Question

Following is an extract from the Journal of MM Ltd. You are required to complete the journal entries filling up the information represented by ‘?’ which is missing from these journal entries.

Journal of MM Ltd. (an extract)
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
	Share Capital A/c     ...Dr.		?
	Securities Premium Reserve A/c     ...Dr.		?
	To Share Forfeiture A/c			?
	To Calls-in-arrears A/c			?
	(Forfeiture of 1,000 shares allotted to a shareholder who had applied for 2,000 shares, for non- payment of allotment and 1st call)
	Bank A/c     ...Dr.		?
	Share Forfeiture A/c     ...Dr.		?
	To Share Capital A/c			?
	(___?___ forfeited shares reissued at ₹7 per share as ₹9 paid up)
	Share Forfeiture A/c     ...Dr.		2,400
	To Capital Reserve A/c			2,400
	(Net Gain on reissued shares transferred to Capital Reserve)

Additional information:

MM Ltd. issued 20,000 Equity shares of the face value of ₹10 each at a premium of ₹5 per share, payable:

₹5 on application;
₹6 on allotment (including premium);
₹3 on first call;

The balance as and when due
You are required to complete:

• The journal entry for forfeiture of shares.
• The journal entry for reissue of shares, clearly mentioning the number of forfeited shares reissued by the company.

Answer 1

Journal of MM Ltd. (an extract)
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
	Share Capital A/c     ...Dr.		9,000
	Securities Premium Reserve A/c (₹5,000 − ₹4,000)(1)     ...Dr.		1,000
	To Share Forfeiture A/c			6,000
	To Calls-in-arrears A/c			4,000
	(Forfeiture of 1,000 shares allotted to a shareholder who had applied for 2,000 shares, for non-payment of allotment and 1st call)
	Bank A/c     ...Dr.		4,200
	Share Forfeiture A/c     ...Dr.		1,200
	To Share Capital A/c			5,400
	(600 forfeited shares reissued at ₹7 per share as ₹9 paid up)
	Share Forfeiture A/c     ...Dr.		2,400
	To Capital Reserve A/c			2,400
	(Net gain on 600 reissued shares @ ₹4 per share transferred to Capital Reserve)

Working Notes:

1)

	₹
Excess application money received: 2,000 shares − 1,000 shares = 1,000 shares × 5	5,000
Amount due on allotment = 1,000 shares × ₹6	6,000
Less: Excess received on application: (Out of this amount 1,000 × ₹1 = ₹1,000 is a part of share capital and balance of ₹4,000 is part of securities premium)	(5,000)
Amount not paid on allotment	1,000
Amount not paid on 1st Call (1,000 × ₹3)	3,000
Calls in Arrears amount	4,000

2) Forfeited amount on 1,000 shares is ₹6,000 which amounts to ₹6 per share. Since loss on reissue is ₹2 per share, net gain of ₹4 per share is transferred to Capital Reserve.

Thus number of reissued shares is `2400/4 = 600`