Question

Alfa Limited invited applications for 4,00,000 of its equity shares of Rs 10 each on the following terms:

Payable on application	Rs. 5 per share
Payable on allotment	Rs. 3 per share
Payable on the first and final call	Rs. 2 per share

Applications for 5,00,000 shares were received. It was decided:

1. to refuse allotment to the applicants for 20,000 shares;
2. to allot in full to applicants for 80,000 shares;
3. to allot the balance of the available shares pro rata among the other applicants; and
4. to utilise excess application money in part as payment of allotment money.

One applicant, whose shares had been allotted on a pro-rata basis, did not pay the amount due on allotment and on the call, and his 400 shares were forfeited. The shares were reissued @ Rs 9 per share. Show the journal and prepare the cash book to record the above.

Answer 1

Journal Entries in the books of Alfa Limited
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Share Application A/c   ...Dr.		24,00,000	-
	To Share Capital A/c		-	20,00,000
	To Share Capital A/c		-	4,00,000
	(Share Application money adjusted)
2.	Share Allotment A/c		12,00,000	-
	To Share Capital A/c		-	12,00,000
	(Share Allotment money due)
3.	Share First and Final Call A/c   ..Dr.		8,00,000	-
	To Share Capital A/c		-	8,00,000
	(Share First and Final Call due)
4.	Share capital A/c		4,000	-
	To Share Forfeiture A/c		-	2,500
	To Share Allotment A/c		-	700
	To Share First and Final call A/c		-	800
	(400 Shares Forfeited for failing to pay the amount due on Allotment and Call)
5.	Share Forfeiture A/c   ...Dr.		400	-
	To Share Capital A/c		-	400
	(Share reissued and loss on issue charged from Share Forfeiture Account)
6.	Share Forfeiture A/c   ...Dr.		2,100	-
	To Capital Reserve A/c		-	2,100
	(Share Forfeiture Account transferred to Capital Reserve Account)

 

Dr.	Cash Book (Bank Column)						Cr.
Date	Particulars	J.F.	Amount (₹)	Date	Particulars	J.F.	Amount (₹)
	To Share Application		25,00,000		By Share Application		1,00,000
	To Share Allotment		7,99,300		By Balance c/d		40,02,100
	To Share First and Final Call		7,99,200
	To Share Capital		3,600
			41,02,100				41,02,100

Working notes:

(i) Calculation of Amount Received on Allotment:

Particulars	Amount (₹)
Money received on application (5,00,000 × 5)	25,00,000
Less: Money transferred to capital (4,00,000 × 5)	20,00,000
	5,00,000
Less: Money refunded for shares rejected (20,000 × 5)	1,00,000
Amount to be taken as allotment advance	4,00,000

(ii) The amount not received on 400 shares Allotted:

Particulars	Amount (₹)
Shares applied	500
Amount received on application (500 × ₹ 5)	2,500
Less: Amount transferred on application.(400 × ₹ 5)	2,000
Advance of Allotment received on application.	500
Amount due on Allotment (400 × ₹3)	1,200
Less: Excess already received with application.	500
Amount not received on Allotment	700

(iii) Money received on the Allotment:

Particulars	Amount (₹)
Total amount due on Allotment	12,00,000
Less: Received on the Application as an advance	4,00,000
	8,00,000
Less: Amount not received on 400 shares	700
Amount received on Allotment	7,99,300

(iv) Calculation of Money Received on First Call

Particulars	Amount (₹)
Money due (4,00,000 × 2)	8,00,000
Less: Amount of arrears (400 × 2)	800
Net amount received on final call	7,99,200