of regret. All the dues on allotment were received except on 15,000 shares held by Sanju. Another shareholder Rocky paid his call dues along with allotment on his holding of 25,000 shares. You are required to prepare the Balance Sheet of the company as per Schedule III of Companies Act, 2013, showing Share Capital balance and also prepare Notes to Accounts.

Answer 7:

About Solution:
Treatment of Surplus Application Money on Pro-rata Allotment:
1 - If the question is silent or states that 'excess application money received is to be adjusted against allotment', surplus application money is adjusted against allotment money due and excess application money, if any is refunded.
2 - If the question requires that surplus application money is to be refunded after adjustment of Allotment Money and Call Money, then the amount is transferred to Shares Allotment Account and Calls-in Advance Account. The balance, if still left, is refunded.

Things to Remember:
Meaning of under subscription of Shares and Difference between Oversubscription and under subscription: Under subscription: It is a situation when the number of shares applied are less than the number of shares issued for subscription

Important Notes:
Meaning of Calls-in-Arrears and Interest on Calls-in-Arrears
Calls-in-Arrears: If the shareholder does not pay the call amount due on allotment or on any subsequent calls according to the terms, the amount not received is called Calls-in Arrears

Q8: Fragrances Ltd. was registered with capital of ₹ 5,00,000 divided into 50,000 Equity Shares of ₹ 10 each. It issued 20,000 Equity Shares to public for subscription. The shares were subscribed and calls were made and received except first and final call of ₹ 2 on 500 shares held by Varun.
Prepare Balance Sheet of the company showing Share Capital.

Answer 8:

About Solution:
Interest on Calls-in-Arrears: If the company is authorized by the Articles of Association, it may charge an interest at the specified rate on Calls-in-Arrears from the due date to the date of payment. In case Articles of Association is silent, Table F of the Companies Act, 2013 shall apply which provides for interest on Calls-in-Arrears at the rate of 10% p.a.

Things to Remember:
Accounting treatment without opening Calls-in-Arrears Account: In this method, amount S received from the shareholders is credited to the relevant call account. The respective call accounts (first, second, etc.) will continue showing debit balance equal to the total amount unpaid on those calls. On a subsequent date, when the amount of Calls-in- Arrears is received, Bank Account is debited and relevant call account is credited. Call Money Due.

Important Notes:
Accounting treatment by opening Calls-in-Arrears Account: In this method, unlike the first method, the unpaid amount is transferred to Calls-in-Arrears Account. On account of this, Share Allotment Account and Shares Call Accounts will not show any balance. The Calls-in Arrears Account will show a debit balance equal to the total unpaid amount on allotment or the calls. At a later date, on receipt of arrear amount, it is credited to the Calls- in-Arrears Account and same is closed with a corresponding debit to Bank A/c

Q9: Red Roses Ltd. was registered with capital of ₹ 25,00,000 divided into 25,000 Equity Shares of ₹ 100 each. It issued 15,000 Equity Shares to public for subscription. The shares were subscribed and calls were made and received except allotment money of ₹ 40 on 100 shares held by Parul and first and final call of ₹ 20 on 500 shares, including shares held by Parul. Prepare Balance Sheet of the company showing Share Capital.

Answer 9:

About Solution:
Meaning Of Calls-in-Advance and Interest on Calls-in-Advance:
Calls-in-Advance: An amount which is accepted by the company against the call or calls not yet made is termed as Calls-in-Advance. A company may accept such calls-in-advance amount only if it is allowed by the Articles of Association of the Company.
Interest on Calls-in-Advance: If the Articles of Association provides for any interest on Calls-in-Advance, then interest can be paid by the company. In case when the Articles of Association is silent, Table F of the Companies Act, 2013 shall apply where company is liable to pay interest at the rate of 12% p.a.

Things to Remember:
Journal Entry passed:
To record calls-in-advances:
Bank A/c              Dr. [amount of calls money received in advance]
To Calls-in-Advance A/c

Important Notes:
Difference between Calls-in-Arrears and Calls-in-Advance:
Calls-in-Arrears:- Amount which is called-up by the company but not paid by the shareholders.
Calls-in-Advance:- Amount which is not called-up by the company, but paid by the shareholders.

Q10: East India Hotels Ltd. was registered with authorised capital of ₹ 25,00,000 divided into 2,50,000 Equity Shares of ₹ 10 each. It issued 1,50,000 Equity Shares to public for subscription. The shares were subscribed and calls were made and received. First and final call of ₹ 3 was not made. Paresh holder of 5,000 shares paid the call money along with the allotment money.
Prepare Balance Sheet of the company showing Share Capital.

Answer 10:

 Question 11: Amit Ltd. was registered with a capital of ₹ 5,00,000 in shares of ₹ 10 each and issued 20,000 such shares at a premium of ₹ 2 per share, payable as ₹ 2 per share on application, ₹ 5 per share on allotment (including premium) and ₹ 2 per share on first call made three months later. All the money payable on application and allotment was duly received but when the first call was made, one shareholder paid the entire balance on his holding of 300 shares and another shareholder holding 1,000 shares failed to pay the first call money. Pass Journal entries to record the above transactions and show how they will appear in the company’s Balance sheet.

Answer 11:

Q12: Global Sales Ltd. issued 2,50,000 Equity Shares of ₹ 10 each to public at par for subscription, amount being payable as application money. Pass necessary Journal entries in the books of the company.

Answer 12:
 

Things to Remember:
Terms of Issue of Shares: A company may issue shares at par or at premium as explained below:
Shares are issued at Par: It means that the issue price is same as the nominal value (face value) of the shares.
Shares are issued at Premium: It means that the issue price is more than the nominal value (face value) of the shares. Amount in excess of the nominal value of the share is termed as premium and such amount of premium is credited to Securities Premium Account or Securities Premium Reserve Account.

Important Notes:
In such case, allotment can be done by any of the 2 alternatives available.
First Alternative: Under this alternative, some applications are accepted and excess applications are rejected.
Second Alternative: Under this alternative, all applicants are allotted shares in proportion which is known as Partial or Pro-rata Allotment.

Q13: Authorised Capital of ₹ 16,00,000 of Bharat Ltd. is divided into 1,60,000 Equity Shares of ₹ 10 each. Out of these shares, 80,000 Equity Shares were issued at par to public for subscription. The issue price is payable on application. All the shares were subscribed. Pass necessary Journal entries in the books of the company.

Answer 13: 

Q14: Alok Leathers Ltd. invited applications for 10,000 shares of ₹ 100 each payable as follows:
₹ 30 on application, ₹ 30 on allotment and balance on first and final call.
All the shares were applied and allotted and the money was duly received.
You are required to Journalise these transactions and show share capital in the Balance Sheet.

Answer 14: 

Things to Remember:
Holding Company and Subsidiary Company: A holding company is a company which controls another company (called subsidiary company) either by acquiring more than half of the equity shares of another company or by controlling the composition of Baord of Directors of another company or by controlling a holding company which controls another company.

Important Notes:
Listed Company and Unlisted Company: A company is required to file an application with stock exchange for listing of its securities on a stock exchange. When it qualifies for the admission and continuance of the said securities upon the list of the stock exchange, it is known as listed company. A company whose securities do not appear on the list of the stock exchange is called unlisted company.

Q15: National Textiles Ltd. was registered with the authorised capital of ₹ 3,00,000 divided into 3,000 shares of ₹ 100 each, which were offered to the public. Amount payable as ₹ 300 per share on application, ₹ 40 per share on allotment and ₹ 30 per share on first and final call. These shares were fully subscribed and all money was duly received.
Prepare Cash Book, Journal and Balance Sheet showing Share Capital.

Answer 15: 

Things to Remember:
Shares issued for consideration other than cash are disclosed in the Balance Sheet under 'Subscribed Capital'. This may be further subscribed and fully paid or subscribed but not fully paid as the case may be and shown in Notes to Accounts under Share Capital.

Important Notes:
Meaning and Accounting Entries for Forfeiture of Shares:
i) It means cancellation of shares for non-payment of calls due.
ii) It can be done by the company only if it is allowed by its Articles of Association.
iii) If any of the shareholders of the company does not pay the amount of call, the company may exercise this power to forfeit the shares held by the shareholder on which amount of call is not paid.

Q16: Modern Diaries Ltd. was registered with an authorised capital of ₹ 10,00,000 divided into 7,500 Equity Shares of ₹ 100 each and 2,500 Preference Shares of ₹ 100 each each. 1,000 Equity Shares and 500; 9% Preference Shares were offered to public on the following terms – Equity Shares payable ₹ 10 on application, ₹ 40 on allotment and the balance in two calls of ₹ 25 each. Preference Shares are payable ₹ 25 on application, ₹ 25 on allotment and ₹ 50 on first and final call. All the shares were applied for and allotted. Amount due was duly received.
You are required to prepare Cash Book, pass necessary Journal entries and show share capital in the Balance Sheet.

Answer 16: 

Q17: Premio Ltd. issued 50,000 Equity Shares of ₹ 100 each at a premium of ₹ 50 per share, payable as follows:
₹ 100 per share on Application; and
Balance on Allotment.
The issue was subscribed and shares were issued to the applicants. Pass the necessary Journal entries.

Answer 17: 

Q18: Bharat Ltd. was incorporated with a capital of Rs. 20,00,000 divided into shares of Rs. 10 each. 20,000 shares were offered for subscription and out of these, 18,000 shares were applied for and allotted. Rs. 3 per share (including Rs. 1 premium) was payable on application, Rs. 4 per share (including Rs. 1 premium) on allotment, Rs. 2 per share on first call and Rs. 3 per share on final call. All the money was received. Give necessary Journal entries and show share capital in the Balance Sheet.

Answer 18: 

About Solution:
Securities offered to the selective group of persons by issuing private placement offer is known as the Private Placement of Shares. There are conditions specified by Companies Act, 2013 that are to be fulfilled for offering such private placement of shares.

Things to Remember:
i. Shares issued are of the same class of shares already issued;
ii. Such issue is authorised by a special resolution passed by the company;
iii. Such resolution specifies all possible details of the number of shares, consideration, market price, and class or classed of employees or directors to whom such shares are to be issued;
iv. At the date of issue, not less than 1 year has been elapsed since the date on which the company had commenced business.

Important Notes:
Public companies whose shares are listed in recognised stock exchanges for public trading are called as Listed Company. Such companies are also known as Quota Companies. Once the securities are listed it helps the investors in knowing the value of their investment in a listed company. It provides the potential investors an idea about the goodwill of the company and helps them on taking future investment decisions and evaluate the viability of investing in the company.

Q19: Authorized capital of Suhani Ltd. is Rs. 45,00,000 divided into 30,000 shares of Rs. 150 each. Out of these company issued 15,000 shares of Rs. 150 each at a premium of Rs. 10 per share. The amount was payable as follows: Rs. 50 per share on application , Rs. 40 per share on allotment (including premium), Rs. 30 per share on first call and balance on final call. Public applied for 14,000 shares.  All the money was duly received. Prepare an extract of Balance Sheet of Suhani Ltd. as per Schedule III, Part I of the companies Act, 2013 disclosing the above information. Also prepare 'Notes to Accounts ' for the same.

Answer 19:

About Solution:
The minimum amount of shares that must be subscribed by the public, so that the share allotting company can allot shares to the applicants, is termed as Minimum Subscription. If Minimum Subscription is not attained, the company cannot allot shares to its applicants and it should refund the amount received to the public. Minimum Subscription should not be less than 90% of the amount issued.

Things to Remember:
Two types of shares:
i.) Preference Share: Section 43 of the Company Act, 2013 defines preference shares as which entitles the holder to receive dividend and also the right to receive capital invested in order of preference before equity share holders when the company is wind up.
ii.) Equity Shares: Equity shareholders manage the affairs of the company and also have a voting right. These types of share do not possess any preferential right for dividend payment or capital repayment. The dividend rate is not fixed and varies year on year which is dependent on available profit left after distributing to preference shareholders.

Important Notes:
When the shareholder pays the whole amount before the share payment date becomes due i.e. before the share issuing company makes a call for it. It is known as Calls-in-advance. In case of advance payment the company has provision in their article of association to pay interest to shareholders from date of payment till date of call. If the article of association is silent in this regard, then a default 6% interest is provided.

Q20: Super Star Ltd. makes an issue of 10,000 Equity Shares of Rs. 100 each, payable as:
On application and allotment    Rs. 50 per share,
On first call                                 Rs. 25 per share,
On second and final call           Rs. 25 per share.
Members holding 400 shares did not pay the second and final call and the shares are duly forfeited, 200 of which are reissued as fully paid-up @Rs. 50 per share. Pass journal entries in the books of the company.

Answer 20:

Things to Remember:
Interest on Calls-in-Advance: If the Articles of Association provides for any interest on Calls-in-Advance, then interest can be paid by the company. In case when the Articles of Association is silent, Table F of the Companies Act, 2013 shall apply where company is liable to pay interest at the rate of 12% p.a.Interest on Calls-in-Advance: If the Articles of Association provides for any interest on Calls-in-Advance, then interest can be paid by the company. In case when the Articles of Association is silent, Table F of the Companies Act, 2013 shall apply where company is liable to pay interest at the rate of 12% p.a.

Important Notes:
If shares are issued for purchase of business: When a business is purchased, both assets and liabilities are taken over for a consideration which can be equal to, more than or less than the difference between values of assets and liabilities.

Q21: Faber Ltd. Invited applications for 70,000 equity shares of ₹ 100 each. The application money received @ ₹ 30 per share was ₹ 27,00,000. Name the kind of subscription. List the three alternatives for allotting these shares.

Answer 21:

Application Money is 70,000 × 3 = ₹ 21,00,000 
Application Money Received = ₹ 27,00,000
Hence, it is the case of over-subscription.
1. The excess money over application ₹ 6,00,000 can be returned
2. The excess money over application ₹ 6,00,000 can be adjusted on allotment.
3. A part of the excess money over application can be returned and rest can be adjusted in allotment money.

About Solution:
Preference Share: Section 43 of the Company Act, 2013 defines preference shares as which entitles the holder to receive dividend and also the right to receive capital invested in order of preference before equity share holders when the company is wind up.

Things to Remember:
Equity Shares: Equity shareholders manage the affairs of the company and also have a voting right. These types of share do not possess any preferential right for dividend payment or capital repayment. The dividend rate is not fixed and varies year on year which is dependent on available profit left after distributing to preference shareholders.

Important Notes:
Registration of a Company: In order to incorporate a company, procedure prescribed in the Companies Act, 2013 should be followed, this includes:
1. Promoters have to get the proposed company name approved from the Registrar of Companies.
2. After getting the name of the proposed company approved, the promoters have to submit Memorandum of Association, Articles of Association, consent of first directors to act as directors and a declaration that the requirements of the Companies Act have been complied with.
Thereafter, if the Registrar is satisfied that the requirements of the Companies Act, 2013 have been complied with, he shall issue the Certificate of Incorporation to the Company.

Q23: Citizen Watches Ltd. invited applications for 50,000 shares of Rs. 10 each payable Rs. 3 on application, Rs. 4 on allotment and balance on first and final call. Applications were received for 60,000 shares. Applications were accepted for 50,000 shares and remaining applications were rejected. All calls were made and received except First and Final call on 500 shares. 
Pass the journal entries in the books of Citizen Watches Ltd.

Answer 23:

About Solution:
Minimum subscription: It is the amount stated in the prospectus that must be subscribed and the amount payable on application for the amount stated as minimum subscription have been paid to and received by the company by cheque or other instrument.

Things to Remember:
Minimum amount is not subscribed and the amount payable on application is not received within the specified period, then the application money shall have to be refunded within fifteen days from the closure of the issue.

Important Notes:
Prospectus: It is a document in which terms and conditions of the issue are stated along with the purpose of the proceeds of issue.

About Solution:
In the beginning, the size of business firms was very small. Sole proprietorship was therefore, the usual form of business organisation. Later on partnership become popular when the size of business firms increased. But sole proprietorship and partnership could not meet the growing demand of big size business because of their limitations such as limited capital, limited managerial ability, unlimited liability and other drawbacks. Therefore, in the present days of business world, it is only the Joint stock company form of business organisation which proved to be useful.

Things to Remember:
A company is a voluntary association of persons formed for some common purpose, with capital divisible into parts, known as shares and with a limited liability. It is created by law and is known as an artificial person with a perpetual succession and a common seal. It has a separate legal entity.

Important Notes:
Companies can be classified under the following heads: 
1. On the basis of formation 
2. On the basis of liability 
3. On the basis of ownership

Q26: Sony Media Ltd. issued 50,000 shares of ₹ 10 each payable ₹ 3 on application, ₹ 4 on allotment and balance on first and final call. Applications were received for 1,00,000 shares and allotment was made as follows:
(i) Applicants for 60,000 shares were allotted 30,000 shares.
(ii) Applicants for 40,000 shares were allotted 20,000 shares. 
Anupam to whom 1,000 shares were allotted from category (i), failed to pay the allotment money.
Pass Journal entries up to allotment.

Answer 26:

Q27: Quality Stationers Ltd. registered with authorised capital of ₹ 20,00,000 divided into 1,00,000 equity shares of ₹ 20 each. 50,000 Equity Shares were issued for subscription at par, issue price being payable along with application. It received application money of ₹ 4,40,000.
You are requited to pass the necessary Journal entries.

Answer 27:

Things to Remember:
In case of such forfeiture, the company must first give a clear 14days' notice to the defaulting shareholder to pay the amount due on call and interest thereon if any.

Important Notes:
Maximum Permissible Discount: At the time of reissue of the forfeited shares, care has to be taken with respect to the maximum permissible discount on the shares reissued. The maximum permissible discount that can be allowed on reissue of forfeited shares is the amount forfeited, i.e., the amount credited to the forfeited shares. In simple terms, the reissue price cannot be less than the amount unpaid on the forfeited shares.

Q28: A-one Product Ltd. is registered with authorised capital of ₹ 10,00,000 divided into 50,000 Equity Shares of ₹ 20 each. It issued 25,000 Equity Shares for Subscription at premium of ₹ 2 per share, issue price being payable along with application. It received ₹ 4,62,000 towards application money.
You are required to pass the necessary Journal entries.

Answer 28:

Things to Remember:
Conditions to issue stock options:
i) Shares issued are of the same class of shares already issued;
ii) Such issue is authorised by a special resolution passed by the company; 
iii) Such resolution specifies all possible details of the number of shares, consideration, market price, and class or classed of employees or directors to whom such shares are to be issued;
iv) At the date of issue, not less than 1 year has been elapsed since the date on which the company had commenced business.

Important Notes:
Limited Liability: The members of a company are liable only to the extent of value of shares subscribed by them or amount guaranteed to be paid at the time of winding up in case of companies limited by guarantee. However, the liability of the members is unlimited, in case if the company that is incorporated with unlimited liabilities, liability of members is unlimited.

Q29: Home Products Ltd. is registered with authorised capital of ₹ 10,00,000 divided into 1,00,000 Equity Shares of ₹ 10 each. it issued 70,000 Equity Shares for subscription at premium of ₹ 2 per share, payable ₹ 3 on application, ₹ 5 on allotment and balance on first and final call. It received subscription for 62,500 shares.
You are required to pass the necessary Journal entries.

Answer 29:

Things to Remember:
Limited Liability: The members of a company are liable only to the extent of value of shares subscribed by them or amount guaranteed to be paid at the time of winding up in case of companies limited by guarantee. However, the liability of the members is unlimited, in case if the company that is incorporated with unlimited liabilities, liability of members is unlimited.

Important Notes:
Common Seal: A cannot sign or enter into any contract on its own by signing the documents. Therefore, a common seal is maintained by many companies to affix it on all important documents of the company.

Q30: Pure Products Ltd. is registered with authorised capital of ₹ 10,00,000 divided into 1,00,000 equity shares of ₹ 10 each. It issued 70,000 Equity Shares for subscription of ₹ 2 per share, payable ₹ 3 on application, ₹ 5 on allotment and balance on first and final call. It received application money amounting to ₹ 1,89,000.
You are required to:
(i) Determine whether the company should allot shares; and
(ii) If yes, pass the necessary Journal entries assuming that the company has received due amount on allotment and call.

Answer 30:

(i) Minimum subcription is 70,000 × 90% = 63,000 shares.
Total Application Amount received = Rs. 1,89,000
Number of Share = 1,89,000/3 
Number of Share = 63,000

Q31: Blue Chip Ltd. was registered on 1st January, 2023 with a capital of ₹ 10,00,000 divided into 1,00,000 shares of ₹ 10 each. The company issued 42,000 shares of which 40,000 shares were taken up by the public and ₹ 1 per share was received with application. on 1st February, 2023, these shares were allotted and ₹ 2 per share was duly received on 28th February, 2023 as allotment money. First call of ₹ 3 per share was made on 1st March, 2023 and the call money on all shares with the exception of 100 shares was received. The final call of ₹ 4 per share was made on 1st June, 2023 and the amount due, with the exception of 400 shares, was received by 30th June, 2023.
Pass necessary Journal and Cash Book entries and prepare the Balance Sheet as at 30th June, 2024.

Answer 31:

Q32: The authorised capital of Sarang Ltd. is ₹ 1,20,00,000 divided into 12,00,000 shares of ₹ 10 each. Out of these, company issued 8,00,000 shares of ₹ 10 each at a premium of 20%. The amount per share was payable as follows:

Public applied for 7,80,000 shares. All the money was duly received. Prepare an extract of Balance Sheet of Sarang Ltd. as per Schedule III, Part I of the Companies Act, 2013, disclosing the above information. Also prepare ‘Notes to Accounts’ for the same.

Answer 32:

Q33: Ghosh Ltd. made the second and final call on its 50,000 Equity Shares @ Rs. 2 per share on 1st January, 2016. The entire amount was received on 15th January, 2016 except on 100 shares allotted to Venkat. Pass necessary journal entries for the call money due and received by opening Calls-in-Arrears Account.

Answer 33

Things to Remember:
Company Under Section 25: A company created under section-25 is to promote art, culture and societal aims. Such companies need not use the term limited at the end of their name. Punjab, Haryana, Delhi chambers of commerce, etc. are the examples of such companies.

Important Notes:
Unlimited Company: The company not having any limit on the liability of its members, is called an unlimited company. Liability in such a case extends to the personal property of its shareholders. Such companies do not use the word ‘limited’ at the end of their name.

Q34: Avon Ltd. issued for subscription 10,000 shares of ₹ 25 each, payable ₹ 5 per share on application, ₹ 10 per share on allotment (including ₹ 5 per share as premium), ₹ 5 per share as first call on the shares and the balance in two equal amounts at intervals of three months. All the shares were applied for and allotted. Due amount was received except the second call and final call on 200 and 400 shares respectively.
Pass the entries in the company’s Journal, Cash Book and the Ledger. Also show the company’s Balance Sheet on Completion of the above transactions.

Answer 34:

Q35: Usha Ltd. was formed with a capital of ₹ 10,00,000 divided into shres of ₹ 100 each. It offered 90% shares to public for subscription. The amount per share was payable as 40% on application, 20% on allotment and the balance on first and final call. The applicants paid ₹ 3,60,000 on application and ₹ 1,69,000 on allotment.
The call has not yet been made. Calculate:
(a) Authorised Capital, (b) Issued Capital, (c) Subscribed Capital, (d) Called Up Capital, (e) Paid-up Capital, and (f) Calls-in-arrears.

Answer 35:

Authorised Capital = Rs. 10,00,000 (10,000 share @ Rs. 100 each)

Issued Capital = Rs. 10,00,000 × 90%
Issued Capital = Rs. 9,00,000

Subscribed Capital = Rs. 9,00,000
Called up Capital = 9,000 Shares @ Rs. 60 per share
Called up Capital = Rs. 5,40,000

Paid up Capital = Rs. 3,60,000 + Rs. 1,69,000
Paid up Capital = Rs. 5,29,000

Calls in arrear:-
Allotment Amount (900 × 20)        = Rs. 1,80,000
Amount Received on Allotment     = Rs. 1,69,000
                                                      = Rs. 11,000

Q36: Random Ltd. took over running business of Mature Ltd. comprising of Assets of ₹ 45,00,000 and Liabilities of ₹ 6,40,000 for a purchase consideration of ₹ 36,00,000. The amount was settled by bank draft of ₹ 1,50,000 and balance by issuing 12% Preference Shares of ₹ 100 each at 15% premium. Pass entries in the books of Random Ltd.

Answer 36:

Q37: 2,000 Equity Shares of ₹ 10 each were issued to Moon Limited from whom assets of ₹ 25,000 were acquired Pass Journal entry.

Answer 37:

Q38: 'Amrit Dhara Ltd.' issued 800 Equity Shares of Rs. 100 each at a premium of 25% as fully paid-up in consideration of the purchase of plant and machinery of Rs. 1,00,000. 
Pass entries in company's Journal.

Answer 38:

About Solution:
Calculation of Shares:- 
Pending amount which is paid in Shares = Rs. 1,00,000
Number of Shares issued = 1,00,000/(100+25) = 800 Shares 

Things to Remember:
A joint stock company divides its capital into units of equal denomination. Each unit is called a share. These units i.e. shares are offered for sale to raise capital. This is termed as issuing shares. A person who buys share/shares of the company is called a shareholder and by acquiring share or shares in the company he/she becomes one of the members of the company.

Important Notes:
A share is an indivisible unit of capital. It expresses the proprietory relationship between the company and the shareholder. The denominated value of a share is its face value. The total capital of a company is divided into number of shares.

Q39: Z Ltd. purchased furniture costing Rs. 2,20,000 from C.D Ltd. The payment was to be made by issue of 9% Preference Shares of Rs. 100 each at premium of Rs. 10 per share. Pass necessary Journal entries in the books of Z Ltd.

Answer 39:

Things to Remember:
Characteristics of Preference Shares
1. Such type of shareholders has priority in the payment of dividend before any other class of shareholders gets their payment of dividend. 
2. The rate of dividend of such shares is pre-determined.

Important Notes:
Equity Shares which are not preference shares are equity shares. Holders of these shares receive dividend out of the profits of the company after the payment of dividend has been made to the preference shareholders.

Q40: Goodluck Ltd purchased machinery costing Rs. 10,00,000 from Fair Deals Ltd. The company paid the price by issue of Equity Shares of Rs. 10 each at a premium of 25%. Pass necessary Journal entries for the above transactions in the books of Goodluck Ltd. 

Answer 40:

Things to Remember:
Characteristics of Equity Shares 
i. Its dividend rate can change from year to year. 
ii. Dividend on Equity shares is paid after the payment of dividend to preference shareholders. 
iii. In the event of winding up of company the repayment of capital to equity shareholder is made at last. iv. They are real owners of the company. Equity shareholders have the right to elect directors of the company. Equity shares are the permanent source of capital.

Important Notes:
A joint stock company estimates its future capital requirements. The amount of the capital is mentioned in the capital clause of the Memorandum of Association registered with the Registrar of the Companies. Total capital is divided into a number of small indivisible units of fixed amount and each such unit is called a share. A share is nothing but a part in the share capital of the company. As the total capital of the company is divided into shares, the capital of the company is called share capital.

Q41: Rajan Ltd. purchased assets from Geeta & Co. for Rs. 5,00,000. A sum of Rs. 1,00,000 was paid by means of a bank draft and for the balance due Rajan Ltd. issued equity Shares of Rs. 10 each at a premium of 25%. Journalize the above transactions in the books of the company.

Answer 41:

Things to Remember:
According to the Companies Act, a company can issue the following types of Shares:
(i) Preference Shares
(ii) Equity Shares

Important Notes:
Preference Shares: A preference share is one which carries following preferential rights over other type of shares called equity shares in regard to the following:
1. Payment of dividend 
2. Repayment of capital at the time of winding up of the company.

Q42: Sona Ltd purchased machinery costing ₹ 17,00,000 from Mona Ltd. Sona Ltd. paid 20% of the amount by cheque and for the balance amount issued Equity Shares of ₹ 100 each at a premium of 25%.
Pass necessary Journal entries for the above transactions in the books of Sonal Ltd. Show your working notes clearly.

Answer 42:

Q43: Mangla Cortubi Ltd. took over a unit of Mangla Tubes Ltd. consisting of Machinery – ₹ 4,00,000, Tools and Dies – ₹ 10,00,000 and Liabilities of ₹ 25,00,000 for a consideration of ₹ 20,00,000. The consideration was paid by issuing Equity Shares of ₹ 10 each at a premium of ₹ 5.
You are required to pass the journal entries in the books of Mangla Cortubi Ltd.

Answer 43:

Q44: Bhushan Lamp Ltd. issued 30,000 fully paid-up shares of Rs. 100 each for purchase of the following assets and liabilities from Sharma & Co:
Plant                             Rs. 7,00,000           Stock-in-Trade           Rs. 9,00,000
Land and Building      Rs. 12,00,000         Sundry Creditors       Rs. 2,00,000
You are required to pass necessary Journal entries.

Answer 44:

Things to Remember:
Paid up Capital is the portion of called up capital which has been paid by the shareholders, to calculate the paid up capital, the amount of instalments in arrears is deducted from the called up capital.

Important Notes:
Reserve Capital: Company may keep some part of its share capital uncalled and keep in reserve to be called only in case of need at the time of its winding up. This is known as Reserve capital. For this, a special resolution will have to be passed by the company. Thus, it is that portion of the uncalled capital which a company has decided to call only in case of liquidation of the company.

Q45: Sandesh Ltd. took over the assets of Rs. 7,00,000 and liabilities of Rs. 2,00,000 from Sanchar Ltd. for a purchase consideration of  Rs. 4,59,500.  Rs. 8,500 were paid by accepting a draft in favour of Sanchar Ltd. payable after three months and the balance was paid by issue of equity shares of  Rs. 10 each at a premium of 10% in favour of Sanchar Ltd. 
Pass necessary journal entries for the above transactions in the books of Sandesh Ltd.

Answer 45:

About Solution:
Number of Equity Shares to be issued Sandesh Ltd. = Rs.4,51,000/10+1
Number of Equity Shares = 41,000 Equity Shares

Things to Remember:
The company purchases certain assets from vendors (sellers or suppliers) on credit. Instead of making payment to vendors in cash, the company issues them certain agreed number of shares at the agreed rate as a consideration (payment in exchange) of assets purchased. Shares may be issued to vendors at par, at premium or at discount.

Important Notes:
Promoters are those persons, firms or companies, who promote the company. They are entrusted with the work of the formation of the company. Promoters are paid remuneration for their services. This remuneration can be paid in the form of shares also. In such cases companies issue shares to their promoters without payment

Q46: Sandesh Ltd. purchased a running business from Sanchar Ltd for ₹ 15,00,000 payable 10% by cheque and the balance by the issue of fully paid Equity Shares of ₹ 100 each at a premium of 20%. The assets and liabilities consisted of the following:

Pass the necessary Journal Entries in the books of Sandesh Ltd.

Answer 46:

Things to Remember:
Limited Liability: The members of a company are liable only to the extent of value of shares subscribed by them or amount guaranteed to be paid at the time of winding up in case of companies limited by guarantee. However, the liability of the members is unlimited, in case if the company that is incorporated with unlimited liabilities, liability of members is unlimited.

Important Notes:
Common Seal: A cannot sign or enter into any contract on its own by signing the documents. Therefore, a common seal is maintained by many companies to affix it on all important documents of the company.

Q47: Light Lamps Ltd. issued 50,000 shares of Rs. 10 each as fully paid-up to the promoters for their services to set-up the company. It also issued 2,000 shares of Rs. 10 each credited as fully paid-up to the underwriters of shares for their services. Journalize these transactions.

Answer 47:

Things to Remember:
Uncalled Capital: Uncalled Capital is that portion of the issued/subscribed capital that is not called up by the company on the shares allotted.

Important Notes:
Paid up Capital is the portion of called up capital which has been paid by the shareholders, to calculate the paid up capital, the amount of instalments in arrears is deducted from the called up capital.

Q48: Vikram Ltd. forfeited 5,000 shares of Rahul, who had applied for 6,000 shares for non-payment of allotment money of ₹ 5 per share and first and final call of ₹ 2 per share. Only application money of ₹ 3 was paid by him. Out of these, 3,000 shares were re-issued @ ₹ 12 per share as fully paid.
Pass entries for forfeiture and reissue of shares.

Answer 48:

Q49: Sangita Limited invited applications for issuing 60,000 shares of ₹ 10 each at par. The amount was payable as follows: on application ₹ 2 per share; on allotment ₹ 3 per share; on first and final call ₹ 5 per share. Applications were received for 92,000 shares.
Allotment was made on the following basis: (a) to applicants for 40,000 shares; full, (b) to applicants for 50,000 shares: 40%; (c) to applicants for 2,000 shares; nil. ₹ 1,08,000 was realised on account of allotment (excluding the amount carried from application money) and ₹ 2,50,000 on account of call. The directors decided to forfeit shares of those applicants to whom full allotment was made and on which allotment money was overdue.
Pass Journal entries in the books of Sangita Limited to record the above transactions.

Answer 49:

Things to Remember:
In case of such forfeiture, the company must first give a clear 14days' notice to the defaulting shareholder to pay the amount due on call and interest thereon if any.

Important Notes:
Maximum Permissible Discount: At the time of reissue of the forfeited shares, care has to be taken with respect to the maximum permissible discount on the shares reissued. The maximum permissible discount that can be allowed on reissue of forfeited shares is the amount forfeited, i.e., the amount credited to the forfeited shares. In simple terms, the reissue price cannot be less than the amount unpaid on the forfeited shares.

Q50: Alpha Ltd. issued 20,000 Equity Shares of Rs. 10 each at par payable: On application Rs. 2 per share; on allotment Rs. 3 per share; on first call Rs. 3 per share; on second and final call Rs. 2 per share. Mr. Gupta was allotted 100 shares. Pass necessary Journal entry relating to the forfeiture of shares in each of the following alternative cases:
Case I    If Mr. Gupta failed to pay the allotment money and his shares were immediately forfeited.
Case II    If Mr. Gupta failed to pay allotment money and on his subsequent failure to pay the first call, his shares were forfeited.
Case III    If Mr. Gupta failed to pay the first call and on his subsequent failure to pay the second and final call, his shares were forfeited.

Answer 50:

Things to Remember:
Minimum Subscription: As per SEBI Guidelines, minimum subscription is to receive subscription for at least 90% of the shares issued. If the company does not receive minimum subscription, it cannot allot the shares and therefore, it will have to refund the application money to the subscribers.

Important Notes:
Calls-in-Arrears: If the shareholder does not pay the call amount due on allotment or on any subsequent calls according to the terms, the amount not received is called Calls-inArrears.Interest on Calls-in-Arrears: If the company is authorized by the Articles of Association, it may charge an interest at the specified rate on Calls-in-Arrears from the due date to the date of payment. In case Articles of Association is silent, Table F of the Companies Act, 2013 shall apply which provides for interest on Calls-in-Arrears at the rate of 10% p.a. However, directors have the right to waive such interest.

Q51: Ratan Ltd forfeited 3,000 shares of ₹ 10 each (issued at ₹ 2 premium) for non-payament of first call of ₹ 2 per share. Final call of ₹ 3 per share was not yet made. Out of thse, 2,000 shares were re-issued at ₹ 10 per share as fully paid. Pass entries for forfeiture and reissue of shares.

Answer 51: 

Q51: Ajanta Ltd. issued a prospectus inviting applications for issuing 5,00,000 equity shares of ₹ 10 each issued at a premium of 10%. The amount was payable as follows:

Applications were received for 6,00,000 shares and pro rata allotment was made to all applicants. Excess money received on application was adjusted towards sums due on allotment. All amounts were duly received except from Sumit, who was the holder of 1,000 shares, and failed to pay the allotment and first and final call. His shares were forfeited.
Pass Journal entries for the above transactions in the books of Ajanta Ltd. Open Calls-in-Arrears Account wherever necessary.

Answer 51:

Question 52: Ankit Ltd. issued 20,000 equity shares of 10 each at a premium of Rs. 2 per share, payable as:
On Application :  Rs. 3
On Allotment :    Rs. 5 (including premium)
On First Call :     Rs. 2
On Second and Final Call : Rs. 2
Vijay was allotted 500 shares. Pass the necessary Journal entries relating to the forfeiture of shares in following cases.
Case I Vijay did not pay allotment money and his shares were immediately forfeited.
Case II Vijay did not pay allotment and first call, his shares were forfeited after first call.
Case III Vijay failed to pay first call and his shares were forfeited immediately.
Case IV Vijay failed to pay both the calls and his shares were forfeited.

Answer 52:

About Solution:
Section 43 of the Companies Act, 2013 prescribes that Shares Capital of a company broadly can be of two types or classes-
1.)    Preference Share
2.)    Equity Shares

Things to Remember:
Accounting treatment without opening Calls-in-Arrears Account: In this method, amount S received from the shareholders is credited to the relevant call account. The respective call accounts (first, second, etc.) will continue showing debit balance equal to the total amount unpaid on those calls. On a subsequent date, when the amount of Calls-in- Arrears is received, Bank Account is debited and relevant call account is credited.

Important Notes:
Call Money Due:
Share First Call A/c    . .Dr. [with actual amount due on say, 100 shares @ 3 each]
         To ShareCapital A/c

Q53: Ankit Ltd. issued 20,000 equity shares of 10 each at a premium of Rs. 2 per share, payable as:
On Application :      Rs. 3
On Allotment :         Rs. 5 (including premium)
On First Call :          Rs. 2
On Second and Final Call : Rs. 2
Vijay was allotted 500 shares. Pass the necessary Journal entries relating to the forfeiture of shares in following cases.
Case I Vijay did not pay allotment money and his shares were immediately forfeited.
Case II Vijay did not pay allotment and first call, his shares were forfeited after first call.
Case III Vijay failed to pay first call and his shares were forfeited immediately.
Case IV Vijay failed to pay both the calls and his shares were forfeited.

Answer 53:

About Solution:
Section 43 of the Companies Act, 2013 prescribes that Shares Capital of a company broadly can be of two types or classes-
1) Preference Share
2) Equity Shares

Things to Remember:
Accounting treatment without opening Calls-in-Arrears Account: In this method, amount S received from the shareholders is credited to the relevant call account. The respective call accounts (first, second, etc.) will continue showing debit balance equal to the total amount unpaid on those calls. On a subsequent date, when the amount of Calls-in- Arrears is received, Bank Account is debited and relevant call account is credited.

Important Notes:
Call Money Due:
Share First Call A/c    . .Dr. [with actual amount due on say, 100 shares @ 3 each]
         To ShareCapital A/c

Q54: Vani Limited invited applications for issuing 1,00,000 equity shares of ₹ 10 each at a premium of 10%. The amounts were payable as under:

Applications for 1,50,000 shares were received and pro rata allotment was made to all the applicants. Excess application money was adjusted towards sums due on calls. Parth, a shareholder who had applied for 600 shares did not pay the first call. His shares were forfeited. The second and final call was not yet made. Half of the forfeited shares were reissued at ₹ 8 per share fully paid-up.
Journalise the above transactions in the books of Vani Limited by opening Calls-in-Arrears and Calls-in-Advance Account wherever necessary.

Answer 54:

Q55: Determine the maximum permissible discount and minimum reissue price that a company can allow at the time of reissue of forfeited shares in the following cases:
(i) A share of ₹ 10 originaly issued at par on which application and allotment money of ₹ 5 was received.
(ii) A share of ₹ 10 originally issued at a premium of ₹ 1 on which application and allotment money (including premium) of ₹ 5 was received.
(iii) A share of ₹ 10 originally issued at a premium of ₹ 1 on which application and allotment money (exluding premium) of ₹ 5 was received.

Answer 55:

(i) ₹ 5 has already been received out of ₹ 10. Thus, this share can be reissued at a minimum of ₹ 5 with a ₹ 5 discount per share.
(ii) ₹ 4 has already been received out of ₹ 10. Thus, such a share can be reissued at a minimum of ₹ 6 with a maximum ₹ 4 discount per share.
(iii) ₹ 5 has already been received out of ₹ 10. Thus, such a share can be reissued at a minimum of ₹ 5 with a maximum ₹ 5 discount per share.

Q56: Star Ltd. issued 10,000 shares of ₹ 10 each, payable as ₹ 4 on application, ₹ 3 on allotment, ₹ 2 on first call and balance on second and final call.
500 shares were forfeited, Calculate the ‘Maximum Permissible Discount’ and Minimum Reissue Price’ on reissue on each of the following cases, if the reissued shares are fully paid-up:
Case 1. If shares were forfeited for non-payment of second and final call.
Case 2. If shares were forfeited for non-payment of First Call and Second and Final Call.
Case 3. If shares were forfeited for non-payment of Allotment, First Call and Second and Final Call.
Case 4. If shares were forfeited for non-payment of Allotment and First Call. Second and Final Call is not yet made.

Answer 56:

Q57: Computer Mart Ltd. forfeited 1,000 Equity Shares of ₹ 50 each issued at 10% premium on which allotment money of ₹ 15 per equity share (including premium) and first call of ₹ 15 per share were not received the second and final call of ₹ 10 per equity share were not yet called.
Calculate ‘Discount Allowed or Premium Received’ and ‘Amount transferred to Capital Reserve’ on reissue of shares as fully paid-up in each of the following cases:
Case 1. If these shares were reissued as ₹ 40 paid-up for ₹ 45 per share.
Case 2. If these shares were issued as ₹ 40 paid-up for ₹ 40 per share.
Case 3. If these shares were reissued as ₹ 40 paid-up for ₹ 35 per share.
Case 4. If these shares were reissued as ₹ 40 paid-up for ₹ 25 per share.
Case 5. If these shares were reissued as ₹ 35 per share as fully paid-up.

Answer 57:

Q58: Dell Ltd. forfeited 2,000 Equity Shares of ₹ 50 each issued at 10% premium on which allotment money of ₹ 15 per equity share (including premium) and first call of ₹ 15 per share were not received, the second and final call of ₹ 10 per equity share was not yet called.
Case 1. If 200 of these shares were reissued as ₹ 40 paid up for ₹ 45 per share.
Case 2. If 200 of these shares were reissued as ₹ 40 paid up for ₹ 40 per share.
Case 3. If 200 of these shares were reissued as ₹ 40 paid up for ₹ 35 per share.
Case 4. If 200 of these shares were reissued as ₹ 40 paid up for ₹ 25 per share.
Case 5. If 200 of these shares were reissued as ₹ 35 per share as fully paid-up.

Answer 58:

Q59: What amount of gain on reissue will be transferred to Capital Reserve under following situations?
(i) 3,000 shares of ₹ 10 each of Rakesh were forfeited by crediting ₹ 5,000 to Forfeited Shares Account.
(ii) Z Ltd. forfeited 20 shares of ₹ 100 each (₹ 60 called-up) issued at par to Shiv on which he paid ₹ 20 per share. Out of these, 15 shares were reissued to Rajesh as ₹ 60 paid-up for ₹ 45 per share.

Answer 59: 

Q60: A company forfeited 4,000 shares of ₹ 10 each fully called-up, on which application money of ₹ 3 each has been paid. Out of these, 2,000 shares were reissued as fully paid-up for ₹ 18,000.
Pass necessary Journal entries for above transactions.

Answer 60:

Q61: Alfa Ltd. forfeited 900 Equity Shares of ₹ 100 each for the non-payment of allotment money of ₹ 30 per share and the first call of ₹ 20 per share. The second and final call of ₹ 25 per share has not 

Answer 61:

Q62: Max Ltd. forfeited 500 sahres of Rs. 100 each for non-payment of first call of Rs. 20 per share and final call of Rs. 25 per share. 250 of these shares were re-issued at Rs. 50 per share fully paid-up.
Pass the necessary Journal entries in the books of Max Ltd. for forfeiture and re-issue of shares. Also prepare the Share Forfeiture Account.

Answer 62:

Q63: On 1st May,2014, Directors of a Limited Company forfeited 200 shares of Rs. 20 each, Rs. 15 per share called-up, on which Rs. 10 per share has been paid by A , the amount of the first call of Rs. 5 per share being unpaid. Ten days later, the Directors reissued the forfeited shares to B credited as Rs. 15 per share paid-up, for a payment of Rs. 10 per share.
Give journal entries in the company's books to record the forfeited shares and their reissue.

Answer 63:

Things to Remember:
Subscription Amount: Amount of subscription should not be less than 20, 000. Any amount payable towards subscription of securities shall be paid through cheque or bank draft or any other banking instrument but not by cash.

Important Notes:
Allotment: Condition with respect to allotment prescribes that the company shall allot its securities within 60 days from the date of receipt of application money. In case the company is not able to allot securities within 60 days, it shall refund the application money within 15 days from the day of completion of 60 days.

Q64: The Directors of Maharashtra Ltd. resolved on 1st May, 2020 that 2,000 Equity Shares of ₹ 10 each, ₹ 7.50 paid be forfeited for non-payment of final call of ₹ 2.50. On 10th June, 2020, 1,800 of these shares were reissued for ₹ 6 per share. Give necessary Journal entries. Give necessary Journal entries.

Answer 64: 

Q65: Sunshine Ltd. issued 20,000 shares of Rs. 100 each payable Rs. 25 per share on application, Rs. 25 per share on allotment and the balance in two calls of Rs. 25 each. The company did not make the final call of Rs. 25 per share. All the money was duly received with the exception of the amount due on the first call on 400 shares held by Mr. Modi. The Board of Directors forfeited these shares and subsequently reissued them @ Rs. 75 per share paid-up for a sum of Rs. 28,000. Journalize the above transactions and prepare Share Capital Account.

Answer 65: 

Things to Remember:
Accounting treatment of Balance in Forfeited Shares Account: When a company has to reissue the forfeited shares there are 2 0ptions for which different accounting entries are required to be passed

Important Notes:
All forfeited shares are not reissued: In this case, the amount of discount allowed on reissue of forfeited shares is a Capital gain (Profit) and therefore, transferred to Capital Reserve.

Q66: R.P Ltd forfeited 1,500 shares of Rahim of ₹ 10 each issued at a premium of ₹ 3 per share for non-payment of allotment and first call money. Rahim had applied for 3,000 shares. On these shares, amount was payable as follows:

Final call has not been called up, 1,000 of the forfeited shares were reissued for ₹ 8,500 as fully paid-up. Record the necessary Journal entries for the above transactions in the books of R.P Ltd.

Answer 66:

Working Note:-
Calculation of Amount of Capital Reserve:-
Forfieted Amount of 1,000 share of Rahim = 7,500/1,500×1,000
Forfieted Amount of 1,000 share of Rahim = Rs. 5,000
Amounnt received on 1,000 Share on Reissue = Rs. 8,500
Amount to be transferred to Capital Reserve = (5,000 + 8,500)-(1,000 × 10)
Amount to be transferred to Capital Reserve = Rs. 3,500

Q67: The Hindustan Manufacturing Ltd. had a total subscribed capital of Rs. 10,00,000 in Equity Shares of Rs. 10 each of which Rs. 7.50 were called-up. A final call of Rs. 2.50 was made and all amount paid except two calls of Rs. 2.50 each in respect of 100 shares held by D. These shares were forfeited and reissued at Rs. 8 per share. Pass necessary journal entries (including that of cash) to record the transactions of final call, forfeiture of shares and reissue of forfeited shares. Also, prepare the Balance Sheet of the company.

Answer 67:

Things to Remember:
Private Placement means any offer of the securities or invitation to subscribe securities to a select group of persons by a company (other than by way of public offer) through issue of private placement offer letter and which satisfies the conditions specified in this section.

Important Notes:
Securities offered to the selective group of persons by issuing private placement offer is known as the Private Placement of Shares. There are conditions specified by Companies Act, 2013 that are to be fulfilled for offering such private placement of shares.

Q68: Star Ltd. forfeited 500 Equity Shares of Rs. 100 each for non-payment of first call of Rs. 30 per share. The final call of Rs. 10 per share was not yet made. Out of these, 60% shares were reissued for Rs. 39,000 fully paid. Journalize the forfeiture and reissue of shares.

Answer 68:

Things to Remember:
Perpetual Existence: A company has an independent and separate existence distinct from its shareholders. Changes in its membership due to death, insolvency etc. does not affect its existence and its continuity.

Important Notes:
Limited Liability: The liablity of the shareholders of a company is limited to the extent of face value of shares held by them. No shareholder can be called upon to pay more than the face value of the shares held by them. At the time of winding up, if necessary, the shareholders may be asked to pay the unpaid value of shares.

Q69: Give necessary journal entries: 
(i) The Directors of Devendra Ltd. resolved on 1st January, 2010 that Equity Shares of Rs. 10 each, Rs. 8 paid up be forfeited for non-payment of final call of Rs. 2. On 1st February, 60 of these shares were reissued @ Rs. 7 per share as fully paid-up. 
(ii) Virender Limited forfeited 20 shares of Rs. 100 each(Rs. 60 called-up) issued at par to Mukesh on which he had paid Rs. 20 per share. Out of these, 15 shares were reissued to Sanjeev as Rs. 60 paid-up for Rs. 45 per share.

Answer 69:

Things to Remember:
One Person Company {OPC): As per Section 2(62) of the Companies Act, 2013, 'One Person Company means a company which has only one person as member'. It is governed by Rule 3 of the Companies (Incorporation) Rules, 2014. Such company should have at least 1 director but not more than 15 directors.

Important Notes:
Prohibits any invitation to public to subscribe for any securities of the company. It is a company which should have at least 2 directors but not more than 15 directors and also the name of such company ends with the words, 'Private Limited'.

Question 70: Show the forfeiture and reissue entries under each of the following cases:
(i) X Ltd. forfeited 300 shares of Rs. 10 each, Rs. 8 called-up held by Mr. A for non-payment of second call money of Rs. 3 per share. These shares were reissued to Mr. Z for Rs. 10 per share as fully paid-up.
(ii) Y Ltd. forfeited 400 shares of Rs. 10 each, fully called-up, held by Mr. B for non-payment of final call money of Rs. 4 per share. These shares were reissued to Mr. Tat Rs. 12 per share as fully paid-up.
(iii) Light Ltd. forfeited 250 shares of Rs. 10 each, fully called-up held by Mr. C for non-payment of allotment money of Rs. 3 per share and first and final call money of Rs. 4 per share. These shares were reissued @ Rs. 8 per share as fully paid-up to Mr. P.

Answer 70:

Things to Remember:
Artificial Legal Person: A company is an artficial person as it is created by law. It has almost all the rights and powers of a natural person. It can enter into contract. It can sue in its own name and can be sued.

Important Notes:
Incorporated Body: A company must be registered under Companies Act. By virtue of this, it is vested with corporate personality. It has an identity of its own. Although the capital is contributed by its members called shareholders yet the property purchased out of the capital belongs to the company and not to its shareholders.

Q71: Rekha holds 100 shares of Rs. 10 each on which he has paid Rs. 1 per share on application. Sunita holds 200 shares of Rs. 10 each on which he has paid Rs. 1 and Rs. 2 per share on application and allotment respectively. 
Teena holds 300 shares of Rs. 10 each and has paid Rs. 1 on application, Rs. 2 on allotment and Rs. 3 on first call. They all fail to pay their arrears and the second call of Rs. 2 per share. Shares are forfeited and subsequently reissued @ Rs. 11 per share as fully paid-up. Journalize the above.
Journalise the above.

Answer 71: 

Things to Remember:
Representative Management: The number of shareholders is so large and scattered that they cannot manage the affairs of the company collectively. Therefore they elect some persons among themselves to manage and administer the company. These elected representatives of shareholders are individually called the ‘directors’ of the company and collectively the Board of Directors.

Important Notes:
Common Seal: A common seal is the official signature of the company. Any document bearing the common seal of the company is legally binding on the company.

Q72: Record the journal entries for forfeiture and reissue of shares in the following cases: 
(i) Basak Ltd. forfeited 20 shares of Rs. 10 each, Rs. 7 called-up on which the shareholder had paid application and allotment money of Rs. 5 per share. Out of these, 15 shares were reissued to Naresh as Rs. 7 per share paid-up for Rs. 8 per share. 
(ii) Y Ltd. forfeited 90 shares of Rs. 10 each, Rs. 8 called-up issued at a premium of Rs. 2 per share to 'R' for non-payment  of allotment money of Rs. 5 per share (including premium). Out of these, 80 shares were reissued to Sanjay as Rs. 8 called-up for Rs. 10 per share.

Answer 72:

Things to Remember:
Capital Divisible into Shares: The capital of the company is divided into shares. A share is an indivisible unit of capital. The face value of a share is generally of a small denomination which may be of Rs. 1, Rs. 2, Rs. 5, Rs. 10, Rs. 25 or Rs. 100 etc.

Important Notes:
Transferability of Shares: The shares of the company are easily transferable. The shares can be bought and sold in the stock market.

Q73: Jain Ltd. invited application for issuing 1,12,000 equity shares of Rs. 10 each at par. The amount per share was payable as follows:

Applications for 1,00,000 shares were received. Shares were fully allotted to all the applicants. Ramesh failed to pay his allotment money which was ₹ 2,000. His shares were forfeited immediately. Suresh did not pay the first call on 500 shares applied by him. His shares were forfeited after the first call. The forfeited shares of Ramesh and Suresh were reissued at ₹ 9 per share fully paid-up. Afterwards the second and final call was made and was duly received.
Pass necessary Journal entries for the above transactions in the books of Jain Ltd.

Answer 73:

Things to Remember:
Companies can be classified under the following heads:
1. On the basis of formation. 
2. On the basis of liability. 
3. On the basis of ownership

Important Notes:
On the basis of Formation On the basis of formation companies can be categorised as: 
(a) Statutory Company: A company formed by a Special Act of parliament or state legislature is called a Statutory Company. Reserve Bank of India, Industrial Financial Corporation of India, Life Insurance Corporation of India, Delhi State Finance Corporation are some of its examples. 
(b) Registered Company: A company formed and registered under the Companies Act, 1956 or earlier Companies Acts is called a Registered Company. The working of such companies is regulated by the provisions of the Companies Act.

Q74: Software Ltd. company with registered capital of Rs. 5,00,000 in shares of Rs. 10 each issued 20,000 of such shares payable Rs. 2 on application, Rs. 4 on allotment, Rs. 2 on first call Rs. 2 on final call. All the money payable on allotment was duly received but on the first call being made, one shareholder paid the entire balance on his holding of 300 shares and five shareholders with a total holding of 1,000 shares failed to pay their dues on the first call. These shares were forfeited for non-payment of first call money. Final call was made and all the money due was received. Later on, forfeited shares were reissued @ Rs. 6 per share as fully paid up. Record the above in the company's Journal and prepare the Balance Sheet.

Answer 74:

Things to Remember:
The size of business firms was very small. Sole proprietorship was therefore, the usual form of business organisation. Later on partnership become popular when the size of business firms increased. But sole proprietorship and partnership could not meet the growing demand of big size business because of their limitations such as limited capital, limited managerial ability, unlimited liability and other drawbacks. Therefore, in the present days of business world, it is only the Joint stock company form of business organisation which proved to be useful.

Important Notes:
A company is a voluntary association of persons formed for some common purpose, with capital divisible into parts, known as shares and with a limited liability. It is created by law and is known as an artificial person with a perpetual succession and a common seal. It has a separate legal entity.

Q75: Slow & Steady Ltd. invited applications for 10,000 Equity Shares of Rs. 10 each for public subscription. The amount of these shares was payable as: On application Rs. 1 per share, on allotment Rs. 2 per share, on first call Rs. 3 per share and on second and final call Rs. 4 per share. All sums payable on application, allotment and calls were duly received with the following exceptions:  
(i) A, who held 200 shares, failed to pay the money on allotments and calls. 
(ii) B, to whom 150 shares were allotted, failed to pay the money on first call and final call. 
(iii) C, who held 50 shares, did not pay the amount of second and final call. 
The shares of A, B and C were forfeited and were subsequently reissued for cash as fully paid-up at a discount of 5%. Pass necessary Journal entries to record these transactions in the books of X Ltd.

Answer 75: 

Things to Remember:
On the basis of Liability On the basis of liabilty, companies can be categorised as: 
(a) Company Limited by Shares: The liability of the member of such company is limited to the face value of shares held by him/her. 
(b) Company Limited by Guarantee: The liabilty of each member of such company is limited to the extent of guarantee undertaken by the member. It may arise in the event of it being wound up.
(c) Unlimited Company: The Company not having any limit on the liability of its members is called an unlimited company. Liability in such a case extends to the personal property of its shareholders. Such companies do not use the word ‘limited’ at the end of their name.

Important Notes:
Company under Section 25: A company created under section-25 is to promote art, culture and societal aims. Such companies need not use the term limited at the end of their name. Punjab, Haryana, Delhi chambers of commerce, etc. are the examples of such companies.

Q76: ‘Venus Ltd.’ was registered with an authorized capital of ₹ 40,00,000 divided into 4,00,000 equity shares of ₹ 10 each. 70,000 of these shares were reissued as fully paid to ‘M/s Star Ltd.’ for building purchased from them. 2,00,000 shares were issued to the public and the amounts were payable as follows:
On Application -     Rs. 3 Per share        On Allotment -                           Rs. 2 per share
On First Call -         Rs. 2 Per share        On Second and Final Call -      Rs. 3 per share
The amount received on these shares were as follows:
On 1,00,000 shares -      Full amount called      On 60,000 shares -      Rs. 7 per share
On 30,000 shares -         Rs. 5 Per share           On 10,000 shares -      Rs. 3 per share
The directors forfeited 10,000 shares on which only Rs. 3 per share were received. These share were reissued at Rs. 12 per share fully paid. Pass necessary Journal entries for the above transactions in the books of Venus Ltd.

Answer 76:

Q77: Kwality Hospitality Ltd. incorporated with authorised capital of ₹ 1,00,000 equity shares of ₹ 10 each, issued 50,000 equity shares for subscription payable ₹ 4 on application, ₹ 3 on allotment and balance as first and final call. The shares were subscribed, and due amounts were received except first and final call on 4,000 shares. These shares were forfeited. Later, half the shares were reissued as fully paid-up and ₹ 4,000 were transferred to Capital Reserve.
Pass the Journal entry for reissue of shares.

Answer 77:

Q78: Park Hospitality Ltd incorporated with authorised capital of ₹ 15,00,000, 1,50,000 equity shares of ₹ 10 each, issued 1,00,000 equity shares for subscription payable ₹ 4 on application, ₹ 3 on allotment and balance as first and final call. The shares were subscribed, and due amounts were received except first and final call on 4,000 shares held by Pawan. Rakesh holding 2,000 shares paid call on his shares along with allotment money. Shares of Pawan were forfeited. Later half the shares were reissued as fully paid-up and ₹ 4,000 were transferred to Capital Reserve. Pass the Journal entry for reissue of shares.

Answer 78:

Q79: Grofers Ltd having authorised capital of ₹ 25,00,000, issued 2,00,000 equity shares of ₹ 10 each for subscription payable ₹ 4 on application, ₹ 3 on allotment and balance on first and final call. The shares were subscribed, and due amounts were received exceept first and final call on 4,000 shares held by Rana. These shares were forfeited. Later, half the shares were reissued as fully paid-up and ₹ 14,000 were transferred to Capital Reserve. Pass the Journal entry for forfeiture and reissue of shares.

Things to Remember:
Government Company: A Government company is one in which not less than 51% of its paid up capital is held by  
(1) Central Government or 
(2) State Government, or 
(3) Partly by Central Government and partly by State Government. Example of a Government company is Hindustan Machine Tools Limited, (HMT) State Trading Corporation (STC). Minerals and metals trading corporation (MMTC).

Important Notes:
A foreign company is one which is incorporated outside India but has a place of business in India, for example Philips, L.G, etc.

Q80: A share of Rs. 100 issued at a premium of Rs. 10 on which Rs. 80 (including premium) was called and Rs. 60 (including premium) was paid, has been forfeited. This share was afterwards reissued as fully paid-up for Rs. 70. Give Journal entries to record the above.

Answer 80:

Things to Remember:
On the basis of Ownership On the basis of ownership, companies can be catagorised as:
(a) Private Company: A private company is one which by its Articles of Association:
(i) Restricts the right of members to transfer its shares; 
(ii) Limits the number of its members to fifty (excluding its past and present employees); 
(iii) Prohibits any invitation to the public to subscribe to its shares, debentures. 
(iv) The minimum paid up capital of the company is one lakh rupees (Rs. 100000). The minimum number of shareholders in such a company is two and the company has to add the words ‘private limited’ at the end of its name. Private companies do not involve participation of public in general.

Important Notes:
Public Copmpany: A company which is not a private company is a public company. Its Articles of association does not contain the above mentioned restrictions. Main features of a public company are:
(i) The minimum number of members is seven. 
(ii) There is no restriction on the maximum number of members. 
(iii) It can invite public for subscription to its shares. 
(iv) It’s shares are freely tansferable. 
(v) It has to add the word ‘Limited’ at the end of its name. 
(vi) Its minimum paid up capital is five lakhs rupees (Rs. 5,00,000).

Q81: NK Ltd. forfeited 200 shares of Rs. 10 each, issued at a premium of Rs. 5 per share, held by Ram for non-payment of the final call of Rs. 3 per share. 100 out of these shares were reissued to Vishu at a discount of Rs. 4 per share.

Answer 81:

Things to Remember:
Holding Company and Subsidiary Company: A holding company is a company which controls another company (called subsidiary company) either by acquiring more than half of the equity shares of another company or by controlling the composition of Baord of Directors of another company or by controlling a holding company which controls another company.

Important Notes:
Listed Company and Unlisted Company: A company is required to file an application with stock exchange for listing of its securities on a stock exchange. When it qualifies for the admission and continuance of the said securities upon the list of the stock exchange, it is known as listed company. A company whose securities do not appear on the list of the stock exchange is called unlisted company.

 Q82: The Directors of a company forfeited 300 shares of Rs. 10 each issued at a premium of Rs. 3 per share, for the non-payment of the first call money of Rs. 2 per share. The final call of Rs. 2 per share has not been made. Half the forfeited shares were reissued at Rs. 1,500 as fully paid-up. Record the journal entries for the forfeiture and reissue of shares.

Answer 82:

Things to Remember:
A joint stock company divides its capital into units of equal denomination. Each unit is called a share. These units i.e. shares are offered for sale to raise capital. This is termed as issuing shares. A person who buys share/shares of the company is called a shareholder and by acquiring share or shares in the company he/she becomes one of the members of the company.

Important Notes:
A share is an indivisible unit of capital. It expresses the proprietory relationship between the company and the shareholder. The denominated value of a share is its face value. The total capital of a company is divided into number of shares.

Q83: X Ltd. forfeited 100 shares of ₹ 10 each (₹ 8 called-up) issued at a premium of ₹ 2 per share to Rahul on which he had paid application money of ₹ 5 per share, for non-payment of allotment money of ₹ 5 per share (including premium). Out of these, 70 shares were reissued to Sanjay for ₹ 7 per share as ₹ 8 called-up for ₹ 7 per share. Give necessary Journal entries relating to forfeiture and reissue of shares.

Answer 83:

Things to Remember:
Nominal/Authorised/Registered Capital: It refers to the maximum amount of share capital which a company is authorised to issue as per its Memorandum of Association.

Important Notes:
Issued Capital: Issued capital is that part of the authorised capital which the company offers to public that may include vendors, for subscription or purchase. A company may issue its entire authorised capital or may issue it in parts from time to time as per the needs of the company. It means and includes the nominal value of shares issued by the company for 
(a) Cash 
(b) Consideration other than cash to 
(i) Promoters of a company, and 
(ii) Others.

Q84: 150 shares of ₹ 10 each issued at a premium of ₹ 4 per share payable with allotment were forfeited for non-payment of allotment money of ₹ 8 per share including premium. The first and final call of ₹ 4 per share was not made. The forfeited shares were reissued at ₹ 15 per share fully paid-up.
Pass Journal entries in the books of X Ltd. for the above.

Answer 84:

Things to Remember:
Characteristics of Equity Shares 
i. Its dividend rate can change from year to year. 
ii. Dividend on Equity shares is paid after the payment of dividend to preference shareholders. 
iii. In the event of winding up of company the repayment of capital to equity shareholder is made at last. iv. They are real owners of the company

Important Notes:
A joint stock company estimates its future capital requirements. The amount of the capital is mentioned in the capital clause of the Memorandum of Association registered with the Registrar of the Companies. Total capital is divided into a number of small indivisible units of fixed amount and each such unit is called a share. A share is nothing but a part in the share capital of the company. As the total capital of the company is divided into shares, the capital of the company is called share capital.

 Q85: JCV Ltd., forfeited 200 shares of Rs. 10 each issued at a premium of Rs. 2 per share for the non-payment of allotment money of Rs. 3 per share (including premium). The first and final call of Rs. 4 per share has not been made as yet. 50% of the forfeited shares were reissued at Rs. 8 per share as fully paid-up. Pass necessary Journal entries for the forfeiture and reissue of shares.

Answer 85:

Things to Remember:
According to the Companies Act, a company can issue the following types of Shares:
(i) Preference Shares 
(ii) Equity Shares

Important Notes:
Preference Shares: A preference share is one which carries following preferential rights over other type of shares called equity shares in regard to the following: 
1. Payment of dividend  
2. Repayment of capital at the time of winding up of the company.

Q86: Pass necessary journal entries in the books of the company for the following transactions:
Vishesh Ltd. forfeited 1,000 Equity Shares of Rs. 10 each issued at a premium of Rs. 2 per share for non-payment of allotment money of Rs. 5 per share including premium. The final call of Rs. 2 per share was not yet called on these shares. Of the forfeited shares 800 shares were reissued at Rs. 12 per share as fully paid-up.
The remaining shares were reissued at Rs. 11 per share fully paid-up.

Answer 86:

Things to Remember:
Characteristics of Preference Shares
i) Such type of shareholders has priority in the payment of dividend before any other class of shareholders gets their payment of dividend. 
ii) The rate of dividend of such shares is pre-determined.

Important Notes:
Equity Shares: All shares which are not preference shares are equity shares. Holders of these shares receive dividend out of the profits of the company after the payment of dividend has been made to the preference shareholders.

 Q87: Gaurav applied for 5,000 shares of Rs. 10 each at a premium of 2.50 per share. But he was allotted only 2,500 shares on pro rata basis. After having paid Rs. 3 per share on application, he did not pay allotment money of Rs. 4.50 per share (including premium) and on his subsequent failure to pay the first call of Rs. 2 per share, his shares were forfeited. These shares were reissued at the rate of Rs. 8 per share credited as fully paid. Pass journal entries to record the forfeiture and reissue of shares. 

Answer 87:

Things to Remember:
Subscribed Capital: It is that part of issued capital which is taken up or subscribed by those who are offered for subscription. Company may receive application for equal to, more than or less than shares issued. This capital can be equal to or less than the issued capital. The portion of nominal value of the issued share capital which is actually paid (or subscribed) by the shareholders forms part of the subscribed capital.

Important Notes:
Called up Capital: It is that part of the issued/subscribed capital which is called up by company to pay on the allotted shares and is to be paid by the shareholders. The portion of the issue price of the shares which a company has demanded or called from shareholders is known as called up capital

Q88: Amal had applied for 7,000 shares of ₹ 10 each at a premium of ₹ 5 per share. He was allotted 4,000 shares on pro rata basis. After having paid ₹ 3 per share on application, he did not pay allotment money of ₹ 7 per share (including premium) and on his subsequent failure to pay the first call of ₹ 3 per share, his shares were forfeited. Calls not received were transferred to Calls-in-Arrears Account. These shares were reissued at the rate of ₹ 8 per share credited as fully paid. 
Pass Journal entries to record the forfeiture and reissue of shares.

Answer 88: 

Calculation of Forfieted amount of Amal:-
Forfieted Amount of Amal = Total Amount received – Securities Premium Reserve
Forfieted Amount of Amal = Rs. 21,000 – Rs. 1,000
Forfieted Amount of Amal = Rs. 20,000

 Q89: 'Telecom Ltd.' issued 20,000 Equity Shares of Rs. 10 each at a premium of Rs. 5 per share, payable as: Rs. 7 (including premium) on application, Rs. 5 on allotment and the balance after three months of allotment. A shareholder to whom 200 shares were allotted failed to pay the allotment and call money and his shares were forfeited. 160 of the forfeited shares were reissued for Rs. 1,600. Give necessary entries in company's Journal and the Balance Sheet. 

Answer 89: 

Things to Remember:
Uncalled Capital: Uncalled Capital is that portion of the issued/subscribed capital that is not called up by the company on the shares allotted.

Important Notes:
Paid up Capital: It is the portion of called up capital which has been paid by the shareholders, to calculate the paid up capital, the amount of instalments in arrears is deducted from the called up capital

Q90: Healthy Foods Ltd. had authorised capital of ₹ 50,00,000, 5,00,000 equity shares of ₹ 10 each issued 3,75,000 equity shares for subscription at a premium of 20% payable ₹ 4 on application, ₹ 5 on allotment and balance as first and final call. The shares were subscribed, and due amounts were received except allotment money on 25,000 shares. These shares were forfeited. Later these shares were reissued at ₹ 7 paid-up and ₹ 50,000 were transferred to Capital Reserve. First and final call was demanded from the shareholders and was received except on 10,000 which was transferred to Calls-in Arrears Account.
Pass the Journal entries for forfeiture, reissue of forfeited shares and first and final call.

Answer 90:

Things to Remember:
Authorised Capital: It is the amount stated in the Memorandum of Association and such amount is the maximum amount that a company can raise as share capital. It is stated separately for each class or kind of shares. As per Section 2 (8) of the Companies Act, 2013, such capital as authorized by the memorandum of a company to be maximum amount of share capital of the company is called as Authorised Capital or Nominal Capital.

Important Notes:
Issued Capital: It is a part of the nominal value or Authorised Share Capital which is issued from time to time for subscription. Therefore, amount of Issued Capital cannot exceed the company's Authorised Share Capital. As per Section 2 (50) of the Companies Act, 2013,such capital of the company that it issues from time to time for subscription.

Q91: Panasonic Ltd. was formed on 1st April, 2010 with an authorised capital of ₹ 2,00,000, divided into 2,000 Equity Shars of ₹ 100 each. 1,000 shares were issued as fully paid to the vendors of building for payment of the purchase consideration. The remaining 1,000 shares were offered for public subscription at a premium of ₹ 5 per share payable as:
 On Application    —       Rs. 4 per share (Including Rs. 2 premium);
 On Allotment    —      Rs.  6 per share (Including Rs.  3 premium);
 On First Call    —      Rs.  5 per share (Including Rs.  1  premium);
 On Second and Final Call    —     Balance Amount
Applications were received for 900 shares which were duly allotted and the allotment money was received in full. At the time of the first call, a shareholder who held 100 shares failed to pay the first call money and his shares were forfeited. These shares were reissued @ ₹ 60 per share, ₹ 70 per share paid-up. Final Call has not been made.
You are required to (i) give necessary Journal entries to record the above transactions and (ii) show how share capital would appear in the Balance Sheet of the company.

Answer 91:

Things to Remember:
Minimum subscription: It is the amount stated in the prospectus that must be subscribed and the amount payable on application for the amount stated as minimum subscription have been paid to and received by the company by cheque or other instrument.

Important Notes:
Minimum amount is not subscribed and the amount payable on application is not received within the specified period, then the application money shall have to be refunded within fifteen days from the closure of the issue.

Q92: VXN Ltd. invited applications for issuing 50,000 equity shares of Rs. 10 each at a premium of Rs. 8 per share. The amount was payable as follows:
 On Application    —       Rs. 4 per share (Including  Rs. 2 premium);
 On Allotment    —      Rs.  6 per share (Including  Rs.  3 premium);
 On First Call    —      Rs.  5 per share (Including  Rs.  1  premium);
 On Second and Final Call    —     Balance Amount
The issue was fully subscribed. Gopal, a shareholder holding 200 shares, did not pay the allotment money and Madhav, a holder of 400 shares, paid his entire share money along with the allotment money. Gopal's shares were immediately forfeited after allotment. Afterwards, the first call was made. Krishna, a holder of 100 shares, failed to pay the first call money and Girdhar, a holder of 300 shares, paid the second call money also along with the first call. Krishna's shares were forfeited immediately after the first call. Second and final call was made afterwards and was duly received. All the forfeited shares were reissued at Rs.9 per share fully paid-up. Pass necessary journal entries for the above transactions in the books of the company.

Answer 92:

Things to Remember:
Meaning Of a Company: As per section 2(20) of the Companies Act, 2013, "Company means a company incorporated under this Act or any previous Company Law."A company (or a joint stock company) is an entity incorporated by a group of persons through the process of law in order to undertake a business.

Important Notes:
Artificial Person: It is an artificial person which is separate from its members (shareholders) and therefore, can own property, enter into contracts, conduct business on its own, sue or be sued for any of its debts or acts.

Q93: Sukanya Ltd. invited applications for issuing 1,00,000 equity shares of  Rs. 10 each. The shares were issued at a premium of Rs. 20 per share. The amount was payable as follows:
On Application and Allotment      —     Rs. 14 per share (including premium of Rs. 10),
On First Call                                   —     Rs.  8 per share (including premium of Rs. 5),
On Final Call                                   —     Rs.  8 per share (including premium of Rs. 5).
Applications for 96,000 shares were received. Rohit, a shareholder holding 7,000 shares, failed to pay both the calls and Namit, a holder of 5,000 shares, did not pay the final call. Shares of Rohit and Namit were forfeited. Of the forfeited shares 8,000 shares including all the shares of Rohit were reissued to Reena at Rs. 8 per share fully paid-up. Pass necessary journal entries for the above transactions in the books of Sukanya Ltd.

Answer 93:
 

Things to Remember:
Limited Liability: The members of a company are liable only to the extent of value of shares subscribed by them or amount guaranteed to be paid at the time of winding up in case of companies limited by guarantee. However, the liability of the members is unlimited, in case if the company that is incorporated with unlimited liabilities, liability of members is unlimited.

Important Notes:
Transferability of Shares: Shares of a company other than a private company are freely transferable. For a private company, transfer of shares is regulated by its Articles of Association.  

Q94: Abhipra Ltd. invited applications for issuing 1,00,000 equity shares of ₹ 10 each. The shares were issued at a premium of ₹ 20 per share. The amount was payable as follows:
On Application               -    Rs. 14 per share (including premium of Rs. 10)
On Allotment                   -    Rs. 8 per share (including premium of Rs. 5)
On First and Final Call   -    Rs. 8 per share (including premium of Rs. 5)
Applications for 90,000 shares were received. Paresh, a shareholder holding 5,000 shares, did not pay the allotment money and call. While Dharam, holder of 3,000 shares, did not pay the call. Shares of Paresh and Dharam were forfeited. Of the forfeited shares, 5,000 shares including 3,000 shares of Paresh and 2,000 shares of Dharam were reissued to Parul at ₹ 8 per share as fully paid-up.
Pass necessary Journal entries for the above transactions in the books of Abhipra Ltd.

Answer 94:

Q95: Ratan Ltd. ‘forfeited 1,000 shares of ₹ 10 each for non-payment of first and final call of ₹ 2 per share. These shares were reissued and gain on reissue transferred to Capital Reserve was ₹ 5,000. Determine the amount realised from reissue of shares.

Answer 95:

Q96: Swasth Ltd. ‘forfeited 2,000 shares of ₹ 10 each for non-payment of final call of ₹ 3 per share. 1,500 of these shares were reissued and gain on reissue transferred to Capital Reserve was ₹ 7,500. Determine the amount realiesd from reissue of shares.

Answer 96:

Q97: Arvind Ltd. issued 20,000 shares of ₹ 10 each at a premium of ₹ 2 per share payable as:
On Application                   ​​​​  -   Rs. 6
On Allotment                        -   Rs. 3 (including premium)
On First Call            ​​​​​​​           ​​​​​​​  -   Rs. 2
On  second and final Call   -    Rs. 1
Applications were received for 30,000 shares. Applications for 6,000 shares were rejected and pro rata allotment was made to the remaining applicants.
Abhay, who was allotted 500 shares failed to pay allotment money and on his subsequent failure to pay the first call his shares were forfeited. Of these, 300 shares were reissued as fully paid-up for ₹ 6 per share.
Journalise the transactions to record the forfeiture and reissue of shares.

Answer 97:

Things to Remember:
Meaning of Pro-rata Allotment Of Shares: This is one of the alternatives available with the company for allotment of shares when the number of shares applied for is more than the number of shares offered for subscription.As per this alternative, all applicants are allotted shares in proportion which is called Partial or Pro rata Allotment.

Important Notes:
If the question is silent or states that 'excess application money received is to be adjusted against allotment', surplus application money is adjusted against allotment money due and excess application money, if any is refunded.

Q98: Alfa Ltd. invited applications for issuing 75,000 equity shares of Rs. 10 each. The amount was payable as follows:
 On application and allotment       -     Rs. 4 per share ,
 On first Call                                   ​​​​​​​ -     Rs.  3 per share,
 On  second and final Call            ​​​​​​​  -     Balance.
Applications for 1,00,000 shares were received. Shares were allotted to all the applicants on pro rata basis and excess money received with applications was transferred towards sums due on first call. Vibha who was allotted 750 shares failed to pay the first call. Her shares were immediately forfeited. Afterwards the second call was made. The amount due on second call was also received except on 1,000 shares applied by Monika. Her shares were also forfeited. All the forefited shares were reissued to Mohit for Rs.9,000 as fully paid-up. Pass necessary journal entries in the Books of Alfa Ltd. for the above transactions.

Answer 98:

Things to Remember:
Management and Ownership: Shareholders of the company are known as owners of the company and therefore, ownership of a company remains with the shareholders. To manage the business activities of a company, representatives are chosen who are known as Directors. Therefore, management and ownership are separate.

Important Notes:
Common Seal: A cannot sign or enter into any contract on its own by signing the documents. Therefore, a common seal is maintained by many companies to affix it on all important documents of the company.

Q99: Himalaya Company Limited issued for public subscription 1,20,000 equity shares of Rs. 10 each at a premium for Rs. 2 per share payable as under:
With Application           ​​​​​​​          ​​​​​​​          ​​​​​​​       -    Rs. 3 per share,
On allotment (including premium)         -    Rs.  5 per share,
On First call             ​​​​​​​          ​​​​​​​          ​​​​​​​            ​​​​​​​ -    Rs.  2 per share 
On Second and Final call              ​​​​​​​          ​​​​​​​-    Rs.  2 per share.
Applications were received for 1,60,000 shares. Allotment was made on pro rata basis. Excess money on application were adjusted against the amount due on allotment. Rohan to whom 4,800 shares were allotted failed to pay for the two calls. These shares were subsequently forfeited after the second call was made. All the shares forfeited were reissued to Teena as fully paid at Rs. 7 per share. Record journal entries and show the transactions relating to share capital in the company's Balance Sheet. 

Answer 99:
 

Things to Remember:
Promotion: A person or a group of persons who agree to start a business in the form of a company are called Promoters. These promoters undertake the responsibility to bring the company into existence by promoting its objects and activities which is the first stage in incorporation of a company.

Important Notes:
After getting the name of the proposed company approved, the promoters have to submit Memorandum of Association, Articles of Association, consent of first directors to act as directors and a declaration that the requirements of the Companies Act have been complied with.

Q100:  SaReGaMa Ltd. invited applications for issuing 80,000 equity shares of ₹ 100 each at a premium of ₹ 10. The amount was payable as follows:
On application    -    Rs. 30 per share,
On allotment    -    Rs. 30 per share (including premium),
On first call    -    Rs. 30 per share
On final call    -    Balance
Applications of 1,20,000 shares were received. Allotment was made on pro rata basis to all applicants. Excess money received on application was adjusted on sums due on allotment. Dhwani, who was allotted 1,600 shares, failed to pay allotment money and Sargam who applied for 6,000 shares did not pay first call money. These shares were forfeited immediately after first call. 2,000 of these shares (including all shares of Dhwani were issued to Tarang for ₹ 95 per share as ₹ 80 paid-up. Pass necessary Journal entries in books of Saregama Ltd. by opening calls in Arrear and Calls in Advance Accounts, if final call has not been made.

Answer 100: 

Things to Remember:
Accounting treatment without opening Calls-in-Arrears Account: In this method, amount S received from the shareholders is credited to the relevant call account. The respective call accounts (first, second, etc.) will continue showing debit balance equal to the total amount unpaid on those calls. On a subsequent date, when the amount of Calls-in- Arrears is received, Bank Account is debited and relevant call account is credited.

Important Notes:
Accounting treatment by opening Calls-in-Arrears Account: In this method, unlike the first method, the unpaid amount is transferred to Calls-in-Arrears Account. On account of this, Share Allotment Account and Shares Call Accounts will not show any balance. The Calls-in Arrears Account will show a debit balance equal to the total unpaid amount on allotment or the calls. At a later date, on receipt of arrear amount, it is credited to the Calls- in-Arrears Account and same is closed with a corresponding debit to Bank A/c.

Q101: XYZ Ltd . is registered with an authorised capital of Rs. 2,00,000 divided into 2,000 shares of Rs. 100 each of which, 1,000 shares were offered for public subscription at a premium of Rs. 5 per share , payable as: 
    On application    -            Rs. 10 per share,
    On allotment    -               Rs. 25 per share (including premium),
    On first call   -                  Rs. 40 per share
    On final call   -                  Rs. 30 per share
Applications were received for 1,800 shares, of which applications for 300 shares were rejected outright; the rest of the applications were allotted 1,000 shares on pro rata basis. Excess application money was transferred to allotment. All the money was duly received except from Sundar, holder of 100 shares, who failed to pay allotment and first call money. His shares were later forfeited and reissued to Shyam at Rs. 60 per share Rs. 70 paid-up. Final call has not been made. Pass necessary Journal entries and prepare Cash Book in the books of XYZ Limited.

Answer 101: 

Things to Remember:
Paid-up Capital: According to section 2(64) of the Companies Act, 2013, Paid-up Share Capital or Share Capital Paid-up means the amount that the shareholder has paid and the company has received against the amount Called-up in respect of the shares towards share capital or has been credited to it as paid-up.

Important Notes:
This is the issue of shares which means the shares are issued by a company against payment received by cheque or a banking instrument. Such issue can be made at par or premium but not at discount and the amount received on such issue can be received either in lump sum or in installments.

Q102: A Ltd. invited applications for issuing 1,00,000 shares of Rs. 10 each at a premium of Rs. 1 per share. The amount was payable as follows:
On Application    –    3 per share;
On Allotment       –    3 per share (including premium);
On First Call        –    3 per share;
On Second and Final Call    –    Balance amount.
Applications for 1,60,000 shares were received. Allotment was made on the following basis:
(i) To applicants for 90,000 shares        –    40,000 shares;
(ii) To applicants for 50,000 shares       –    40,000 shares;
(iii) To applicants for 20,000 shares      –    Full shares.
Excess money paid on application is to be adjusted against the amount due on allotment and calls.Rishabh, a shareholder, who applied for 1,500 shares and belonged to category (ii), did not pay allotment, first and second and final call money.
Another shareholder, Sudha, who applied for 1,800 shares and belonged to category (i), did not pay the first and second and final call money.
All the shares of Rishabh and Sudha were forfeited and were subsequently reissued at Rs. 7 per share fully paid. Pass the necessary Journal entries in the books of A Ltd. Open Calls-in-Arrears Account and Calls-in-Advance Account wherever required.

Answer 102:

Things to Remember:
Shares are issued at Par: It means that the issue price is same as the nominal value (face value) of the shares.

Important Notes:
Shares are issued at Premium: It means that the issue price is more than the nominal value (face value) of the shares. Amount in excess of the nominal value of the share is termed as premium and such amount of premium is credited to Securities Premium Account or Securities Premium Reserve Account.

Q103: Ruchi Ltd. issued for public subscription 40,000 Equity Shares of Rs. 10 each at a premium of Rs. 2 per share payable as: 
       On application        ​​​​​​​    ​​​​​​​    ​​​​​​​    ​​​​​​​    ​​​​​​​ - Rs. 2 per share;
       On allotment           ​​​​​​​    ​​​​​​​    ​​​​​​​        ​​​​​​​ - Rs. 5 per share (including premium),
       On first call                             ​​​​​​​ - Rs. 2 per share,
       On second and final call        -  Rs. 3 per share.
Applications were received for 60,000 shares. Allotment was made on pro rata basis to the applicants for 48,000 shares, the remaining applications being refused. Money overpaid on application was utilized towards sums due on allotment. Ram to whom 1,600 shares were allotted failed to pay the allotment money and Shyam to whom 2,000 shares were allotted failed to pay the two calls. These shares were subsequently forfeited after the second and final call was made. All the forfeited shares were reissued as fully paid-up @ Rs. 8 per share. Give necessary Journal entries for the above transactions.

Answer 103: 
 

Things to Remember:
Section 52(2) Of the Companies Act, 2013 on use Of the amount received as premium on securities: As per section 52(2) of the Companies Act, 2013, use of the amounts received as premium on securities is restricted to the following purposes only:
i) Issuing fully paid bonus shares to the members; 
ii) Writing off preliminary expenses of the company;
iii) Writing off the expenses of, or the commission paid or discount allowed on any issue of securities or debentures of the company;
iv) Providing for the premium payable on the redemption of any redeemable Preference Shares of any debentures of the company; 
v) In purchasing its own shares i.e., in case of buy back of shares.

Important Notes:
Oversubscription means, the number of applications received are more than the number of shares offered.

Q104: Janta Ltd. issued applications for 5,00,000 equity shares of ₹ 10 each, at a premium of ₹ 4 per share. The amount was payable as follows:
On application ₹ 6 (including ₹ 2 premium), on Allotment ₹ 6 (including ₹ 2 premium) and Balance on first and final call.
Applications for 7,50,000 shares were received. Allotment was made to all the applicants on pro rata basis. Mohan to whom 1,000 shares were allotted did not pay allotment and call money. Vikram to whom 500 shares were allotted, did not pay the call money. These shares were forfeited and afterwards reissued @ ₹ 8 per share fully paid-up. Pass the necessary Journal entries.

Answer 104:

Q105: Nitro Paints Ltd invited applications for issuing 1,60,000 equity shares of ₹ 10 each at a premium of ₹ 3 per share. The amount was payable as follows:
On application                  Rs. 6 per share (including premium Rs. 1)
On allotment                    ​​​​​​​ Rs. 4 per share (including premium Rs. 1) and
On first and final call        On First and Final Call.
Applications for 1,80,000 shares were received. Applications for 10,000 shares were rejected and pro rata allotment was made to the remaining applicants. Over payment received on application was adjusted towards sums due on allotment. All calls were made and were duly received except allotment and final call from Aditya who was allotted 3,200 shares. His shares were forfeited. Half of the forfeited shares were reissued for ₹ 43,000 as fully paid-up.
Pass necessary Journal enries for the above transactions in the books of Nitro Paints Ltd.

Answer 105:

Q106: XYZ Ltd. invited applications for issuing 50,000 Equity Shares of Rs.10 each. The amount was payable as: 
On application                     Rs. 3 per share,
On allotment                        Rs. 4 per share,
On first and final call           Rs. 3 per share.
Applications were received for 75,000 shares and pro rata allotment was made as: 
Applicants for 40,000 shares were allotted 30,000 shares on pro rata basis. 
Applicants for 35,000 shares were allotted 20,000 shares on pro rata basis. 
Ramu, to whom 1,200 shares were allotted out of the group applying for 40,000 shares, failed to pay the allotment money. His shares were forfeited immediately after allotment. 
Shamu, who had applied for 700 shares out of the group applying for 35,000 shares, failed to pay the first and final call. His shares were also forfeited. Out of the forfeited shares, 1,000 shares were reissued @ Rs. 8 per share as fully paid-up. 
Pass necessary Journal entries to record the above transactions.

Answer 106: 

Things to Remember:
Calls-in-Advance: An amount which is accepted by the company against the call or calls not yet made is termed as Calls-in-Advance. A company may accept such calls-in-advance amount only if it is allowed by the Articles of Association of the Company.

Important Notes:
Interest on Calls-in-Advance: If the Articles of Association provides for any interest on Calls-in-Advance, then interest can be paid by the company. In case when the Articles of Association is silent, Table F of the Companies Act, 2013 shall apply where company is liable to pay interest at the rate of 12% p.a.

Q107: Konark Ltd. invited applications for issuing 3,00,000 shares of ₹ 10 each. The amount per share was payable as follows: ₹ 3 on application, ₹ 3 on allotment, and ₹ 4 on first and final call.
The company received applications for 4,00,000 shares. Allotment was done as follows:
(i) Applicants of 2,40,000 shares were allotted 2,00,000 shares.
(ii) Applicants of 1,20,000 shares were allotted 80,000 shares.
(iii) Remaining applicants were allotted 20,000 shares.
Money overpaid on applications was adjusted towards sums due on allotment. Divji, a sharehlder, belonging to group (ii), who had applied for 6,000 shares, failed to pay allotment and call money, Faisal, another shareholder, who was allotted 10,000 shares, paid the call money along with allotment. Faisal belonged to group (i).
Divji’s shares were forfeited after the first and final call. Half of the forfeited shares were reissued @ ₹ 10 per share fully paid.
Pass the necessary Journal entries to record the above transactions in the books of the company.

Answer 107:

Q108: Max Ltd. invited application for Rs. 2,00,000 Equity Share of Rs. 10 each to be issued at 20% premium. The money payable per share was: on application Rs. 5, on allotment Rs. 4 (including premium of Rs. 2), First call Rs. 2 and Final call Rs. 1.
Applications were received for 2,40,000 shares and allotment was made as:
(i) to applicants for 1,00,000 shares – in full,
(ii) to applicants for 80,000 shares – 60,000 shares,
(iii) to applicants for 60,000 shares – 40,000 shares.
Applicants of 1,000 shares falling in Category (i) and applicants of 1,200 shares falling in Category (ii) failed to pay allotment money. These shares were forfeited on failure to pay first call. Holders of 1,200 shares falling in Category (iii) failed to pay the first and final call and these shares were forfeited after final call.
1,300 shares [1,000 of Category (i) and 300 of Category (ii)] were reissued at ₹ 8 per share as fully paid-up.
Journalise the above transactions. Prepare Cash Book and Balance Sheet.

Answer 108:

Things to Remember:
If shares are issued for purchase of business: When a business is purchased, both assets and liabilities are taken over for a consideration which can be equal to, more than or less than the difference between values of assets and liabilities.

Important Notes:
Maximum Permissible Discount: At the time of reissue of the forfeited shares, care has to be taken with respect to the maximum permissible discount on the shares reissued. The maximum permissible discount that can be allowed on reissue of forfeited shares is the amount forfeited, i.e., the amount credited to the forfeited shares. In simple terms, the reissue price cannot be less than the amount unpaid on the forfeited shares.

Q109: XYZ Ltd. issued a prospectus inviting applications for 2,000 shares of Rs. 10 each at a premium of Rs. 4 per share, payable as:        
On application                        -    Rs. 6 (including Rs. 1 premium)
On allotment                           -    Rs. 2 (including Rs. 1 premium)
On first  call                            -    Rs. 3 (including Rs. 1 premium)
On second and final call        -    Rs. 3 (including Rs. 1 premium)
Applications were received for 3,000 shares and pro rata allotment was made on the applications for 2,400 shares. It was decided to utilize excess application money towards the amount due on allotment. 
X, to whom 40 shares were allotted, failed to pay the allotment money and on his subsequent failure to pay the first call, his shares were forfeited.
Y, who applied for 72 shares failed to pay the two calls and on his failure, his shares were forfeited. Of the shares forfeited, 80 shares were sold to Z credited as fully paid-up for Rs. 9 per share, the whole of Y's shares being included. Prepare Journal, Cash Book and the Balance Sheet.

Answer 109:

Things to Remember:
Offers: Offer for such securities shall be made only to such persons whose names are recorded by the company before the invitation to subscribe.

Important Notes:
Public Advertisement: No public advertisement or use of any media, marketing or distribution channels or agents to inform the public at large about the offer.

Q110: Eastern India Company Limited, having an authorised capital of ₹ 10,00,000 divided into shares of ₹ 10 each, issued 50,000 shares at a premium of ₹ 3 per share payable as follows:
On Application    Rs. 3 per share
On Alloment (including Premium)    Rs. 5 per share
On First Call (due three months after allotment)    Rs. 3 per share
And the balance as and when required    
Applications were received for 60,000 shares and the directors allotted the shares as follows:
(i) Applicants for 40,000 shares received in full.
(ii) Applicants for 15,000 shares received an allotment of 8,000 shares.
(iii) Applicants for 5,000 shares received 2,000 shares on allotment, excess money being returned.
All amounts due on allotment were received.
The first call was made and the money was received except on 100 shares.
Give Journal and Cash Book entries to record these transactions of the company. Also prepare the Balance Sheet of the company.

Answer 110:

Old Questions

Question: Gopal Ltd. was registered with an authorized capital of 50,00,000 divided into Equity Shares of 100 each. The company offered for public subscription all the shares. Public applied for 45,000 shares and allotment was made to all the applicants. All the calls were made and were duly received except the final call of 20 per share on 500 shares.
​​​​​​​Prepare the Balance Sheet of the company showing the different types of share capital.

Answer:

Balance Sheet of Gopal ltd. as per Schedule VI part I of the Companies act 1956 as at date:

Question: Lennova Ltd. has authorised share capital of Rs. 1,00,00,000 divided into 1,00,000 Equity Shares of Rs. 100 each. It has existing issued and paid up capital of Rs. 25,00,000. It further issued to public 25,000 Equity Shares at a premium of 20% for subscription payable as under:
 On Application:    Rs. 30
 On Allotment:      Rs. 60 and
 On Call:    Balance Amount.
The issue was fully subscribed and allotment was made to all the applicants. The company did not make the call during the year.
Show share capital of the company in the Balance Sheet of the Company.The issue was fully subscribed and allotment was made to all the applicants. The company did not make the call during the year. 

Answer:

Question: The authorized capital of Rs. 16,00,000 of Bharat Ltd. is divide into 1,60,000 Equity Shares of Rs. 10 each. Out of these shares, 80,000 Equity Shares were issued at par to public for subscription. The full nominal value is payable on application. All the shares were subscribed by the public and total amount was paid for. Pass necessary journal entries in the books of the company.

Answer:

Point of Knowledge:-
Authorized Capital 1,60,000 equity shares of Rs. 10 each
Issued and Subscribed Share = 80,000 × 10 = Rs. 8,00,000

Question: Hema Ltd. invited applications for 10,000 shares of Rs. 100 each payable as follows:
Rs. 20 on application, Rs. 30 on allotment, Rs. 20 on first call and the balance on final call.
All the shares were applied and allotted. All the money was duly received.
You are required to journalize these transactions. 

Answer:

Issued and Subscribed Capital 10,000 shares of Rs. 100 each 

Question: Shiva Ltd. issued 1,00,000 Equity Shares of Rs. 10 each at a premium of Rs. 5 per share . The whole amount was payable on application. The issue was fully subscribed. Pass necessary Journal entries.

Answer:

Point of Knowledge: 

Issued 1,00,000 equity shares of Rs. 10 each at a premium of Rs. 5

Applied 1,00,000 shares.

Total Application money = 1,00,000 × (10+5) = Rs. 15,00,000

Question: A company invited applications for 75,000 equity shares of Rs. 100 each. The application money received @ Rs. 30 per share was Rs. 27,00,000. Name the kind of subscription. List the three alternatives for allotting these shares. 

Answer:

Question: Arti Ltd. offered for subscription 20,000 shares of Rs. 10 each payable Rs. 3 on application, Rs. 5 on allotment and balance on first and final call. Applications were received for 30,000 shares. Letters of regret were issued to applicants for 5,000 shares and their application money was refunded. Application money for other 5,000 shares was applied towards the payment for allotment money. The balance of allotment money was also received in due time. Company didn't make first and final call.
You are to prepare the Journal, Cash Book, and Ledger Accounts and show 'Share Capital' in the Balance Sheet of the company.

Answer:

Calls-in-Arrears and Calls-in-Advance
 

Question: Green Ltd. issued 8,000 Equity Shares of Rs. 10 each. Rs. 5 per share was called, payable Rs. 2 on application, Rs. 1 on allotment, Rs. 1 on first call and Rs. 1 on second call. All the money was duly received with the following exceptions:

A who holds 250 shares paid nothing after application.

B who holds 500 shares paid nothing after allotment.

C who holds 1,250 shares paid nothing after first call.

Prepare Journal and the Balance Sheet. 

Answer:

Issued Capital 5,000 Shares of Rs.10 each Rs. 5 called up

Question: Bharat Ltd made the first call of Rs. 2 per share on its 1,00,000 Equity Shares on 1st March , 2006. Ashok, a shareholder, holding 800 shares paid the second and final call amount along with the first call money. The second and final call amount was Rs. 3 per share. Pass necessary journal entries for recording  the above using the Calls-in Advance Account.

Answer:

Question: 2,000 Equity Shares of Rs. 10 each were issued to Limited from whom assets of Rs. 25,000 were acquired. Pass Journal entry.

Answer:

Question: Goodluck Ltd purchased  machinery costing Rs. 10,00,000 from Fair Deals Ltd. The company paid the price by issue of Equity Shares of Rs. 10 each at a premium of 25%.
Pass necessary Journal entries for the above transactions in the books of Goodluck Ltd. 

Answer:

Question: Jain Ltd. purchased machinery costing Rs. 10,00,000 from Ayer Ltd. 50% of the payment was made by cheque and for the remaining 50%, the company issued Equity Shares of Rs. 100 each at a premium of 25%. Pass necessary Journal entries in the books of Jain Ltd. for the above transaction.

Answer:

Question: Sure Ltd. purchased a running business from M/s. Rai Brothers for a sum of Rs. 15,00,000 payable Rs. 12,00,000 in fully paid shares of Rs. 10 each and balance through cheque.
The assets and liabilities consisted of the following:
Plant and Machinery  Rs. 4,00,000     Stock                      Rs. 4,00,000
Building                      Rs. 4,00,000     Cash                        Rs. 3,00,000
Sundry Debtors         Rs. 3,00,000     Sundry Creditors   Rs. 2,00,000
You are required to pass necessary Journal entries in the company's books.

Answer:

.

Question: Better Prospect Ltd. acquired land costing Rs. 1,00,000 and in payment allotted 1,000 Equity Shares of Rs. 100 each as fully paid. Further, the company issued 4,000 Equity Shares to public. The shares were payable as: Rs. 30 on application; Rs. 30 on allotment; Rs. 40 on first and final call. Applications were received for all shares which were allotted. All the money was received except the call on 200 shares. Pass journal entries and prepare Balance Sheet of the company.

Answer:

Question: Alankrit Ltd. purchased machinery of Rs. 10,00,000 from Grand Iron Works Ltd. and paid as follows:
(a) Issued 50,000 Equity Shares of Rs. 10 each at a premium of Rs. 2.
(b) Gave an acceptance of Rs. 3,00,000 payable after 3 months; and
(c) Balance by issuing post-dated cheque of two months of Rs. 1,00,000.
Pass the Journal entries in the books of Alankrit Ltd. and Grand Iron Works Ltd.

Answer:

Question: U.P. Sugar Works Ltd. was registered on 1st January, 2019 with an authorised capital of Rs. 15,00,000 divided into 15,000 shares of Rs. 100 each. The company issued on 1st April, 2019, 5,000 shares of Rs. 100 each at a premium of Rs. 5 per share payable Rs. 25 per share on application, Rs. 30 (including premium) on allotment and the balance in two equal installments of Rs. 25 each on 1st July and 1st October respectively. All the allotments and call moneys were paid when due, except in case of one shareholder who failed to pay the final call on 100 shares held by him. His shares were forfeited on 1st November after giving him a due notice. Show necessary entries in the books of the company to record these transactions.

Answer:

Question: Black Stone Ltd. issued 10,000 Equity Shares of Rs. 10 each at a premium of Rs. 3 per share payable Rs. 5 on application, Rs. 5 (including premium) on allotment and the balance on first call. All the shares offered were applied for and allotted. All the money due on allotment was received except on 200 shares. Call was made. All the amount due thereon was received except on 300 shares. Directors forfeited 200 shares on which both allotment and call money were not received.
Pass necessary Journal entries to record the above.

Answer:

Question: A company issued 10,000 shares of the value of Rs. 10 each, payable Rs. 3 on application, Rs. 3 on allotment and Rs. 4 on the first and final call . All amounts are duly received except the call money on 100 shares. These shares are subsequently forfeited by Directors and are resold as fully paid-up for Rs. 500. Give necessary journal entries for the transactions.

Answer:

Point of Knowledge:-
Reserve Capital and Capital Reserve are two different terms.
Reserve Capital is part of Share Capital that a company resolves not to call except in the event of it being wound up. Capital Reserve is a reserve, which is created out of capital profits and is not free for distribution as dividend.

Question: Bee Ltd. Company forfeited 100 Equity Shares of the face value of Rs. 10 each, Rs. 6 per share called-up, for non-payment of first call of Rs. 2 per share. The forfeited shares were subsequently reissued as fully paid-up @ Rs. 7 each. Give necessary entries in the company's Journal.

Answer:

Question: New Company Ltd. has a nominal capital of Rs. 2,50,000 in shares of Rs. 10. Of these, 4,000 shares were issued as fully paid in payment of building purchased, 8,000 shares were subscribed by the public and during the first year Rs. 5 per share were called-up, payable Rs. 2 on application, Rs. 1 on allotment, Rs. 1 on first call and Rs. 1 on second call. The amounts received in respect of these shares were:
On 6,000 shares Full amount called,
On 1,250 shares     Rs. 4 per share,
On 500 shares        Rs. 3 per share,
On 250 shares        Rs. 2 per share.
The Directors forfeited the 750 shares on which less than Rs. 4 had been paid. The shares were subsequently reissued at Rs. 3 per share.
Pass journal entries recording the above transactions and prepare the company's Balance Sheet.

Answer:

Question: Pass journal entries in the following cases: M Ltd. forfeited 200 Equity Shares of Rs.10 each, issued at a premium of Rs. 5 per share, held by Ram for non-payment of the final call of Rs. 3 per share. Of these, 100 shares were reissued to Vishu at a discount of Rs. 4 per share.

Answer:

Question: Commence Publications Ltd. issued 50,000 Equity Shares of Rs. 10 each at a premium of 10% payable as under:
On application  Rs. 2,    On first call     Rs. 2,
On allotment    Rs. 5,    On final call     Rs. 2.
The calls were made by the company and all the money was duly received except the allotment and call money on 500 shares. These shares were, therefore, forfeited and later reissued @ Rs. 9 per share as fully paid-up.
Pass necessary journal entries to record the above transactions.

Answer:

Question: Krishna & Co. Ltd. with an authorised capital of Rs. 2,00,000 divided into 20,000 Equity Shares of Rs. 10 each, issued the entire amount of the shares payable as:
Rs. 5 on application (including premium Rs. 2 per share),
Rs. 4 on allotment, and
Rs. 3 on call.
All share money is received in full with the exception of the allotment money on 200 shares and the call money on 500 shares (including the 200 shares on which the allotment money has not been paid). The above 500 shares are duly forfeited and 400 of these( including the 200 shares on which allotment money has not been paid) are reissued at Rs. 7 per share payable by the purchaser as fully paid-up. Pass journal entries (including cash transactions) and show the balances in the Balance Sheet giving effect to the above transactions.

Answer:

Question: Midee Ltd. invited application for issuing 27,000 shares of Rs. 100 each payable as follows:
Rs. 50 per share on Application;
Rs. 10 per share on allotment; and
Balance- on first and final call
Applications were received for 40,000 shares. Full allotment was made to the applicants of 7,000 shares. The remaining applicants were allotted 20,000 shares on pro rata basis. Excess money received on applications was adjusted towards allotment and call. Asha, holding 600 shares was belonged to the category of applicants to whom full allotment was made, paid the call money at the time of allotment. Ankur, who belonged to the category of applicants to whom shares were allotted on prorata basis, did not pay anything after application on his 200 shares. Ankur's shares were forfeited after the First and Final call. These shares were later reissued at Rs. 105 per share as fully paid-up. Pass necessary journal entries in the books of Midee Ltd. for the above transactions, by opening Calls-in-Arrears and Calls-in-Advance Accounts wherever necessary.

Answer:

Question: Amrit Ltd. issued 50,000 shares of Rs. 10 each at a premium of Rs. 2 per share payable as Rs. 3 on application, Rs. 4 on allotment (including premium) , Rs. 2 on first call and the remaining on second call. Applications were received for 75,000 shares and pro rata allotment was made to all the applicants. All moneys due were received except allotment and first call from Sonu who applied for 1,200 shares. All his shares were forfeited. The forfeited shares were reissued for Rs. 9,600. Final call was not made. Pass necessary Journal entries.

Answer:

Question: Dogra Ltd. had an authorised capital of Rs. 1,00,00,000 divided into Equity Shares of Rs. 100 each. The company offered 84,000 shares to the public at premium. The amount was payable as follow:
On Application                 —— Rs. 30 per share,
On Allotment                    —— Rs. 40 per share(including premium),
On First and Final call    —— Rs. 50 per share.
Applications were received for 80,000 shares. All sums were duly received except the following: Lakhan, a holder of 200 shares did not pay allotment and call money. Paras, a holder of 400 shares did not pay call money. The company forfeited the shares of Lakhan and Paras. Subsequently the forfeited shares were reissued for Rs. 80 per share as fully paid-up. Show the entries for the above transactions in the Cash Book and journal of the company.

Answer:

Question: Jeevan Dhara Ltd. invited applications for issuing 1,20,000 equity shares of Rs. 10 each at a premium of Rs. 2 per share. The amount was payable as follows:
On application                 - Rs. 2 per share,
On allotment                   - Rs. 5 per share(including premium),
On first and final call     - Balance.
Applications for 1,50,000 shares were received . Shares were allotted to all the applicants on pro rata basis. Excess money received on applications was adjusted towards sums due on allotment. All calls were made. Manu who had applied for 3,000 shares failed to pay the amount due on allotment and first and final call Madhur who was allotted 2,400 shares failed to pay the first and final call. Shares of both Manu and Madhur were forfeited. The forfeited shares were reissued at Rs. 9 per share as fully paid-up. Pass necessary journal entries for the above transactions in the books of Jeevan Dhara Ltd.

Answer:

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

Answer:

Question: Competent Ltd. issued a prospectus inviting applications for 50,000 Equity Shares of Rs. 10 each, payable Rs. 5 as per application (including Rs. 2 as premium), Rs. 4 as per allotment and the balance towards first and final call.
Applications were received for 65,000 shares. Application money received on 5,000 shares was refunded with letter of regret and allotments were made on pro rata basis to the applicants of 60,000 shares. Money overpaid on applications including premium was adjusted on account of sums due on allotment.
Mr. Sharma to whom 700 shares were allotted failed to pay the allotment money and his shares were forfeited by the Directors on his subsequently failure to pay the call money.
All the forfeited shares were subsequently sold to Mr. Jain credited as fully paid-up for Rs. 9 per share.
You are required to set out the Journal entries and the relevant entries in the Cash Book.

Answer 85:

Question: Raja Ltd. invited applications for issuing 50,000 Equity Shares of Rs. 10 each. The amount was payable as follows:
On Application                               - Rs. 3 Per share
On Allotment                                 - Rs. 5 Per share
On First and Final Call                 - Rs. 2 Per share
Applications for 70,000 shares were received. Allotment was made to all applicants on pro rata basis. Excess money received on application was adjusted towards sums due on allotment. Ramesh, who had applied for 700 shares, did not pay the allotment money and on his failure to pay the allotment money his shares were forfeited. Afterwards, the first and the final call were made. Adhar, who had been allotted 500 shares, did not pay the first and final call. His shares were also forfeited. Out of the forfeited shares 900 shares were reissued at Rs. 8 per share as fully paid-up. The reissued shares included all the shares of Ramesh.
Pass necessary journal entries for the above transactions in the books of the company.

Answer:

Question: Prince Limited issued a prospectus inviting applications for 20,000 equity shares of Rs.10 each at a premium of Rs. 3 per share payable as follows:
With application                                        - Rs.2,
On allotment (including premium)          - Rs.5,
On first call                                                - Rs.3,
On second call                                          - Rs.3.
Applications were received for 30,000 shares and allotment was made on pro rata basis. Money overpaid on application s was adjusted to the amount due on allotment. Mr Mohit whom 400 shares were allotted, failed to pay the allotment money and the first call, and his shares were forfeited after the first call. Mr Joly, whom 600 shares were allotted, failed to pay for the two calls and hence, his shares were forfeited. Of the shares forfeited, 800 shares were reissued to Supriya as fully paid for Rs. 9 per share, the whole of Mr. Mohit's shares being included.

Answer:

Question: Super Star Ltd. issued a prospectus inviting applications for 2,000 shares of Rs. 10 each at a premium of Rs. 2 per share, payable as:
On application                               - Rs. 3 per share (including Rs. 1 premium),
On allotment                                 - Rs. 4 per share (including Rs. 1 premium),
On first call                                   - Rs. 3 per share
On second and final call             - Rs. 2 per share.
Applications were received for 3,000 shares and pro rata allotment was made on the applications for 2,400 shares. It was decided to utilize excess application money towards the amount due on allotment. Ramesh, to whom 40 shares were allotted, failed to pay the allotment money and on his subsequent failure to pay the first call, his shares were forfeited. Rajesh, who applied for 72 shares failed to pay the two calls and on such failure, his shares were forfeited. Of the shares forfeited, 80 shares were sold to Krishan credited as fully paid-up for Rs. 9 per share, the whole of Ramesh's shares being included. Give journal entries to record the above transactions (including cash transactions).

Answer:

Question: Bharat Ltd. invited applications for issuing 2,00,000 Equity Shares of Rs. 10 each. The amount was payable as:
On application Rs. 3 per share, on allotment Rs. 5 per share and on first and final call Rs. 2 per share. Applications for 3,00,000 shares were received and pro rata allotment was made to all the applicants on the following basis:
Applicants for 2,00,000 shares were allotted 1,50,000 shares on pro rata basis. Applicants for 1,00,000 shares were allotted 50,000 shares on pro rata basis. Bajaj, who was allotted 3,000 shares out of group applying for 2,00,000 shares failed to pay the allotment money. His shares were forfeited immediately after allotment. Sharma, who had applied for 2,000 shares out of the group applying for 1,00,000 shares failed to pay the first and final call. His shares were also forfeited. Out of the forfeited shares 3,500 shares were reissued as fully paid-up @ Rs. 8 per share. The reissued shares included all the forfeited shares of Bajaj. Give necessary journal entries to record the above transactions.

Answer: