Question

'Telecom Ltd.' issued 20,000 Equity Shares of ₹ 10 each at a premium of ₹ 5 per share, payable as: ₹ 7 (including premium) on application, ₹ 5 on allotment and the balance after three months of allotment. A shareholder to whom 200 shares were allotted failed to pay the allotment and call money and his shares were forfeited. 160 of the forfeited shares were reissued for ₹ 1,600.
Give necessary entries in company's Journal and the Balance Sheet.

Answer 1

Issued and Applied 20,000 equity shares of ₹ 10 each at a premium of ₹ 5

Application	₹	7	(2+5)
Allotment	₹	5
First and Final Call	₹	3
		15	(10+5) per share

Books of Telecom Ltd.
Journal Entries

Date	Particulars		L.F.	Debit Amount (₹)	Credit Amount (₹)
	Bank A/c	Dr.		140,000
	To Equity Share Application A/c				140,000
	(Share application money received for 20,000 shares at Rs 7 each)
	Equity Share Application A/c	Dr.		1,40,000
	To Equity Share Capital A/c				40,000
	To Securities Premium A/c				1,00,000
	(Share application money of 20,000 shares transferred Share Capital at Rs25 per share and Securities Premium at Rs 5 per share)
	Equity Share Allotment A/c	Dr.		1,00,000
	To Equity Share Capital A/c				1,00,000
	(Share allotment due on 20,000 shares at Rs 5 each)
	Bank A/c	Dr.		99,000
	Calls-in-Arrears A/c	Dr.		1,000
	To Equity Share Allotment A/c				1,00,000
	(Share allotment received on 19,800 shares and a holder of 200 shares failed to pay it)
	Equity Share First and Final call A/c	Dr.		60,000
	To Equity Share Capital A/c				60,000
	(First and final call due on 20,000 shares at Rs 3 each)
	Bank A/c	Dr.		59,400
	Calls-in-Arrears A/c	Dr.		600
	To Equity Share First and Final Call A/c				60,000
	(First and final call received on 19,800 shares and a holder of 200 shares failed to pay it)
	Equity Share Capital A/c	Dr.		2,000
	To Share Forfeiture A/c (Rs 2 × 200 Shares)				400
	To Calls-in-Arrears A/c				16,00
	(200 shares of Rs 10 each forfeited for the non-payment amount due Rs 8 per share)
	Bank A/c	Dr.		1,600
	To Equity Share Capital A/c				1,600
	(160 shares of Rs 10 each re-issued for the sum of Rs 1,600)
	Share Forfeiture A/c	Dr.		320
	To Capital Reserve A/c				320
	(Balance in Share Forfeiture of 160 re-issued shares transferred to Capital Reserve)

As per the Schedule III of Companies Act, 2013, the Company's Balance Sheet is presented as follows.

A Ltd.
Balance Sheet

Particulars	Note No.	Amount  (₹)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital	1	1,99,680
b. Reserves and Surplus	2	1,00,320
2. Non-Current Liabilities
3. Current Liabilities
Total		3,00,000
II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents	3	3,00,000
Total		3,00,000

NOTES TO ACCOUNTS 

Note No.	Particulars		Amount (₹)
1	Share Capital
	Authorised Share Capital
	…… Equity Shares of Rs 10 each		-
	Issued Share Capital
	20,000 Equity Shares of Rs 10 each		2,00,000
	Subscribed, Called-up and Paid-up Share Capital
	19,960 Equity Shares of Rs 10 each	1,99,600
	Add: Shares Forfeited (40 shares × Rs 2)	80	1,99,680
2	Reserves and Surplus
	Securities Premium	1,00,000
	Capital Reserve	320	1,00,320
3	Cash and Cash Equivalents
	Cash at Bank		3,00,000

Working Notes: 1. Share Forfeiture of Re-issued Shares

Share Forfeiture (at the time of forfeiture after deducting premium)	Cr.	2	(7 – 5)
Less: Share Forfeiture (at the time of re-issue)	Dr.	NIL
Balance in Share Forfeiture after re-issue	Cr.	2	per share

Capital Reserve = Balance in Share Forfeiture after reissue (per share) × Number of Shares Re-issued = Rs 2 × 160 = Rs 320 

2. Calculation of balance remaining in Share Forfeiture Account (to be shown in the Balance Sheet)

Share Forfeiture (at the time of forfeiture of 200 shares)	=	400	Debit
Less: Share Forfeiture (at the time re-issue of 160 shares)	=	(320)	Credit
Balance in Share Forfeiture Account (for 40 shares which are not re-issued)	=	Rs 80	Debit