Question

Hindustan Steel Ltd. invited applications for 50,000 equity shares of ₹10 each at a premium of ₹4 per share. The amount was payable as follows:

On Application	₹4 (including premium ₹2)
On Allotment	₹6 (including premium ₹2)
On First and Final Call	Balance

Applications for 60,000 shares were received. Allotment was made to all the applicants on pro-rata basis. Excess application money was adjusted towards sums due on allotment. Ram, to whom 500 shares were allotted, failed to pay allotment and call money. Shyam, to whom 1,000 shares were allotted, failed to pay the call money. These shares were forfeited. Out of the forfeited shares 1,200 shares (including all shares of Shyam) were re-issued at 10% discount as fully paid-up.
Pass the necessary journal entries in the books of the company by opening ‘Calls in Arrears A/c’ wherever necessary.

Answer 1

Journal entries In the books of Hindustan Steel Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		2,40,000
	To Share Application A/c			2,40,000
	(Application money received on 60,000 shares @ ₹4 each)
2.	Share Application A/c     ...Dr.		2,40,000
	To Share Capital A/c			2,00,000
	To Share Allotment A/c			40,000
	(Application money transferred to share capital and allotment as per pro-rata allotment)
3.	Share Allotment A/c     ...Dr.		3,00,000
	To Share Capital A/c			2,00,000
	To Securities Premium Reserve A/c			1,00,000
	(Allotment money due on 50,000 shares @ ₹6, including premium ₹2)
4.	Bank A/c     ...Dr.		2,57,400
	Calls in Arrears A/c     ...Dr.		2,600
	To Share Allotment A/c			2,60,000
	(Allotment money received except from Ram; excess application money adjusted)
5.	Share First & Final Call A/c     ...Dr.		2,00,000
	To Share Capital A/c			2,00,000
	(First & Final Call money due on 50,000 shares @ ₹4 each)
6.	Bank A/c     ...Dr.		1,94,000
	Calls in Arrears A/c     ...Dr.		6,000
	To Share First & Final Call A/c			2,00,000
	(First & Final Call money received except from Ram and Shyam)
7.	Share Capital A/c     ...Dr.		15,000
	Securities Premium Reserve A/c     ...Dr.		1,000
	To Calls in Arrears A/c			8,600
	To Share Forfeiture A/c			7,400
	(Forfeiture of 500 shares of Ram and 1,000 shares of Shyam)
8.	Bank A/c     ...Dr.		10,800
	Share Forfeiture A/c     ...Dr.		1,200
	To Share Capital A/c			12,000
	(Reissue of 1,200 forfeited shares @ 10% discount, fully paid)
9.	Share Forfeiture A/c     ...Dr.		5,360
	To Capital Reserve A/c			5,360
	(Profit on reissue transferred to Capital Reserve)

Working Notes:

1) Pro‑rata & Excesst)
Applied 60,000; Allotted 50,000 → Pro‑rata 6:5
Application received = 60,000 × ₹4 = ₹2,40,000
Application due on 50,000 shares = 50,000 × ₹4 = ₹2,00,000
Excess to Allotment = ₹40,000

2) Allotment Due & Bank on Allotment
50,000 × ₹6 = ₹3,00,000 (Cap ₹2,00,000 + SPR ₹1,00,000)
Less excess from apps = ₹40,000 → Cash due on allotment = ₹2,60,000
Ram (500 allotted) app‑excess = applied 600 → excess = (600−500)×₹4 = ₹400
Ram unpaid cash on allot = 500×₹6 − ₹400 = ₹2,600
Bank on allotment = ₹2,60,000 − ₹2,600 = ₹2,57,400

3) First & Final Call
Call due = 50,000 × ₹4 = ₹2,00,000
Unpaid: Ram 500 × ₹4 = ₹2,000; Shyam 1,000 × ₹4 = ₹4,000
Bank on call = ₹2,00,000 − ₹6,000 = ₹1,94,000

4) Forfeiture (after call)
Share Capital Dr:
Ram: 500 × ₹10 = ₹5,000
Shyam: 1,000 × ₹10 = ₹10,000
Total = ₹15,000

5) Securities Premium Dr (Ram’s unpaid prem on allot):
500 × ₹2 = ₹1,000

6) Calls in Arrears Cr:
Ram: allot ₹2,600 + call ₹2,000 = ₹4,600
Shyam: call ₹4,000
Total = ₹8,600

Share Forfeiture Cr (amounts actually received on capital):
Ram: app capital ₹2 × 500 = ₹1,000 + his app‑excess ₹400 → ₹1,400
Shyam: app cap ₹2 × 1,000 = ₹2,000; allot cap ₹4 × 1,000 = ₹4,000 → ₹6,000
Total = ₹7,400

8) Reissue (1,200 shares @ 10% disc, fully paid)
Issue price = ₹9 → Bank = ₹10,800
Discount from Forfeiture = ₹1,200 (₹1 per share)
Forfeiture attached to reissued shares:

• Shyam’s 1,000 → ₹6,000

• Ram’s 200 → (₹1,400/500) = ₹2.80 per share → 200 × 2.80 = ₹560

• Total forfeiture on reissued = ₹6,560

Capital Reserve = ₹6,560 − ₹1,200 = ₹5,360
Balance in Share Forfeiture A/c = total ₹7,400 − ₹6,560 = ₹840