Question

AB Ltd. invited applications for issuing 1,00,000 equity shares of no each. The amount was payable as follows:

On Application	₹3 per share
On Allotment	₹3 per share
On First and Final Call	₹4 per share

Applications for 1,50,000 shares were received and pro-rata allotment was made to all applicants as follows:
Applicants for 80,000 shares were allotted 60,000 shares on pro-rata basis.
Applicants for 70,000 shares were allotted 40,000 shares on pro-rata basis.
Sudha, to whom 600 shares were allotted out of the group applying for 80,000 shares failed to pay the allotment money. Her shares were forfeited immediately after allotment.
Asha, who had applied for 1,400 shares out of the group applying for 70,000 shares failed to pay the first and final call. Her shares were also forfeited.
Out of the forfeited shares 1,000 were re-issued @ ₹8 per share fully paid-up. The re-issued shares included all the forfeited shares of Sudha.
Pass necessary journal entries to record the above transactions.

Answer 1

Journal Entries In the books of AB Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		4,50,000
	To Share Application A/c			4,50,000
	(Application money received on 1,50,000 shares @ ₹3)
2.	Share Application A/c     ...Dr.		4,50,000
	To Share Capital A/c			3,00,000
	To Share Allotment A/c			1,50,000
	(Transfer of application money to share capital and allotment, excess adjusted on allotment)
3.	Share Allotment A/c     ...Dr.		3,00,000
	To Share Capital A/c			3,00,000
	(Allotment money due on 1,00,000 shares @ ₹3)
4.	Bank A/c     ...Dr.		1,48,800
	To Share Allotment A/c			1,48,800
	(Being allotment money received, excluding Sudha’s arrears ₹1,200)
5.	Share Capital A/c     ...Dr.		3,600
	To Share Allotment A/c			1,200
	To Share Forfeiture A/c			2,400
	(Being forfeiture of 600 shares of Sudha for non-payment of allotment; ₹6 called-up)
6.	Share First & Final Call A/c     ...Dr.		3,97,600
	To Share Capital A/c			3,97,600
	(Being call money due @ ₹4 on 99,400 shares)
7.	Bank A/c     ...Dr.		3,94,400
	To Share First & Final Call A/c			3,94,400
	(Being call money received except Asha’s ₹3,200)
8.	Share Capital A/c     ...Dr.		8,000
	To Share First & Final Call A/c			3,200
	To Share Forfeiture A/c			4,800
	(Being forfeiture of 800 shares of Asha for non-payment of call; ₹10 called-up)
9.	Bank A/c     ...Dr.		8,000
	Share Forfeiture A/c     ...Dr.		2,000
	To Share Capital A/c			10,000
	(Being re-issue of 1,000 forfeited shares @ ₹8 fully paid; discount ₹2 per share from forfeiture)
10.	Share Forfeiture A/c     ...Dr.		2,800
	To Capital Reserve A/c			2,800
	(Being surplus on re-issued shares transferred to Capital Reserve)

Working Notes:

1) Pro-Rata Allotment Ratios
Group A: 80,000 applied → 60,000 allotted ⇒ ratio 4:3
Group B: 70,000 applied → 40,000 allotted ⇒ ratio 7:4

2) Sudha (Group A)
Allotted = 600 shares ⇒ Applied = 600 × 4/3 = 800 shares
Application paid = 800 × ₹3 = ₹2,400
Required on application = 600 × ₹3 = ₹1,800 ⇒ Excess ₹600 adjusted to allotment
Allotment due = 600 × ₹3 = ₹1,800 ⇒ unpaid = ₹1,200
Amount forfeited = ₹2,400

3) Asha (Group B)
Applied 1,400 ⇒ Allotted = 1,400 × 4/7 = 800 shares
Application paid = 1,400 × ₹3 = ₹4,200
Excess = ₹1,800 adjusted to allotment ⇒ cash paid on allotment = ₹600
Call due = 800 × ₹4 = ₹3,200 ⇒ unpaid = ₹3,200
Amount forfeited = ₹4,800 (₹4,200 app + ₹600 allot)

4) Call Calculation
Sudha’s 600 shares forfeited before call ⇒ call made on 99,400 shares
Call money due = 99,400 × ₹4 = ₹3,97,600
Asha unpaid ₹3,200 ⇒ Bank = ₹3,94,400

5) Re-issue & Capital Reserve
1,000 shares re-issued @ ₹8 fully paid (incl. Sudha’s 600 + Asha’s 400)
Discount allowed = ₹2,000
Forfeiture on these 1,000 shares = ₹4,800
Surplus to Capital Reserve = ₹4,800 − ₹2,000 = ₹2,800