Question

Alfa Ltd. invited applications for issuing 75,000 equity shares of  ₹  10 each. The amount was payable as follows:

On application and allotment	₹ 4 per share
On first Call	₹ 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 forfeited shares were reissued to Mohit for ₹9,000 as fully paid-up.

Pass necessary journal entries in the Books of Alfa Ltd. for the above transactions.

Answer 1

Journal Entries in the Books of Alfa Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Bank A/c   ...Dr.		4,00,000
	To Equity Shares Application and Allotment A/c			4,00,000
	(Application and allotment money received)
2.	Equity Shares Application and Allotment A/c   ...Dr.		4,00,000
	To Equity Share Capital A/c			3,00,000
	To Equity Shares First Call A/c			1,00,000
	(Application and allotment money transferred and excess adjusted towards First Call)
3.	Equity Shares First Call A/c   ...Dr.		2,25,000
	To Equity Share Capital A/c			2,25,000
	(First Call due on 75,000 shares @ ₹ 3 per share)
4.	Bank A/c   ...Dr.		1,23,750
	Calls-in-Arrears A/c   ...Dr.		1,250
	To Equity Shares First Call A/c			1,25,000
	(Balance First Call received except from Vibha)
5.	Equity Share Capital A/c   ...Dr.		5,250
	To Calls-in-Arrears A/c			1,250
	To Share Forfeiture A/c			4,000
	(750 shares of Vibha forfeited for non-payment of First Call)
6.	Equity Shares Second and Final Call A/c   ...Dr.		2,22,750
	To Equity Share Capital A/c			2,22,750
	(Second and Final Call due on 74,250 shares @ ₹ 3 per share)
7.	Bank A/c   ...Dr.		2,20,500
	Calls-in-Arrears A/c   ...Dr.		2,250
	To Equity Shares Second and Final Call A/c			2,22,750
	(Second and Final Call received except from Monika)
8.	Equity Share Capital A/c   ...Dr.		7,500
	To Calls-in-Arrears A/c			2,250
	To Share Forfeiture A/c			5,250
	(750 shares of Monika forfeited for non-payment of Second and Final Call)
9.	Bank A/c   ...Dr.		9,000
	Share Forfeiture A/c   ...Dr.		6,000
	To Equity Share Capital A/c			15,000
	(1,500 forfeited shares reissued to Mohit for ₹ 9,000 as fully paid-up)
10.	Share Forfeiture A/c   ...Dr.		3,250
	To Capital Reserve A/c			3,250
	(Gain on reissue transferred to Capital Reserve)

Working Notes:

Face value per share: ₹ 10

Amount payable:

Application and Allotment: ₹ 4 per share

First Call: ₹ 3 per share

Second and Final Call:

₹ 10 − ₹ 4 − ₹ 3 = ₹ 3 per share

Applications received = 1,00,000 shares

Shares allotted = 75,000 shares

Pro rata ratio:

1,00,000 : 75,000 = 4 : 3

1. Application and Allotment Money

Money received:

1,00,000 × ₹ 4 = ₹ 4,00,000

Amount required on 75,000 allotted shares:

75,000 × ₹ 4 = ₹ 3,00,000

Excess application money transferred towards First Call:

₹ 4,00,000 − ₹ 3,00,000 = ₹ 1,00,000​

2. Vibha's Shares

Vibha was allotted 750 shares.

Shares applied for:

`750 xx 4/3 = 1,000` shares

Money paid with application:

1,000 × ₹ 4 = ₹ 4,000

Amount required on 750 allotted shares:

750 × ₹ 4 = ₹ 3,000

Excess adjusted towards First Call:

₹ 4,000 − ₹ 3,000 = ₹ 1,000

First Call due:

750 × ₹ 3 = ₹ 2,250

Amount remaining unpaid:

₹ 2,250 − ₹ 1,000 = ₹ 1,250

Amount credited to Share Forfeiture A/c:

₹ 3,000 + ₹ 1,000 = ₹ 4,000​

3. First Call

First Call due:

75,000 × ₹ 3 = ₹ 2,25,000

Less: Excess application money adjusted:

₹ 2,25,000 − ₹ 1,00,000 = ₹ 1,25,000

Less: Amount not paid by Vibha:

₹ 1,25,000 − ₹ 1,250 = ₹ 1,23,750​

4. Second and Final Call

After forfeiture of Vibha's 750 shares, shares outstanding:

75,000 − 750 = 74,250 shares

Second and Final Call due:

74,250 × ₹ 3 = ₹ 2,22,750

Monika had applied for 1,000 shares. Therefore, shares allotted to her:

`1,000 xx 3/4 = 750` shares

Second and Final Call unpaid by Monika:

750 × ₹ 3 = ₹ 2,250

Amount received:

₹ 2,22,750 − ₹ 2,250 = ₹ 2,20,500

5. Forfeiture of Monika's Shares

Called-up value:

750 × ₹ 10 = ₹ 7,500

Second and Final Call unpaid:

₹ 2,250

Amount credited to Share Forfeiture A/c:

₹ 7,500 − ₹ 2,250 = ₹ 5,250

6. Reissue and Capital Reserve

Total forfeited shares:

750 + 750 = 1,500 shares

All were reissued for ₹ 9,000 as fully paid-up.

Share Capital credited:

1,500 × ₹ 10 = ₹ 15,000

Discount on reissue:

₹ 15,000 − ₹ 9,000 = ₹ 6,000

Total amount forfeited:

₹ 4,000 + ₹ 5,250 = ₹ 9,250

Capital Reserve:

₹ 9,250 − ₹ 6,000 = ₹ 3,250