Question

X Ltd. offered 25,000 shares of ₹ 100 each payable as ₹ 25 on application, ₹ 20 on allotment, ₹ 30 on first call and the balance on final call. Applications were received for 40,000 shares out of which shares were allotted to the applicants for 35,000 shares on a pro-rata basis. All shareholders paid the allotment money excepting Mr. Gopal who was allotted 500 shares. These shares were forfeited immediately. The first call was made thereafter. The forfeited shares were re-issued @ ₹ 78 per share ₹ 75 paid up. The final call was not made. Pass necessary journal entries.

Answer 1

Journal entries
In the books of X Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		10,00,000
	To Share Application A/c			10,00,000
	(Being Application money received on 40,000 shares @ ₹ 25)
2.	Share Application A/c     ...Dr.		10,00,000
	To Share Capital A/c			6,25,000
	To Share Allotment A/c			2,50,000
	To Bank A/c			1,25,000
	(Being Application money adjusted: capital & balance to allotment)
3.	Share Allotment A/c     ...Dr.		5,00,000
	To Share Capital A/c			5,00,000
	(Being Allotment due on 25,000 shares @ ₹ 20)
4.	Bank A/c     ...Dr.		2,45,000
	To Share Allotment A/c			2,45,000
	(Being 24500 shares paid allotment)
5.	Share Capital A/c     ...Dr.		22,500
	To Forfeiture Share A/c			17,500
	To Share Allotment  A/c			5,000
	(Being 500 shares forfeited)
6.	Share First Call A/c     ...Dr.		7,35,000
	To Share Capital A/c			7,35,000
	(Being Share First Call due)
7.	Bank A/c     ...Dr.		7,35,000
	To Share First Call A/c			7,35,000
	(Being Share First call received on 24,500 shares)
8.	Bank A/c      ...Dr.		39,000
	To Share Capital A/c			37,500
	To Securities Premium A/c			1,500
	(Being 500 forfeited shares reissued @ ₹ 78 fully paid-up to ₹ 75)
9.	Forfeiture Share A/c     ...Dr.		17,500
	To Capital Reserve A/c			17,500
	(Being Profit on reissue of forfeited shares transferred to Capital Reserve)

Working Note:

Calculation of Forfeiture Share amount of Mr. Gopal

Applied shares = `(35,000)/(25,000)xx500` = 700 shares

Application received on 700 shares (700 × 25) = ₹ 17,500 

Actual application (500 × 25) = ₹ 12,500

Excess application to be used on allotment = 17,500 – 12,500 = ₹ 5,000

Actual Allotment (500 × 20) = ₹ 10,000

Allotment not paid by Mr. Gopal = 10,000 – 5,000 = 5,000