Question

X Ltd. invited applications for 4,00,000 shares of ₹10 each. The shares were issued at a premium of ₹7 per share. The amount was payable as follows:

On Application & Allotment	₹9 per share (including premium ₹4)
On First & Final Call	The balance amount (including premium)

Applications were received for 5,70,000 shares and the allotment was made as under:

1. To applicants for 3,50,000 shares : 2,50,000 shares on pro-rata basis
2. To applicants for 2,00,000 shares : 1,50,000 shares on pro-rata basis
3. To applicants for 20,000 shares : NIL

Excess application and allotment money could be utilized for calls.
A, who belonged to the first category and was allotted 500 shares, failed to pay the first call money. B, who belonged to the second category and was allotted 300 shares also failed to pay the first call money. Their shares were forfeited and were re-issued @ ₹15 per share fully paid-up.
Pass necessary Cash-Book and Journal entries.

Answer 1

Dr.	Cash Book				Cr.
Date	Particulars	Amount	Date	Particulars	Amount
	Share Application & Allotment A/c	49,50,000		Refund – Cat III Applicants	1,80,000
	Share First & Final Call A/c	18,46,300
	Share Capital A/c (Re-issue)	12,000
	Total Receipts	68,08,300		Total Payments	1,80,000

 

Journal entries In the books of X Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		51,30,000
	To Share Application & Allotment A/c			51,30,000
	(Being application & allotment money received on 5,70,000 shares @ ₹9)
2.	Share Application & Allotment A/c     ...Dr.		51,30,000
	To Share Capital A/c			20,00,000
	To Securities Premium Reserve A/c			16,00,000
	To Share First & Final Call A/c			15,30,000
	(Being application & allotment money transferred; surplus adjusted to call)
3.	Share First & Final Call A/c     ...Dr.		32,00,000
	To Share Capital A/c			20,00,000
	To Securities Premium Reserve A/c			12,00,000
	(Being call money due on 4,00,000 shares @ ₹8, incl. ₹3 premium)
4.	Bank A/c     ...Dr.		18,46,300
	Calls in Arrears A/c     ...Dr.		9,600
	To Share First & Final Call A/c			18,55,900
	(Being call money received; A – 500 shares & B – 300 shares unpaid)
5.	Share Capital A/c     ...Dr.		4,000
	Securities Premium Reserve A/c     ...Dr.		2,400
	To Share Forfeiture A/c			6,700
	To Calls in Arrears A/c			9,600
	(Being forfeiture of 800 shares for non-payment of call; full ₹17 called up)
6.	Bank A/c     ...Dr.		12,000
	To Share Capital A/c			8,000
	To Securities Premium Reserve A/c			4,000
	(Being 800 forfeited shares re-issued @ ₹15 fully paid)
7.	Share Forfeiture A/c     ...Dr.		6,700
	To Capital Reserve A/c			6,700
	(Being surplus on re-issue transferred to Capital Reserve)

Working note:

1) Application & Allotment = ₹9 per share (₹5 capital + ₹4 premium) on 5,70,000 shares → ₹51,30,000 received; refund ₹1,80,000 to Category III.

2) Call = ₹8 per share (₹5 capital + ₹3 premium) on 4,00,000 shares → ₹32,00,000 due; ₹15,30,000 adjusted from surplus; balance cash = ₹18,46,300 (arrears ₹9,600 from A & B).

3) Forfeiture:
- A: 500 shares → Cap ₹2,500, Premium ₹1,500, Forf. ₹2,700
- B: 300 shares → Cap ₹1,500, Premium ₹900, Forf. ₹4,000
- Total forfeiture = ₹6,700 ⇒ transferred to Capital Reserve.

4) Cash at Bank Closing = ₹68,08,300