Question

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 1

Journal Entries in the Books of the Company
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Share Capital A/c   ...Dr.		52,000
	Securities Premium A/c   ...Dr.		20,000
	To Share Allotment A/c			19,000
	To Calls-in-Arrears A/c			12,000
	To Share Forfeiture A/c			21,000
	(4,000 shares forfeited for non-payment of allotment and First Call)
2.	Bank A/c   ...Dr.		32,000
	Share Forfeiture A/c   ...Dr.		8,000
	To Share Capital A/c			40,000
	(4,000 forfeited shares reissued at ₹ 8 per share as fully paid-up)
3.	Share Forfeiture A/c   ...Dr.		12,000
	To Capital Reserve A/c			12,000
	(Gain on reissue transferred to Capital Reserve)

Working Note:

Face value per share: ₹ 10

Premium per share: ₹ 5

Issue price:

₹ 10 + ₹ 5 = ₹ 15

Amal applied for 7,000 shares and was allotted 4,000 shares on pro rata basis.

Pro-rata ratio:

7,000 : 4,000 = 7 : 4

1. Application Money

Application money paid:

7,000 × ₹ 3 = ₹ 21,000

Application money required on 4,000 shares:

4,000 × ₹ 3 = ₹ 12,000

Excess application money adjusted towards allotment:

₹ 21,000 − ₹ 12,000 = ₹ 9,000​

2. Allotment Money

Allotment due:

4,000 × ₹ 7 = ₹ 28,000

Amount adjusted from excess application money:

₹ 28,000 − ₹ 9,000 = ₹ 19,000

Allotment money not received = ₹ 19,000

3. First Call

First Call due:

4,000 × ₹ 3 = ₹ 12,000

This amount was not received and transferred to Calls-in-Arrears.

4. Forfeiture

Called-up capital:

4,000 × (₹ 3 + ₹ 7 + ₹ 3) = ₹ 52,000

Unpaid allotment + call:

₹ 19,000 + ₹ 12,000 = ₹ 31,000

Amount received towards capital:

Application money on allotted shares:

4,000 × ₹ 3 = ₹ 12,000

Excess application adjusted towards allotment:

₹ 9,000

Total amount forfeited:

₹ 12,000 + ₹ 9,000 = ₹ 21,000

Less: Premium not received:

4,000 × ₹ 5 = ₹ 20,000

Forfeited Shares A/c credited = ₹ 20,000

5. Reissue

Shares reissued:

4,000 shares

Reissue price = ₹ 8 per share

Cash received:

4,000 × ₹ 8 = ₹ 32,000

Share Capital credited:

4,000 × ₹ 10 = ₹ 40,000

Discount on reissue:

₹ 40,000 − ₹ 32,000 = ₹ 8,000

Capital Reserve:

₹ 20,000 − ₹ 8,000 = ₹ 12,000