Question

Software Solution India Ltd is inviting applications for 20,000 equity shares of Rs 100 each, payable Rs 40 on application, Rs 30 on allotment and Rs 30 on call. The company received applications for 32,000 shares. Applications for 2,000 shares were rejected, and the money was returned to the applicants. Applications for 10,000 shares were accepted in full, and applicants for 20,000 shares were allotted half of the number of shares applied for, and excess application money was adjusted into allotment. All money received is due on allotment and call.

Prepare journal and cash book.

Answer 1

Journal Entries
Date	Particulars	L.F	Debit (₹)	Credit (₹)
1.	Equity Share Application A/c   ...Dr.		12,00,000	-
	To Equity Share Capital A/c		-	8,00,000
	To Equity Share Allotment A/c		-	4,00,000
	(Application money transferred to Equity Share Capital for 20,000 shares @ Rs 40 and Rs 4,00,000 is adjusted towards allotment)
2.	Equity Share Allotment A/c   ....Dr.		6,00,000	-
	To Equity Share Capital A/c		-	6,00,000
	(Equity Share Allotment money due on 20,000 @ Rs 30 per share)
3.	Equity Share First and Final call A/c   ....Dr.		6,00,000	-
	To Equity Share Capital A/c		-	6,00,000
	(Equity share on First and Final call due on 20,000 @ Rs 30 per share)

 

Dr.	Cash Book (Bank column)						Cr.
Date	Particulars	J.F	Amount (₹)	Date	Particulars	J.F	Amount (₹)
	To Equity Share Application A/c		12,80,000		By Equity Share Application A/c		80,000
	To Equity Share Allotment A/c		2,00,000		By Balance c/d		20,00,000
	To Equity Share First and Final Call		6,00,000
			20,80,000				20,80,000

Working note:

Total Applications Received = 32,000 shares

Total Shares Allotted = 20,000 shares

1. Rejected = 2,000 shares × ₹ 40

= ₹ 80,000 (Fully refunded)

2. Full Allotment = 10,000 shares applied, 10,000 shares allotted.

3. Pro-Rata Allotment = 20,000 shares applied, 10,000 shares allotted (half).

(i) Application Money Received = 20,000 × 40

= 8,00,000

(ii) Application Money Required = 10,000 × 40

= 4,00,000

(iii) Excess Application Money = 8,00,000 − 4,00,000

= 4,00,000

(iv) Total Allotment Money Due (All Shares) = 20,000 × 30

= 6,00,000

(v)

Amount due on Allotment	6,00,000
Money adjusted on application	4,00,000
Money to be received on Allotment	2,00,000