Question

R Ltd. invited application for 3,00,000 shares of ₹10 each, payable as follows:

	₹
On Application	3
On Allotment	5
On First and Final Call	2

Application were received for 4,80,000 shares and the allotment was made as follows:

Category	Shares Applied for	Shares Allotted
I	40,000	30,000
II	3,00,000	2,00,000
III	1,40,000	70,000

All the shares were allotted on pro-rata basis and excess application money was adjusted towards sum due on allotment.
Archna, who belonged to category I and who had applied for 1,200 shares, failed to pay the allotment money. Her shares were forfeited immediately after allotment was not received. Deepali, who belonged to Category II and who had applied for 600 shares, failed to pay the final call money. Her shares were forfeited after the final call. The forfeited shares were re-issued @ ₹8 per share fully paid up.
Pass necessary journal entries in the books of R Ltd.

Answer 1

Journal entries In the books of R Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		14,40,000
	To Share Application A/c			14,40,000
	(Application money received on 4,80,000 shares @ ₹3)
2.	Share Application A/c     ...Dr.		14,40,000
	To Share Capital A/c			9,00,000
	To Share Allotment A/c			5,40,000
	(Application adjusted: ₹3 on 3,00,000 shares → capital; surplus → allotment)
3.	Share Allotment A/c     ...Dr.		15,00,000
	To Share Capital A/c			15,00,000
	(Allotment due @ ₹5 on 3,00,000 shares)
4.	Bank A/c     ...Dr.		9,56,400
	Calls-in-Arrears (Allot.) A/c     ...Dr.		3,600
	To Share Allotment A/c			9,60,000
	(Allotment received; after adjusting surplus ₹5,40,000; Archna unpaid ₹3,600)
5.	Share Capital A/c     ...Dr.		7,200
	To Share Allotment A/c			3,600
	To Share Forfeiture A/c			3,600
	(Forfeiture of Archna’s 900 shares for non‑payment of allotment; ₹8 called‑up)
6.	Share First & Final Call A/c     ...Dr.		5,98,200
	To Share Capital A/c			5,98,200
	(Call due @ ₹2 on 2,99,100 shares; Archna’s 900 already forfeited)
7.	Bank A/c     ...Dr.		5,97,400
	Calls-in-Arrears (Call) A/c     ...Dr.		800
	To Share First & Final Call A/c			5,98,200
	(Call received; Deepali unpaid ₹800)
8.	Share Capital A/c     ...Dr.		4,000
	To Calls-in-Arrears (Call) A/c			800
	To Share Forfeiture A/c			3,200
	(Forfeiture of Deepali’s 400 shares for non‑payment of call; ₹10 called‑up)
9.	Bank A/c     ...Dr.		10,400
	Share Forfeiture A/c     ...Dr.		2,600
	To Share Capital A/c			13,000
	(Re‑issue of all 1,300 forfeited shares @ ₹8 fully paid; discount from forfeiture)
10.	Share Forfeiture A/c     ...Dr.		4,200
	To Capital Reserve A/c			4,200
	(Surplus on re‑issued shares transferred to Capital Reserve)

Working notes:

1) Pro-Rata Ratios & Excess Application Money
40,000 → 30,000 ⇒ 4:3, surplus ₹1/share = ₹30,000
3,00,000 → 2,00,000 ⇒ 3:2, surplus ₹1.5/share = ₹3,00,000
1,40,000 → 70,000 ⇒ 2:1, surplus ₹3/share = ₹2,10,000
Total surplus to allotment = ₹5,40,000

2) Allotment Receipt
Allotment due = 3,00,000×₹5 = ₹15,00,000
Less surplus adj. = ₹5,40,000 → balance ₹9,60,000
Archna unpaid ₹3,600 ⇒ Bank = ₹9,56,400

3) Call Receipt
Call on 2,99,100 shares = ₹5,98,200
Deepali unpaid ₹800 ⇒ Bank = ₹5,97,400

4) Reissue & Capital Reserve
Reissued 1,300 shares @ ₹8 (discount ₹2,600 from forfeiture).
Total forfeiture = ₹6,800 → Capital Reserve = ₹6,800 − ₹2,600 = ₹4,200