Question

A company issued 10,000 shares of ₹10 each at a premium of ₹1 per share, payment to be made as follows:

	₹
On Application	3
On Allotment	4 (including premium)
On First call	2
On Second and final call	2

Applications were received for 20,000 shares. Applications for 5,000 shares were rejected and allotment was made proportionately to the remaining applicants. The directors made both the calls and all the money were received, except the allotment, first call and final call on 400 shares, which were subsequently forfeited. Later, 300 of the forfeited shares were re-issued as fully paid @ ₹15 per share. Give journal entries to record the above. Also prepare the Balance Sheet.

Answer 1

Journal entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		60,000
	To share application A/c			60,000
	(Application money received on 20,000 shares)
2.	Share Application A/c     ...Dr.		60,000
	To Share Capital A/c			30,000
	To Share Allotment A/c			30,000
	(Application money adjusted: 10,000 shares allotted; excess adjusted to allotment)
3.	Share Allotment A/c     ...Dr.		40,000
	To Share Capital A/c			30,000
	To Securities Premium A/c			10,000
	(Allotment due including premium)
4.	Bank A/c     ...Dr.		10,000
	To Share Allotment A/c			10,000
	(Allotment money received in cash)
5.	Share First Call A/c     ...Dr.		20,000
	To Share Capital A/c			20,000
	(First call due on 10,000 shares)
6.	Bank A/c     ...Dr.		19,200
	To Share First Call A/c			19,200
	(First call money received; 400 shares unpaid)
7.	Share Second & Final Call A/c     ...Dr.		20,000
	To Share Capital A/c			20,000
	(Second call due on 10,000 shares)
8.	Bank A/c     ...Dr.		19,200
	To Share Second & Final Call A/c			19,200
	(Second call money received; 400 shares unpaid)
9.	Share Capital A/c     ...Dr.		4,000
	Securities Premium A/c     ...Dr.		400
	To Share Forfeiture A/c			1,200
	To Share Allotment A/c			1,600
	To Share First Call A/c			800
	To Share Second Call A/c			800
	(400 shares forfeited for non-payment of allotment and calls)
10.	Bank A/c     ...Dr.		4,500
	Share Forfeiture A/c     ...Dr.		900
	To Share Capital A/c			3,000
	To Securities Premium A/c			1,500
	(300 shares reissued at ₹15 fully paid including ₹5 premium)
11.	Share Forfeiture A/c     ...Dr.		1,350
	To Capital Reserve A/c			1,350
	(Gain on reissue of 300 shares transferred to Capital Reserve)

Balance Sheet (Extract)

Liabilities	Amt. (₹)	Assets	Amt. (₹)
Shareholders’ Funds:		Bank Balance	1,11,900
Share Capital (10,000 – 400 + 300) × ₹10	99,000	Less: Outstanding Forfeiture not adjusted	(450)
Securities Premium Reserve (₹10,000 – ₹400 + ₹1,500)	11,100
Capital Reserve	1,350
	1,11,450		1,11,450

Working Notes:

1) Details of Issue
Issue: 10,000 shares of ₹10 each at ₹1 premium = ₹11
Total applications = 20,000 shares
5,000 shares rejected; balance 15,000 allotted proportionately for 10,000 shares → Ratio = 15,000:10,000 = 3:2

2) Application Money
Received = 20,000 × ₹3 = ₹60,000
Allotment made for 10,000 shares = ₹3 × 10,000 = ₹30,000
Excess = ₹30,000 adjusted toward allotment

3) Allotment Due
₹4 per share × 10,000 shares = ₹40,000

4) Forfeited Shares (400 shares)
Allotment (₹4), First Call (₹2), Final Call (₹2) not paid
Only application money ₹3 was received on 400 shares = ₹1,200
Called-up = ₹3 + ₹4 + ₹2 + ₹2 = ₹11
Paid = ₹3, Unpaid = ₹8
Premium ₹1 not received → must be reversed

5) Reissue
300 forfeited shares reissued @ ₹15 fully paid Gain = ₹15 − ₹10 = ₹5 per share = premium
Remaining balance in Share Forfeiture = (400 × ₹3) − (300 × ₹3) = ₹450
Capital Reserve = 300 × ₹4.50 = ₹1,350