Question

Avon Ltd. issued for subscription 10,000 shares of ₹ 25 each, payable ₹ 5 per share on application, ₹ 10 per share on allotment (including ₹ 5 per share as premium), ₹ 5 per share as first call on the shares and the balance in two equal amounts at intervals of three months. All the shares were applied and allotted. Due amount was received except the second call and final call on 200 and 400 shares respectively.

Pass the entries in the company's Journal, Cash Book and the Ledger. Also show the company's Balance Sheet on completion of the above transactions.

Answer 1

Number of shares: 10,000

Face value per share: ₹ 25

Premium per share: ₹ 5

Issue price: ₹ 30 per share

Amount payable:

Application: ₹ 5

Allotment: ₹ 10, including premium ₹ 5

First Call: ₹ 5

Balance:

₹ 30 − (₹ 5 + ₹ 10 + ₹ 5) = ₹ 10

Second Call and Final Call are equal:

₹ 10 ÷ 2 = ₹ 5 each

Second Call arrears:

200 × ₹ 5 = ₹ 1,000

Final Call arrears:

400 × ₹ 5 = ₹ 2,000

Total Calls-in-Arrears:

₹ 1,000 + ₹ 2,000 = ₹ 3,000

Journal Entries in the Books of Avon Ltd
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Shares Application A/c   ...Dr.		50,000
	To Share Capital A/c			50,000
	(Application money transferred to Share Capital)
2.	Shares Allotment A/c   ...Dr.		1,00,000
	To Share Capital A/c			50,000
	To Securities Premium A/c			50,000
	(Allotment money due, including premium ₹ 5 per share)
3.	Shares First Call A/c   ...Dr.		50,000
	To Share Capital A/c			50,000
	(First Call money due @ ₹ 5 per share)
4.	Shares Second Call A/c    ...Dr.		50,000
	To Share Capital A/c			50,000
	(Second Call money due @ ₹ 5 per share)
5.	Shares Final Call A/c   ...Dr.		50,000
	To Share Capital A/c			50,000
	(Final Call money due @ ₹ 5 per share)

 

Cash Book
Particulars	₹
To Shares Application A/c	50,000
To Shares Allotment A/c	1,00,000
To Shares First Call A/c	50,000
To Shares Second Call A/c	49,000
To Shares Final Call A/c	48,000
Balance c/d	2,97,000

Second Call received:

₹ 50,000 − ₹ 1,000 = ₹ 49,000

Final Call received:

₹ 50,000 − ₹ 2,000 = ₹ 48,000

Ledger Accounts

Shares Application A/c
Dr. Particulars	₹	Cr. Particulars	₹
To Share Capital A/c	50,000	By Bank A/c	50,000
Total	50,000	Total	50,000

 

Shares Allotment A/c
Dr. Particulars	₹	Cr. Particulars	₹
To Share Capital A/c	50,000	By Bank A/c	1,00,000
To Securities Premium A/c	50,000
Total	1,00,000	Total	1,00,000

 

Shares First Call A/c
Dr. Particulars	₹	Cr. Particulars	₹
To Share Capital A/c	50,000	By Bank A/c	50,000
Total	50,000	Total	50,000

 

Shares Second Call A/c
Dr. Particulars	₹	Cr. Particulars	₹
To Share Capital A/c	50,000	By Bank A/c	49,000
		By Calls-in-Arrears A/c	1,000
Total	50,000	Total	50,000

 

Shares Final Call A/c
Dr. Particulars	₹	Cr. Particulars	₹
To Share Capital A/c	50,000	By Bank A/c	48,000
		By Calls-in-Arrears A/c	2,000
Total	50,000	Total	50,000

 

Share Capital A/c
Dr. Particulars	₹	Cr. Particulars	₹
To Balance c/d	2,50,000	By Shares Application A/c	50,000
		By Shares Allotment A/c	50,000
		By Shares First Call A/c	50,000
		By Shares Second Call A/c	50,000
		By Shares Final Call A/c	50,000
Total	2,50,000	Total	2,50,000

 

Balance Sheet
Particulars	Note No.	₹
EQUITY AND LIABILITIES
Shareholders' Funds
Share Capital	1	2,47,000
Reserves and Surplus: Securities Premium		50,000
Total		2,97,000
ASSETS
Cash and Cash Equivalents		2,97,000
Total		2,97,000

 

Notes to Accounts
Particulars	₹
Note 1: Share Capital
Issued, Subscribed and Fully Called-up Capital:
10,000 Equity Shares of ₹ 25 each	2,50,000
Less: Calls-in-Arrears	(3,000)
Share Capital	2,47,000