Question

In the year 2022-23, Paresh Ltd. invited applications for 25,000 equity shares of ₹10 each payable as follows:

On application	₹5 per share
On allotment	₹3 per share
On call	₹2 per share

Applications were received for 50,000 shares. It was decided:

1. To allot 50% to Shyam who had applied for 10,000 shares.
2. To allot in full to Kevin who had applied for 10,000 shares.
3. To allot the balance of the available shares on pro rata basis among the other applicants.
4. To utilise the excess application money in part payment of allotment and final call.

Till the Balance Sheet as at 31st March, 2023, the company had asked the shareholders to pay up to the allotment stage.
The amount due on the allotment was received from all shareholders except from Kevin, whose shares were immediately forfeited by the company.
You are required to pass journal entries in the books of the company to record the above transactions.

Answer 1

Journal entries In the books of Paresh Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		2,50,000
	To Equity Share Application A/c			2,50,000
	(Share application money received)
2.	Equity Share Application A/c     ...Dr.		2,50,000
	To Equity Share Capital A/c			1,25,000
	To Equity Share Allotment A/c (₹15,000 + ₹30,000)			45,000
	To Calls in Advance A/c ₹10,000 + ₹2000)			30,000
	To Bank A/c			50,000
	(Share application money adjusted)
3.	Equity Share Allotment A/c     ...Dr.		75,000
	To Equity Share Capital A/c			75,000
	(Share allotment due)
4.	Calls in Arrears A/c     ...Dr.		30,000
	To Equity Share Allotment A/c			30,000
	(Share allotment money in arrear)
5.	Equity Share Capital A/c     ...Dr.		80,000
	To Calls in Arrears A/c			30,000
	To Share Forfeiture A/c			50,000
	(Forfeiture of 10,000 shares of Kevin)

Working Notes:

1) Allotment was made as follows:

	Shares Applied	Shares Allotted
To Shyam	10,000	5,000
To Kevin	10,000	10,000
On Pro-rata basis (Balance)	30,000	10,000
	50,000	25,000

2) Excess application money from Shyam: 

	₹
10,000 shares − 5,000 shares = 5,000 shares × ₹5	25,000
Less: Amount adjusted on allotment: 5,000 × ₹3	(15,000)
Adjusted on 1st & Final Call (Transferred to Calls in Advance)	10,000

3) 

Excess application money on shares allotted on pro-rata basis: 30,000 − 10,000 = 20,000 shares × ₹5	1,00,000
Less: Adjusted on allotment: 10,000 × ₹3	(30,000)
	70,000
Less: Adjusted on 1st & Final Call (Transferred to Calls in Advance: 10,000 × ₹2)	(20,000)
Excess application money returned	50,000