Question

Arvind Ltd. issued 20,000 shares of ₹ 10 each at a premium of ₹ 2 per share payable as:

On Application	₹ 6
On Allotment	₹ 3 (including premium)
On First Call	₹ 2
On Second and Final Call	₹ 1

Applications were received for 30,000 shares. Applications for 6,000 shares were rejected and pro rata allotment was made to the remaining applicants.

Abhay, who was allotted 500 shares failed to pay allotment money and on his subsequent failure to pay the first call his shares were forfeited. Of these, 300 shares were reissued as fully paid-up for ₹ 6 per share.

Journalise the transactions to record the forfeiture and reissue of shares.

[Hints: At the time of forfeiture of shares, Securities Premium A/c will be debited by ₹900.
Calls-in-Arrears = [₹ 900 + (500 × ₹ 2)] = ₹ 1,900.]

Answer 1

Journal Entries
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Share Capital A/c   ...Dr.		4,500
	Securities Premium A/c   ...Dr.		900
	To Calls-in-Arrears A/c			1,900
	To Share Forfeiture A/c			3,500
	(500 shares of Abhay forfeited for non-payment of allotment and First Call)
2.	Bank A/c   ...Dr.		1,800
	Share Forfeiture A/c   ...Dr.		1,200
	To Share Capital A/c			3,000
	(300 forfeited shares reissued @ ₹ 6 per share as fully paid-up)
3.	Share Forfeiture A/c   ...Dr.		900
	To Capital Reserve A/c			900
	(Gain on reissue transferred to Capital Reserve)

Working Note:

Face value per share: ₹ 10

Premium per share: ₹ 2

Amount payable:

Application: ₹ 6

Allotment: ₹ 3 (including premium ₹ 2)

First Call: ₹ 2

Second and Final Call: ₹ 1

Applications for 6,000 shares were rejected. Therefore, applications considered for pro rata allotment:

30,000 − 6,000 = 24,000 shares

Shares allotted = 20,000

Pro rata ratio:

24,000 : 20,000 = 6 : 5

Abhay was allotted 500 shares. Therefore, shares applied for:

`500 xx 6/5 = 600` shares

1. Excess Application Money

Application money paid:

600 × ₹ 6 = ₹ 3,600

Application money required:

500 × ₹ 6 = ₹ 3,000

Excess application money:

₹ 3,600 − ₹ 3,000 = ₹ 600

This ₹ 600 was adjusted towards allotment.

2. Allotment Arrears

Allotment due:

500 × ₹ 3 = ₹ 1,500

Less: Excess application money adjusted:

₹ 1,500 − ₹ 600 = ₹ 900

Thus, allotment money unpaid = ₹ 900.

Since premium was payable on allotment, Securities Premium A/c will be debited by ₹ 900.

3. Calls-in-Arrears

First Call unpaid:

500 × ₹ 2 = ₹ 1,000

Total Calls-in-Arrears:

₹ 900 + ₹ 1,000 = ₹ 1,900​

4. Amount Credited to Share Forfeiture A/c

Share Capital called-up per share up to First Call:

₹ 6 + (₹ 3 − ₹ 2) + ₹ 2 = ₹ 9

500 × ₹ 9 = ₹ 4,500

Less: Capital amount unpaid on First Call:

500 × ₹ 2 = ₹ 1,000

Therefore:

₹ 4,500 − ₹ 1,000 = ₹ 3,500​

5. Reissue of 300 Shares

Cash received:

300 × ₹ 6 = ₹ 1,800

Share Capital credited:

300 × ₹ 10 = ₹ 3,000

Discount on reissue:

₹ 3,000 − ₹ 1,800 = ₹ 1,200

Forfeited amount relating to 300 shares:

`3,500 xx 300/500 = 2,100`

Capital Reserve:

₹ 2,100 − ₹ 1,200 = ₹ 900​