Question

Ajanta Ltd. invited applications for issuing 30,000 equity shares of ₹ 10 each at a premium of ₹ 5 per share. The amount was payable as follows:

On Application and Allotment ₹ 10 per share (including premium) On first and final call - Balance

Applications for 50,000 shares were received. Applications for 10,000 shares were rejected and their application money was refunded. Pro-rata allotment was made to the remaining applicants. Excess money received with application was adjusted towards sums due on first and final call. Sonu, an applicant of 4,000 shares, paid his entire share money with application. Vedika, to whom 300 shares were allotted, failed to pay the first and final call. After giving her the mandatory notice, her shares were forfeited.

Pass necessary journal entries for the above transactions in the books of Ajanta Ltd.

Answer 1

Journal Entries In the books of Ajanta Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		5,20,000
	To Equity Share Application & Allotment A/c			5,20,000
2.	Equity Share Application & Allotment A/c   ...Dr.		5,20,000
	To Equity Share Capital A/c (30,000 shares × ₹ 5)			1,50,000
	To Securities Premium A/c (30,000 shares × ₹ 5)			1,50,000
	To Equity Share First & Final Call A/c			1,05,000
	To Share Refund Suspense A/c			1,15,000
	(Being application funds are transferred to Share Capital, Securities Premium, excess adjusted to Call, and balance to Refund account.)
3.	Share Refund Suspense A/c   ...Dr.		1,15,000
	To Bank A/c			1,15,000
	(Being refund of rejected application money and surplus money from Sonu paid back through a bank transaction)
4.	Bank A/c   ...Dr.		29,500
	To Equity Share First & Final Call A/c			29,500
	(Being balance call money received except from Vedika)
5.	Equity Share Capital A/c   ...Dr.		3,000
	To Equity Share First & Final Call (Arrears) A/c			500
	To Share Forfeiture A/c			2,500
	(Being 300 Vedika shares forfeited due to nonpayment of call)

Working Note:

1. Calculation of Total Money Received on Application:

Money from 46,000 shares @ ₹ 10 = ₹ 4,60,000

Money from Sonu (4,000 shares @ ₹ 15) = ₹ 60,000

Total Received = ₹ 5,20,000

2. Adjustment of Excess Application Money:

Total shares applied (excluding rejected) = 40,000

Total shares allotted = 30,000

Excess shares = 10,000.

Excess money from General Category (9,000 shares @ ₹10) = ₹ 90,000

Excess money from Sonu (1,000 shares @ ₹ 15 + 3,000 shares @ ₹ 5 excess call) = ₹ 30,000

Total Excess adjusted against Call = ₹ 1,20,000

3. Calculation of Vedika’s Arrears:

Shares Allotted to Vedika = 300

Shares Applied by Vedika = `300 xx (40,000)/(30,000)` = 400 shares

Money paid on application (400 × ₹ 10) = ₹ 4,000

Adjusted for Application & Allotment (300 × ₹ 10) = ₹ 3,000

Excess money available for Call = ₹ 1,000

Amount Due on Call (300 × ₹ 5) = ₹ 1,500

Calls-in-Arrears (₹ 1,500 − ₹ 1,000) = ₹ 500 

4. Net Bank Receipt on Call:

Total Call Due (30,000 × 5) = ₹ 1,50,000

Less: Already adjusted from Application = ₹ 1,20,000

Less: Vedika’s Arrears = ₹ 500

Net Bank Receipt = ₹ 29,500