Question

A Limited company invites applications for 50,000 equity shares of ₹10 each payable as follows:

On Application	₹3
On Allotment	₹4
On First Call	₹2
On Final Call	Balance

Applications were received for 70,000 shares. Allotments were made on the following basis:

1. To applicants for 10,000 shares - in full
2. To applicants for 60,000 shares - 40,000 shares

Excess money paid on application was utilised towards allotment money.
A shareholder who was allotted 1,000 shares out of the group applying for 60,000 shares failed to pay allotment money and money due on calls. These shares were forfeited. 600 forfeited shares were re-issued as fully paid on receipt of ₹8 per share.
Prepare Cash Book and journal entries in the books of company.

Answer 1

Dr.	Cash Book (Bank Column)		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Share Application A/c	2,10,000
To Share Allotment A/c	1,37,500
To Share First Call A/c	98,000
To Share Final Call A/c	49,000
To Share Capital A/c (Re‑issue)	4,800
To Balance c/d (Bank)	4,99,300

 

Journal entries In the books of A Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		2,10,000
	To Share Application A/c			2,10,000
	(Being application money received: 70,000 × ₹3)
2.	Share Application A/c     ...Dr.		2,10,000
	To Share Capital A/c (50,000 × ₹3)			1,50,000
	To Share Allotment A/c (excess on pro‑rata)			60,000
	(Being transfer of application; excess adjusted to allotment)
3.	Share Allotment A/c     ...Dr.		2,00,000
	To Share Capital A/c			2,00,000
	(Being allotment due: 50,000 × ₹4)
4.	Bank A/c     ...Dr.		1,37,500
	Calls in Arrears (Allot.) A/c     ...Dr.		2,500
	To Share Allotment A/c			1,40,000
	(Being allotment received after adjusting ₹60,000 excess; one holder unpaid net ₹2,500)
5.	Share First Call A/c     ...Dr.		1,00,000
	To Share Capital A/c			1,00,000
	(Being first call due: 50,000 × ₹2)
6.	Bank A/c     ...Dr.		98,000
	Calls in Arrears (1st Call) A/c     ...Dr.		2,000
	To Share First Call A/c			1,00,000
	(Being first call received; 1,000 shares unpaid)
7.	Share Final Call A/c     ...Dr.		50,000
	To Share Capital A/c			50,000
	(Being final call due: 50,000 × ₹1)
8.	Bank A/c     ...Dr.		49,000
	Calls in Arrears (Final Call) A/c     ...Dr.		1,000
	To Share Final Call A/c			50,000
	(Being final call received; 1,000 shares unpaid)
9.	Equity Share Capital A/c     ...Dr.		10,000
	To Share Allotment A/c			2,500
	To Share First Call A/c			2,000
	To Share Final Call A/c			1,000
	To Share Forfeiture A/c			4,500
	(Being forfeiture of 1,000 shares for non‑payment of allotment & both calls)
10.	Bank A/c     ...Dr.		4,800
	Share Forfeiture A/c     ...Dr.		1,200
	To Share Capital A/c			6,000
	(Being re‑issue of 600 forfeited shares @ ₹8 fully paid; discount ₹2/share from Forfeiture)
11.	Share Forfeiture A/c     ...Dr.		1,500
	To Capital Reserve A/c			1,500
	(Being surplus forfeiture on re‑issued shares transferred to Capital Reserve)

Working Notes:

1) Pro‑rata allotment
(60,000 → 40,000)
3 : 2
= 60,000 × ₹3 − 40,000 × ₹3 = ₹60,000 → adjusted to allotment.

2) Defaulting shareholder
Application paid = 1,500 × ₹3 = ₹4,500; required = 1,000 × ₹3 = ₹3,000
₹1,500 set off against allotment.
Allotment due on 1,000 = ₹4,000 ⇒ arrears ₹2,500 (unpaid).
Call arrears: 1st call ₹2,000; Final call ₹1,000.

3) Cash receipts
Allotment received = ₹2,00,000 − ₹60,000 (excess) − ₹2,500 (arrears) = ₹1,37,500
First Call = ₹1,00,000 − ₹2,000 = ₹98,000
Final Call = ₹50,000 − ₹1,000 = ₹49,000
Re‑issue = 600×₹8 = ₹4,800
Bank balance total = 2,10,000 + 1,37,500 + 98,000 + 49,000 + 4,800 = ₹4,99,300

4) Forfeiture & Capital Reserve
Forfeiture on 1,000 shares = ₹4,500
Re‑issue 600 @ ₹8 fully paid: discount = 600 × ₹2 = ₹1,200
Forfeiture pertaining to 600 shares = `4,500×(600/(1,000))` = ₹2,700
Transfer to Capital Reserve = 2,700 − 1,200 = ₹1,500