Question

Kochi Silk Ltd. issued a prospectus inviting applications for 40,000 shares of ₹10 each at a premium of ₹8 per share, payable as follows:

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

Applications were received for 80,000 shares and pro-rata allotment was made on the applications for 70,000 shares. It was decided to utilise excess application money towards the sums due on allotment.
X, to whom 1,200 shares were allotted, failed to pay the allotment money and on his subsequent failure to pay the first call his shares were forfeited.
Y, who applied for 3,500 shares failed to pay the two calls and on his such failure, his shares were also forfeited.
Of the shares forfeited, 2,500 shares were reissued as fully paid up for ₹9 per share, the whole of Y's shares being included. Prepare Cash Book and Journal entries.

Answer 1

Dr.	Cash Book						Cr.
Date	Particulars	L.F.	Amt. (₹)	Date	Particulars	L.F.	Amt. (₹)
	Share Application A/c		4,80,000		Refund – Application (10,000 × ₹6)		60,000
	Share Allotment A/c		58,200
	Share First Call A/c		2,03,000
	Share Second & Final Call A/c		2,57,800
	Share Capital A/c (Re-issue)		22,500
	Total Receipts		7,21,500		Closing Balance		7,21,500

 

Journal entries In the books of Kochi Silk Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		4,80,000
	To Share Application A/c			4,80,000
	(Application money received on 80,000 shares @ ₹6 incl. ₹2 premium)
2.	Share Application A/c     ...Dr.		4,80,000
	To Share Capital A/c			1,60,000
	To Securities Premium Reserve A/c			53,200
	To Share Allotment A/c			2,66,800
	(Transfer of application money; excess adjusted to allotment; refund of 10,000 shares)
3.	Share Allotment A/c     ...Dr.		2,40,000
	To Share Capital A/c			1,60,000
	To Securities Premium Reserve A/c			80,000
	(Allotment due on 40,000 shares @ ₹6 incl. ₹2 premium)
4.	Bank A/c     ...Dr.		58,200
	To Share Allotment A/c			58,200
	(Allotment money received after adjustments)
5.	Share First Call A/c     ...Dr.		1,20,000
	To Share Capital A/c			40,000
	To Securities Premium Reserve A/c			80,000
	(First call due on 40,000 shares @ ₹3 incl. ₹2 premium)
6.	Bank A/c     ...Dr.		2,03,000
	Calls in Arrears A/c     ...Dr.		17,000
	To Share First Call A/c			2,20,000
	(First call money received; arrears from X & Y)
7.	Share Second & Final Call A/c     ...Dr.		1,20,000
	To Share Capital A/c			40,000
	To Securities Premium Reserve A/c			80,000
	(Second & final call due on 40,000 shares @ ₹3 incl. ₹2 premium)
8.	Bank A/c     ...Dr.		2,57,800
	Calls in Arrears A/c     ...Dr.		2,200
	To Share Second & Final Call A/c			2,60,000
	(Second & final call money received; arrears from Y)
9.	Share Capital A/c     ...Dr.		10,800
	Securities Premium Reserve A/c     ...Dr.		4,200
	To Calls in Arrears A/c			9,600
	To Share Forfeiture A/c			5,400
	(Forfeiture of X’s 1,200 shares for non-payment of allotment & first call)
10.	Share Capital A/c     ...Dr.		18,000
	Securities Premium Reserve A/c     ...Dr.		12,000
	To Calls in Arrears A/c			30,000
	(Forfeiture of Y’s shares for non-payment of both calls)
11.	Bank A/c     ...Dr.		22,500
	Share Forfeiture A/c     ...Dr.		1,250
	To Share Capital A/c			25,000
	(Re-issue of 2,500 forfeited shares @ ₹9 fully paid; discount from forfeiture)
12.	Share Forfeiture A/c     ...Dr.		17,500
	To Capital Reserve A/c			17,500
	(Profit on re-issue transferred to Capital Reserve)

Working Note:

1) Pro-rata ratio
= 70,000 : 40,000 = 7 : 4.

2) Excess application money for X = ₹5,400 (₹4,800 capital + ₹600 premium).