Question

Vinod Papers Ltd. invited applications for issuing 1,00,000 shares of ₹10 each at a premium of ₹4 per share payable as follows:

On Application	₹4 (including premium ₹2)
On Allotment	₹4 (including premium ₹2)
On First & Final Call	₹6

Applications were received for 1,30,000 shares and pro-rata allotment was made to all applicants as follows:

1. Applicants for 80,000 shares were allotted 60,000 shares, and
2. Applicants for 50,000 shares were allotted 40,000 shares.

X, who belonged to the first category and was allotted 900 shares failed to pay the allotment and call money.
Y, who belonged to the second category and who applied for 1,000 shares also failed to pay the allotment and call money. Their shares were forfeited and 1,400 of the forfeited shares were re-issued @ ₹9 per share as fully paid. Re-issued shares included whole of Y's shares.
Prepare Cash Book, journal entries and an opening Balance Sheet.

Answer 1

Dr.	In the books of Vinod Papers Ltd. Cash Book		Cr.
Particulars	Amt. (₹)	Particulars	Amt. (₹)
To Share Application A/c (1,30,000 × ₹4)	5,20,000
To Share Allotment A/c	2,75,200
To Share First & Final Call A/c	5,89,800
To Share Capital A/c (Re‑issue: 1,400 × ₹9)	12,600
To Balance c/d (Bank)	13,97,600

 

Journal entries In the books of Vinod Papers Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		5,20,000
	To Share Application A/c			5,20,000
	(Application on 1,30,000 shares @ ₹4)
2.	Share Application A/c     ...Dr.		5,20,000
	To Share Capital A/c (1,00,000 × ₹2)			2,00,000
	To Securities Premium Res. A/c (1,00,000 × ₹2)			2,00,000
	To Share Allotment A/c			1,20,000
	(Pro‑rata to all applicants; no refunds; excess to Allotment)
3.	Share Allotment A/c     ...Dr.		4,00,000
	To Share Capital A/c (1,00,000 × ₹2)			2,00,000
	To Securities Premium Res. A/c (1,00,000 × ₹2)			2,00,000
	(Allotment @ ₹4 incl. ₹2 premium)
4.	Bank A/c     ...Dr.		2,75,200
	Calls‑in‑Arrears (Allot.) A/c			4,800
	To Share Allotment A/c			2,80,000
	(Allotment due 4,00,000 − appn excess 1,20,000 = 2,80,000; X & Y net unpaid ₹4,800)
5.	Share First & Final Call A/c     ...Dr.		6,00,000
	To Share Capital A/c			6,00,000
6.	Bank A/c     ...Dr.		5,89,800
	Calls‑in‑Arrears (Call) A/c     ...Dr.		10,200
	To Share First & Final Call A/c			6,00,000
	(Unpaid call: X 900 × ₹6 = 5,400; Y 800 × ₹6 = 4,800)
7.	Equity Share Capital A/c     ...Dr.		9,000
	Securities Premium Res. A/c     ...Dr.		1,800
	To Share Allotment A/c			2,400
	To Share First & Final Call A/c			5,400
	To Share Forfeiture A/c			3,000
	(Forfeiture after call; application excess used for capital only → unpaid allotment premium reversed)
8.	Equity Share Capital A/c     ...Dr.		8,000
	Securities Premium Res. A/c     ...Dr.		1,600
	To Share Allotment A/c			2,400
	To Share First & Final Call A/c			4,800
	To Share Forfeiture A/c			2,400
	(Forfeiture of Y’s 800 shares)
9.	Bank A/c     ...Dr.		12,600
	Share Forfeiture A/c     ...Dr.		1,400
	To Equity Share Capital A/c (1,400 × ₹10)			14,000
	(Discount on re‑issue ₹1/share adjusted from forfeiture)
10.	Share Forfeiture A/c     ...Dr.		3,000
	To Capital Reserve A/c			3,000
	(Profit = Forfeiture on re‑issued shares − discount)

 

Balance Sheet
Liabilities	Amt. (₹)	Amt. (₹)	Assets	Amt. (₹)	Amt. (₹)
Share Capital		9,97,000	Bank Balance		13,97,600
Add: Forfeited Shares A/c		1,000
Securities Premium Reserve		3,96,600
Capital Reserve		3,000
Total		13,97,600	Total		13,97,600

 

Working Note:

1) Defaulters’ excess at application:
X (900 allotted): Applied 1,200 → Appn paid 1,200 × ₹4 = ₹4,800; needed 900 × ₹4 = ₹3,600 → excess ₹1,200. Allotment due 900 × ₹4 = ₹3,600 → unpaid ₹2,400.
Y (applied 1,000 → 800 allotted): Appn paid ₹4,000; needed ₹3,200 → excess ₹800; allotment unpaid ₹2,400.

2) Allotment cash check:
Net allotment due = 4,00,000 − 1,20,000 = ₹2,80,000
Less X & Y arrears ₹4,800 ⇒ Bank on allotment ₹2,75,200

3) Call receipt:
Due 1,00,000 × ₹6 = ₹6,00,000; unpaid (X 900 + Y 800) × ₹6 = ₹10,200 ⇒ Bank ₹5,89,800.

4) Capital Reserve:
Forfeiture on re‑issued shares: Y 2,400 + X `(3,000×600/900=2,000)` = 4,400.
Less discount on re‑issue 1,400 × ₹1 = 1,400 → ₹3,000 to Capital Reserve