Question

Slow & Steady Ltd. invited  applications for 10,000 Equity Shares of ₹ 10 each for public subscription. The amount of these shares was payable as:

On application ₹ 1 per share, on allotment ₹ 2 per share, on first call ₹ 3 per share and on second and final call ₹ 4 per share.

Amounts payable on application, allotment and calls were duly received with the following exceptions:

1. A, who held 200 shares, failed to pay the money on allotments and calls.
2. B, to whom 150 shares were allotted, failed to pay the money on first call and final call.
3. C, who held 50 shares, did not pay the amount of second and final call.

The shares of A, B and C were forfeited and were subsequently reissued for cash as fully paid-up at a discount of 5%.

Pass necessary Journal entries to record these transactions in the books of the company.

Answer 1

Journal Entries in the Books of Slow & Steady Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Bank A/c   ...Dr.		10,000
	To Shares Application A/c			10,000
	(Application money received on 10,000 shares @ ₹ 1 per share)
2.	Shares Application A/c   ...Dr.		10,000
	To Share Capital A/c			10,000
	(Application money transferred to Share Capital)
3.	Shares Allotment A/c   ...Dr.		20,000
	To Share Capital A/c			20,000
	(Allotment money due @ ₹ 2 per share)
4.	Bank A/c   ...Dr.		19,600
	To Shares Allotment A/c			19,600
	(Allotment money received except on A's 200 shares)
5.	Shares First Call A/c   ...Dr.		30,000
	To Share Capital A/c			30,000
	(First Call money due @ ₹ 3 per share)
6.	Bank A/c   ...Dr.		28,950
	To Shares First Call A/c			28,950
	(First Call money received except on shares held by A and B)
7.	Shares Second and Final Call A/c   ...Dr.		40,000
	To Share Capital A/c			40,000
	(Second and Final Call money due @ ₹ 4 per share)
8.	Bank A/c   ...Dr.		38,400
	To Shares Second and Final Call A/c			38,400
	(Second and Final Call money received except on shares held by A, B and C)
9.	Share Capital A/c   ...Dr.		4,000
	To Shares Allotment A/c			400
	To Shares First Call A/c			1,050
	To Shares Second and Final Call A/c			1,600
	To Share Forfeiture A/c			950
	(400 shares held by A, B and C forfeited for non-payment of amounts due)
10.	Bank A/c Dr.		3,800
	Share Forfeiture A/c Dr.		200
	To Share Capital A/c			4,000
	(400 forfeited shares reissued @ ₹ 9.50 per share as fully paid-up)
11.	Share Forfeiture A/c Dr.		750
	To Capital Reserve A/c			750
	(Gain on reissue transferred to Capital Reserve)

Working Note:

Face value per share: ₹ 10

Amount payable:

Application = ₹ 1

Allotment = ₹ 2

First Call = ₹ 3

Second and Final Call = ₹ 4

1. Amount unpaid

A: 200 shares

Allotment unpaid:

200 × ₹ 2 = ₹ 400

First Call unpaid:

200 × ₹ 3 = ₹ 600

Second and Final Call unpaid:

200 × ₹ 4 = ₹ 800

Amount received and forfeited:

200 × ₹ 1 = ₹ 200

B: 150 shares

First Call unpaid:

150 × ₹ 3 = ₹ 450

Second and Final Call unpaid:

150 × ₹ 4 = ₹ 600

Amount received and forfeited:

150 × (₹ 1 + ₹ 2) = ₹ 450

B: 150 shares

First Call unpaid:

150 × ₹ 3 = ₹ 450

Second and Final Call unpaid:

150 × ₹ 4 = ₹ 600

Amount received and forfeited:

150 × (₹ 1 + ₹ 2) = ₹ 450

2. Reissue

Total shares reissued:

200 + 150 + 50 = 400 shares

Discount = 5% of ₹ 10:

₹ 10 × 5% = ₹ 0.50 per share

Reissue price:

₹ 10 − ₹ 0.50 = ₹ 9.50

Cash received:

400 × ₹ 9.50 = ₹ 3,800

Discount on reissue:

400 × ₹ 0.50 = ₹ 200

Capital Reserve:

₹ 950 − ₹ 200 = ₹ 750