Question

Mahadev Ltd. with an authorised capital of ₹5,00,000 divided into 50,000 equity shares of ₹10 each, issues the entire amount of the shares payable as follows:

₹5 on Application (including premium of ₹3 per share)
₹4 on Allotment, and
₹4 on Call.

All share money is received in full with the exception of the allotment on 200 shares and the call money on 500 shares (including the 200 shares on which the allotment money has not been paid).
The above 500 shares are duly forfeited and 400 of these (including the 200 shares on which allotment money has not been paid) are re-issued at ₹8 per share as fully paid up. Pass journal entries (including cash transactions) and show the balances in the Balance Sheet giving effect to the above transactions.

Answer 1

Journal entries In the books of Mahadev Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		2,50,000
	To Share Application A/c			2,50,000
	(Being application money received on 50,000 shares @ ₹5 each)
2.	Share Application A/c     ...Dr.		2,50,000
	To Share Capital A/c (₹2 × 50,000)			1,00,000
	To Securities Premium Reserve A/c (₹3 × 50,000)			1,50,000
	(Being application money transferred to share capital and premium)
3.	Bank A/c     ...Dr.		1,99,200
	To Share Allotment A/c			1,99,200
	(Being allotment money received on 49,800 shares, 200 unpaid)
4.	Share Allotment A/c     ...Dr.		2,00,000
	To Share Capital A/c			2,00,000
	(Being allotment due on 50,000 shares @ ₹4 each)
5.	Bank A/c     ...Dr.		1,98,000
	To Share Call A/c			1,98,000
	(Being call money received on 49,500 shares; 500 unpaid)
6.	Share Call A/c     ...Dr.		2,00,000
	To Share Capital A/c			2,00,000
	(Being call due on 50,000 shares @ ₹4 each)
7.	Share Capital A/c (500 × ₹10)     ...Dr.		5,000
	To Share Allotment A/c (200 × ₹4)			800
	To Share Call A/c (500 × ₹4)			2,000
	To Share Forfeiture A/c			2,200
	(Being 500 shares forfeited for non-payment of allotment/call money)
8.	Bank A/c (400 × ₹8)     ...Dr.		3,200
	Share Forfeiture A/c     ...Dr.		1,800
	To Share Capital A/c (400 × ₹10)			4,000
	(Being 400 forfeited shares reissued @ ₹8 fully paid up)
9.	Share Forfeiture A/c     ...Dr.		400
	To Capital Reserve A/c			400
	(Being gain on re-issue of 200 shares originally unpaid on allotment transferred to capital reserve)
10.	Share Forfeiture A/c     ...Dr.		400
	To Capital Reserve A/c			400
	(Being gain on re-issue of 200 other shares transferred to capital reserve)

 

Balance Sheet of Mahadev Ltd.
Liabilities	Amount (₹)	Assets	Amount (₹)
Shareholders’ Funds (N-1)	4,99,600	Bank Balance (N - 3)	6,50,400
Reserves & Surplus (N-2)	1,50,800
Total	6,50,400	Total	6,50,400

Working Notes:

1) Application:
Received full: 50,000 × ₹5 = ₹2,50,000
50,000 × ₹2 = ₹1,00,000
Premium: 50,000 × ₹3 = ₹1,50,000

2) Allotment Due:
50,000 × ₹4 = ₹2,00,000
200 shares: 200 × ₹4 = ₹800
Received: ₹1,99,200

3) Call Due:
50,000 × ₹4 = ₹2,00,000
Not received on 500 shares: 500 × ₹4 = ₹2,000
Received: ₹1,98,000

4) Forfeited Shares:
Capital credited: 500 × ₹10 = ₹5,000
Share Forfeiture balance:
Application (₹5 received on all): 500 × ₹5 = ₹2,500
Less: Allotment unpaid on 200 = 200 × ₹4 = ₹800
Less: Call unpaid on 500 = 500 × ₹4 = ₹2,000
Share Forfeiture A/c = ₹2,500 – ₹800 – ₹2,000 = ₹2,200

5) Re-issue: 400 shares @ ₹8
Bank: 400 × ₹8 = ₹3,200
Share Capital: 400 × ₹10 = ₹4,000
Discount = ₹2 per share = ₹800
Discount adjusted from Forfeiture: ₹800
Remaining Forfeiture (on 400 shares): ₹2,200 – ₹800 = ₹1,400

Notes to Accounts

Note 1: Share Capital

Particulars	Amount (₹)
Issued & Subscribed Capital:
50,000 Equity Shares of ₹10 each	5,00,000
Less: 500 Forfeited Shares	(5,000)
Add: 400 Reissued Shares	4,000
Total	4,99,600

Note 2: Reserves and Surplus

Particulars	Amount (₹)
(a) Securities Premium Reserve	1,50,000
(b) Capital Reserve	800
Total	1,50,800

Note 3: Cash and Bank Balance

Particulars	Amount (₹)
Application Money (50,000 × ₹5)	2,50,000
Allotment Received	1,99,200
Call Money Received	1,98,000
Reissue of Forfeited Shares	3,200
Total Bank Balance	6,50,400