Question

Panasonic Ltd. was formed on 1st April, 2024 with an authorised capital of ₹ 20,00,000, divided into 20,000 Equity Shares of ₹ 100 each. 10,000 shares were issued as fully paid to the vendors of building for payment of the purchase consideration. The remaining 10,000 shares were offered for public subscription at a premium of ₹ 5 per share payable as:

On Application	₹ 10 per share
On Allotment	₹ 25 per share (including premium)
On First Call	₹40 per share
On Final Call	₹30 per share

Applications were received for 9,000 shares which were duly allotted and the allotment money was received in full. At the time of the first call, a shareholder who held 1,000 shares failed to pay the first call money and his shares were forfeited. These shares were reissued @ ₹ 60 per share, ₹ 70 per share paid-up. Final call has not been made.

You are required to (i) give necessary Journal entries to record the above transactions and (ii) show how share capital would appear in the Balance Sheet of the company.

Answer 1

Journal Entries in the Books of Panasonic Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Building A/c   ...Dr.		10,00,000
	To Vendors A/c			10,00,000
	(Building purchased from vendors)
2.	Vendors A/c   ...Dr.		10,00,000
	To Equity Share Capital A/c			10,00,000
	(10,000 Equity Shares of ₹ 100 each issued as fully paid-up to vendors)
3.	Bank A/c   ...Dr.		90,000
	To Equity Shares Application A/c			90,000
	(Application money received on 9,000 shares @ ₹ 10 per share)
4.	Equity Shares Application A/c   ...Dr.		90,000
	To Equity Share Capital A/c			90,000
	(Application money transferred to Share Capital)
5.	Equity Shares Allotment A/c   ...Dr.		2,25,000
	To Equity Share Capital A/c			1,80,000
	To Securities Premium A/c			45,000
	(Allotment money due including premium ₹ 5 per share)
6.	Bank A/c   ...Dr.		2,25,000
	To Equity Shares Allotment A/c			2,25,000
	(Allotment money received in full)
7.	Equity Shares First Call A/c   ...Dr.		3,60,000
	To Equity Share Capital A/c			3,60,000
	(First Call due on 9,000 shares @ ₹ 40 per share)
8.	Bank A/c   ...Dr.		3,20,000
	Calls-in-Arrears A/c   ...Dr.		40,000
	To Equity Shares First Call A/c			3,60,000
	(First Call received except on 1,000 shares)
9.	Equity Share Capital A/c   ...Dr.		70,000
	To Calls-in-Arrears A/c			40,000
	To Share Forfeiture A/c			30,000
	(1,000 shares forfeited for non-payment of First Call)
10.	Bank A/c   ...Dr.		60,000
	Share Forfeiture A/c   ...Dr.		10,000
	To Equity Share Capital A/c			70,000
	(1,000 forfeited shares reissued @ ₹ 60 per share as ₹ 70 paid-up)
11.	Share Forfeiture A/c   ...Dr.		20,000
	To Capital Reserve A/c			20,000
	(Gain on reissue transferred to Capital Reserve)

 

Balance Sheet
Particulars	Note No.	₹
EQUITY AND LIABILITIES
Shareholders' Funds
Share Capital	1	16,30,000
Reserves and Surplus: Securities Premium		45,000
Capital Reserve		20,000
Total		16,95,000

 

Notes to Accounts
Particulars	₹
Note 1: Share Capital
Authorised Capital:
20,000 Equity Shares of ₹ 100 each	20,00,000
Issued Capital:
20,000 Equity Shares of ₹ 100 each	20,00,000
Subscribed Capital:
10,000 Equity Shares of ₹ 100 each, fully paid-up	10,00,000
9,000 Equity Shares of ₹ 100 each, ₹ 70 paid-up	6,30,000
Total Share Capital	16,30,000

Working Note:

Face value per share: ₹ 100

Premium per share: ₹ 5

Public issue payment:

Application: ₹ 10

Allotment: ₹ 25, including premium ₹ 5

First Call: ₹ 40

Final Call: ₹ 30, not yet made

Therefore, Share Capital called-up per public share:

₹ 10 + (₹ 25 − ₹ 5) + ₹ 40 = ₹ 70

1. Shares issued to Vendors

10,000 × ₹ 100 = ₹ 10,00,000

2. Public Issue

Shares subscribed = 9,000

Application:

9,000 × ₹ 10 = ₹ 90,000

Allotment:

9,000 × ₹ 25 = ₹ 2,25,000

Capital portion:

9,000 × ₹ 20 = ₹ 1,80,000

Premium:

9,000 × ₹ 5 = ₹ 45,000

First Call:

9,000 × ₹ 40 = ₹ 3,60,000

Unpaid on 1,000 shares:

1,000 × ₹ 40 = ₹ 40,000

Amount received:

₹ 3,60,000 − ₹ 40,000 = ₹ 3,20,000​

3. Forfeiture of 1,000 Shares

Called-up Share Capital:

1,000 × ₹ 70 = ₹ 70,000

Amount already received towards capital:

1,000 × (₹ 10 + ₹ 20) = ₹ 30,000

Therefore, Share Forfeiture A/c = ₹ 30,000.

4. Reissue

1,000 shares were reissued for ₹60 per share as ₹70 paid-up.

Cash received:

1,000 × ₹ 60 = ₹ 60,000

Share Capital credited:

1,000 × ₹ 70 = ₹ 70,000

Discount on reissue:

₹ 70,000 − ₹ 60,000 = ₹ 10,000

Capital Reserve:

₹ 30,000 − ₹ 10,000 = ₹ 20,000