Question

Janta Ltd. issued applications for 5,00,000 equity shares of ₹ 10 each, at a premium of ₹ 4 per share. The amount was payable as follows:

On application ₹ 6 (including ₹ 2 premium), on Allotment ₹ 6 (including ₹ 2 premium) and Balance on first and final call.

Applications for 7,50,000 shares were received. Allotment was made to all the applicants on pro rata basis. Mohan to whom 1,000 shares were allotted did not pay allotment and call money. Vikram to whom 500 shares were allotted, did not pay the call money. These shares were forfeited and afterwards reissued @ ₹ 8 per share fully paid-up. Pass the necessary Journal entries.

Answer 1

Journal Entries in the Books of Janta Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Bank A/c   ...Dr.		45,00,000
	To Equity Shares Application A/c			45,00,000
	(Application money received on 7,50,000 shares @ ₹ 6 per share)
2.	Equity Shares Application A/c   ...Dr.		45,00,000
	To Equity Share Capital A/c			20,00,000
	To Securities Premium A/c			10,00,000
	To Equity Shares Allotment A/c			15,00,000
	(Application money transferred and excess adjusted towards allotment)
3.	Equity Shares Allotment A/c   ...Dr.		30,00,000
	To Equity Share Capital A/c			20,00,000
	To Securities Premium A/c			10,00,000
	(Allotment money due @ ₹ 6 per share including premium ₹ 2)
4.	Bank A/c   ...Dr.		14,97,000
	Calls-in-Arrears A/c   ...Dr.		3,000
	To Equity Shares Allotment A/c			15,00,000
	(Balance allotment money received except from Mohan)
5.	Equity Shares First and Final Call A/c   ...Dr.		10,00,000
	To Equity Share Capital A/c			10,00,000
	(First and Final Call due @ ₹ 2 per share)
6.	Bank A/c   ...Dr.		9,97,000
	Calls-in-Arrears A/c   ...Dr.		3,000
	To Equity Shares First and Final Call A/c			10,00,000
	(Call money received except from Mohan and Vikram)
7.	Equity Share Capital A/c   ...Dr.		10,000
	Securities Premium A/c   ...Dr.		2,000
	To Calls-in-Arrears A/c			5,000
	To Share Forfeiture A/c			7,000
	(Mohan's 1,000 shares forfeited for non-payment of allotment and call)
8.	Equity Share Capital A/c   ...Dr.		5,000
	To Calls-in-Arrears A/c			1,000
	To Share Forfeiture A/c			4,000
	(Vikram's 500 shares forfeited for non-payment of call)
9.	Bank A/c   ...Dr.		12,000
	Share Forfeiture A/c   ...Dr.		3,000
	To Equity Share Capital A/c			15,000
	(1,500 forfeited shares reissued @ ₹ 8 per share as fully paid-up)
10.	Share Forfeiture A/c   ...Dr.		8,000
	To Capital Reserve A/c			8,000
	(Gain on reissue transferred to Capital Reserve)

Working Notes:

Face value per share: ₹ 10

Premium per share: ₹ 4

Amount payable:

Application: ₹ 6, including premium ₹ 2

Allotment: ₹ 6, including premium ₹ 2

First and Final Call:

₹ 14 − (₹ 6 + ₹ 6) = ₹ 2

Applications received = 7,50,000 shares

Shares allotted = 5,00,000 shares

Pro rata ratio:

7,50,000 : 5,00,000 = 3 : 2

1. Application Money

7,50,000 × ₹ 6 = ₹ 45,00,000

Application money required:

5,00,000 × ₹ 6 = ₹ 30,00,000

Excess application money:

₹ 45,00,000 − ₹ 30,00,000 = ₹ 15,00,000

This is adjusted towards allotment.

2. Mohan's Shares

Mohan was allotted 1,000 shares.

Shares applied for:

`1,000 xx 3/2 = 1,500` shares

Application money paid:

1,500 × ₹ 6 = ₹ 9,000

Application money required:

1,000 × ₹ 6 = ₹ 6,000

Excess adjusted towards allotment:

₹ 9,000 − ₹ 6,000 = ₹ 3,000

Allotment due:

1,000 × ₹ 6 = ₹ 6,000

Allotment money not received:

₹ 6,000 − ₹ 3,000 = ₹ 3,000

Call unpaid:

1,000 × ₹ 2 = ₹ 2,000

Premium on allotment not received:

1,000 × ₹ 2 = ₹ 2,000

Amount credited to Share Forfeiture A/c:

₹ 7,000

3. Vikram's Shares

Vikram was allotted 500 shares and did not pay the call.

Call unpaid:

500 × ₹ 2 = ₹ 1,000

Amount credited to Share Forfeiture A/c:

500 × ₹ 8 = ₹ 4,000

4. Reissue and Capital Reserve

Total forfeited shares:

1,000 + 500 = 1,500

Cash received on reissue:

1,500 × ₹ 8 = ₹ 12,000

Share Capital credited:

1,500 × ₹ 10 = ₹ 15,000

Discount on reissue:

₹ 15,000 − ₹ 12,000 = ₹ 3,000

Total amount forfeited:

₹ 7,000 + ₹ 4,000 = ₹ 11,000

Capital Reserve:

₹ 11,000 − ₹ 3,000 = ₹ 8,000