Question

Max Ltd. invited applications for 2,00,000 Equity Shares of ₹ 10 each to be issued at 20% premium. The money payable per share was: on application ₹ 5, on allotment ₹ 4 (including premium of ₹ 2), first call ₹ 2 and final call ₹ 1.

Applications were received for 2,40,000 shares and allotment was made as:

1. to applicants for 1,00,000 shares - in full,
2. to applicants for 80,000 shares - 60,000 shares,
3. to applicants for 60,000 shares - 40,000 shares.

Applicants of 1,000 shares falling in Category (i) and applicants of 1,200 shares falling in Category (ii) failed to pay allotment money. These shares were forfeited on failure to pay first call. Holders of 1,200 shares falling in Category (iii) failed to pay the first and final calland these shares were forfeited after final call.

1,300 shares [1,000 of Category (i) and 300 of Category (ii)] were reissued at ₹ 8 per share as fully paid-up.

Journalise the above transactions. Prepare Cash Book and Balance Sheet.

Answer 1

Journal Entries in the books of Max Ltd
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Equity Share Application A/c ...Dr.		12,00,000
	To Equity Share Capital A/c			10,00,000
	To Equity Share Allotment A/c			2,00,000
	(Being application money transferred to Share Capital and excess adjusted on allotment)
2.	Equity Share Allotment A/c ...Dr.		8,00,000
	To Equity Share Capital A/c (2,00,000 × ₹2)			4,00,000
	To Securities Premium A/c (2,00,000 × ₹2)			4,00,000
	(Being allotment money due including premium)
3.	Equity Share First Call A/c ...Dr.		4,00,000
	To Equity Share Capital A/c (2,00,000 × ₹2)			4,00,000
	(Being first call money due)
4.	Forfeiture Entry (Categories i & ii):
	Equity Share Capital A/c ...Dr. (1,900 × ₹9 called-up)		17,100
	Securities Premium A/c ...Dr. (Unpaid premium: 1,000 × ₹2 + ₹1,800)		3,800
	To Equity Share Allotment A/c (Arrears)			6,100
	To Equity Share First Call A/c (Arrears)			3,800
	To Forfeited Shares A/c (Balance)			11,000
	(Being 1,900 shares forfeited due to non-payment of allotment and first call)
5.	Equity Share Final Call A/c ...Dr.		1,98,100
	To Equity Share Capital A/c (1,98,100 × ₹1)			1,98,100
	(Being final call money due on remaining active shares)
6.	Forfeiture Entry (Category iii):
	Equity Share Capital A/c ...Dr. (1,200 × ₹10)		12,00,000
	To Equity Share First Call A/c (1,200 × ₹2)			2,40,000
	To Equity Share Final Call A/c (1,200 × ₹1)			1,200
	To Forfeited Shares A/c (Balance)			8,400
	(Being 1,200 shares from Category iii forfeited for non-payment of calls)
7.	Reissue Entry:
	Forfeited Shares A/c ...Dr. (Discount on reissue: 1,300 × ₹2)		2,600
	To Equity Share Capital A/c			2,600
	(Being 1,300 shares reissued at ₹8 per share as fully paid up; bank entry recorded in Cash Book)
8.	Forfeited Shares A/c ...Dr.		4,400
	To Capital Reserve A/c			4,400
	(Being net profit on reissued shares transferred to Capital Reserve)

 

Cash Book
Particulars	₹	Particulars	₹
To Equity Shares Application A/c	12,00,000	By Balance c/d	23,95,000
To Equity Shares Allotment A/c	5,93,900
To Equity Shares First Call A/c	3,93,800
To Equity Shares Final Call A/c	1,96,900
To Equity Share Capital A/c (Reissue)	10,400
Total	23,95,000	Total	23,95,000

 

Balance Sheet of Max Ltd.
Particulars	Note No.	Amount (₹)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds
(a) Share Capital	1	19,94,400
(b) Reserves and Surplus	2	4,00,600
Total		23,95,000
II. ASSETS
1. Current Assets
(a) Cash and Cash Equivalents (Bank Balance)		23,95,000
Total		23,95,000

 

Notes to Accounts
Note No.	Particulars	Amount (₹)	Amount (₹)
1	Share Capital
	Issued Capital:
	2,00,000 Equity Shares of ₹ 10 each		20,00,000
	Subscribed Capital:
	Subscribed and Fully Paid-up:
	1,98,200 Equity Shares of ₹ 10 each	19,82,000
	Add: Balance in Forfeited Shares Account (WN)	12,400	19,94,400
	Total Share Capital		19,94,400
2	Reserves and Surplus
	Securities Premium A/c (₹ 4,00,000 − ₹ 3,800)	3,96,200
	Capital Reserve	4,400	4,00,600