Question

Premier Tools Ltd. invited applications for issuing 2,00,000 equity shares of ₹10 each at a premium of ₹2 per share. The amount was payable as follows:

On application	₹5 per share (including premium)
On allotment	₹3 per share
On first & final call	Balance

Applications were received for 2,50,000 shares. Applications for 10,000 shares were rejected and pro-rata allotment was made to the remaining applicants. Over payments received on application were adjusted towards sums due on allotment.

All calls were made and duly received except allotment and first and final call from Naveen who applied for 7,200 shares. His shares were forfeited. Half of the forfeited shares were reissued for ₹48,000 as fully paid.

Pass the necessary journal entries for the above transactions in the books of Premier Tools Ltd. Open calls-in-arrears account wherever required.

Answer 1

Journal entries In the books of Premier Tools Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		12,50,000
	To Share Application A/c			12,50,000
	(Received application money on 2,50,000 shares)
2.	Share Application A/c     ...Dr.		12,50,000
	To Share Capital A/c			6,00,000
	To Security Premium Reserve A/c			4,00,000
	To Share Allotment A/c			2,00,000
	To Bank A/c			50,000
	(Transfer of application money to Share Capital)
3.	Share Allotment A/c     ...Dr.		6,00,000
	To Share Capital A/c			6,00,000
	(Allotment due on 2,00,000 shares)
4.	Bank A/c     ...Dr.		3,88,000
	Calls in arrears A/c     ...Dr.		12,000
	To Share Allotment A/c			4,00,000
	(Allotment money received)
5.	Share First and Final Call A/c     ...Dr.		8,00,000
	To Share Capital A/c			8,00,000
	(Call money due on 2,00,000 shares)
6.	Bank A/c     ...Dr.		7,76,000
	Calls-in-Arrears A/c (6000 × 4)     ...Dr.		24,000
	To Share First and Final Call A/c			8,00,000
	(Received call money)
7.	Share Capital A/c (6000 × 10)     ...Dr.		60,000
	To Calls in Arrears A/c (12,000 + 24,000)			36,000
	To Share Forfeiture A/c			24,000
	(Forfeiture of 6000 shares for non-payment of allotment and call money)
8.	Bank A/c     ...Dr.		48,000
	To Share Capital A/c			30,000
	To Security Premium Reserve A/c			18,000
	(Forfeiture of 6000 shares for non-payment of allotment and call money)
9.	Share Forfeiture A/c     ...Dr.		12,000
	To Capital Reserve A/c			12,000
	(Profit on re-issue transferred to Capital Reserve Account)

Working Notes:

(1) Computation Table

Categories	Shares Applied	Shares Allotted	Money received on Application  @ ₹5 each	Money transferred to Share Capital @ ₹3 each	Money transferred to SPR @ ₹2 each	Excess Application money	Amount due on Allotment	Amount adjusted on allotment	Money refunded
I	2,40,000	2,00,000	12,00,000	6,00,000	4,00,000	2,00,000	6,00,000	2,00,000
II	10,000	-	50,000						50,000
Total	2,50,000	2,00,000	12,50,000	6,00,000	4,00,000				50,000

(2) Calculation of Shares allotted to Naveen:

Shares allotted to Naveen = 6000 shares = `(2,00,000)/(2,40,000) xx 7200`

Amount unpaid by Naveen
Amount received on application (7200 × 5)	36,000
Less: actual transferred to share capital (6000 × 5)	30,000
Excess	6,000
Amount due on the allotment (6000 × 3)	18,000
Less: excess adjusted	(6000)
Calls in arrears	12,000

(3) Share forfeiture amount transferred to capital reserve  = `(24,000)/(6,000) xx 3,000 =  ₹12,000`