Question

MV Ltd. was registered with a capital of ₹ 2,00,000 divided into 10,000 Equity shares of ₹ 20 each payable as follows:

On Application	₹ 5 per share
On Allotment	₹ 7 per share
On First & Final Call	₹ 8 per share

The company offered 5,000 shares to the public for subscription. It received applications for 6,700 shares.

From amongst the applicants:

1. Vimal, who had applied for 1,500 shares, paid ₹ 7,500 on application, but was allotted only 800 shares.
2. Abhay, who had applied for 2,000 shares, paid the full amount of ₹ 40,000 with his application, but was allotted only 1,000 shares.
3. Nitin, who had applied for and allotted 500 shares, did not pay the allotment and call money when due.
4. The remaining applicants paid as and when due.

The surplus money paid by both Vimal and Abhay was used towards allotment and call and any surplus beyond the call was refunded.

The company forfeited Nitin's shares after the final call.

You are required to pass journal entries to record the above transactions in the books of the company.

Answer 1

In the book of the MV Ltd. Journal Entries
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Bank A/c  ((3,200 × 5) + 7,500 + 40,000)      ...Dr.		63,500
	To Equity Share Application A/c			63,500
	(Application money received)
2.	Equity Share Application A/c      ...Dr.		63,500
	To Equity Share Capital A/c  (5,000 × 5)			25,000
	To Equity Share Allotment A/c			10,500
	To Calls in Advance A/c			8,000
	To Bank A/c			20,000
	(Application money transferred to Capital account and adjusted).
3.	Equity Share Allotment A/c  (5,000 × 7)   ...Dr.		35,000
	To Equity Share Capital A/c			35,000
	(Allotment money due)
4.	Bank A/c   ...Dr.		21,000
	Calls in Arrears A/c  (500 × 7)   ...Dr.		3,500
	To Equity Share Allotment A/c			24,500
	(Allotment money received)
5.	Equity Share First and Final Call A/c  (5,000 × 8)      ...Dr.		40,000
	To Equity Share Capital A/c			40,000
	(Call money due)
6.	Bank A/c    ...Dr.		28,000
	Calls in Advance A/c    ...Dr.		8,000
	Calls in Arrears A/c  ..Dr.		4,000
	To Equity Share First and Final Call A/c			40,000
	(Call money received)
7.	Equity Share Capital A/c  (500 × 20)     ...Dr.		10,000
	To Calls in Arrears A/c (3,500 + 4,000)			7,500
	To Share Forfeiture  A/c			2,500
	(Nitin's 500 shares forfeited)

Working Note:

(1) 

Money paid by Vimal an application =	7,500
Application money on 800 shares allotted to Vimal =	(4,000)
Excess money paid on application =	3,500

Money due on allotment on Vimal's share = 800 × 7 = ₹ 5,600

Thus, whole of excess money will be adjusted

(2)

Application money paid by Abhay =	40,000
Application money on shares allotted to him (1,000 × 5) =	(5,000)
Excess =	35,000
Allotment money due on Abhay's share (1,000 × 7) =	(7,000)
Excess =	28,000
Call money due on Abhay's share (1,000 × 8)	(8,000)
Excess to be returned =	20,000

Total Application money adjusted towards allotment = 3,500 + 7,000 = ₹10,500