Question

Bright Ltd. issued 80,000 Equity Shares of ₹ 10 each against which it received applications for 1,20,000 Shares. Application Money was ₹ 4, Allotment Money and First and Final Call was of ₹ 3 each.

Pass the Journal entry for allotment of shares in each of the following cases:

Case 1: Excess Applications were refused allotment.

Case 2: Pro rata allotment is made.

Case 3: Applications for 20,000 Shares were refused allotment and pro rata allotment was made to remaining.

Case 4: Applications for 10,000 Shares were refused allotment, applications for 10,000 shares were allotted the shares applied and pro rata allotment was made to the remaining.

Answer 1

Shares issued: 80,000 shares

Application money: ₹ 4 per share

Allotment money: ₹ 3 per share

Total application money received:

1,20,000 × ₹ 4 = ₹ 4,80,000

Application money required on 80,000 shares:

80,000 × ₹ 4 = ₹ 3,20,000

Case 1: Excess Applications were Refused Allotment

Applications rejected:

1,20,000 − 80,000 = 40,000 shares

Refund:

40,000 × ₹ 4 = ₹ 1,60,000

	Journal Entry
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Shares Application A/c   ...Dr.		4,80,000
	To Share Capital A/c			3,20,000
	To Bank A/c			1,60,000
	(Application money transferred and excess application money refunded)

Case 2: Pro rata Allotment is Made

All 1,20,000 applications are considered for 80,000 shares.

Excess application money:

₹ 4,80,000 − ₹ 3,20,000 = ₹ 1,60,000

This excess is adjusted towards allotment.

Journal Entry
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Shares Application A/c Dr.		4,80,000
	To Share Capital A/c			3,20,000
	To Shares Allotment A/c			1,60,000
	(Application money transferred and excess adjusted towards allotment)

Case 3: Applications for 20,000 Shares Refused and Remaining Allotted Pro rata

Refund on 20,000 rejected shares:

20,000 × ₹ 4 = ₹ 80,000

Applications considered for pro rata:

1,20,000 − 20,000 = 1,00,000 shares

Application money on these shares:

1,00,000 × ₹ 4 = ₹ 4,00,000

Excess adjusted towards allotment:

₹ 4,00,000 − ₹ 3,20,000 = ₹ 80,000

Journal Entry
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Shares Application A/c   ...Dr.		4,80,000
	To Share Capital A/c			3,20,000
	To Shares Allotment A/c			80,000
	To Bank A/c			80,000
	(Application money transferred, excess adjusted towards allotment and rejected applications refunded)

Case 4: 10,000 Shares Refused, 10,000 Shares Fully Allotted and Remaining Allotted Pro rata

Refund on rejected applications:

10,000 × ₹ 4 = ₹ 40,000

After rejection and full allotment:

1,20,000 − 10,000 − 10,000 = 1,00,000

These 1,00,000 applications receive the remaining:

80,000 − 10,000 = 70,000 shares

Excess application money on pro rata allotment:

(1,00,000 − 70,000) × ₹ 4 = ₹ 1,20,000

Journal Entry
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Shares Application A/c   ...Dr.		4,80,000
	To Share Capital A/c			3,20,000
	To Shares Allotment A/c			1,20,000
	To Bank A/c			40,000
	(Application money transferred, excess adjusted towards allotment and rejected applications refunded)