Question

X Limited offered to the public 10,000 equity shares of ₹10 each at a premium of ₹2 per share payable as follows:
On application ₹3; On allotment (including premium) ₹4; On first call ₹3 and on second and final call ₹2.
Applications were received for 15,000 shares.
All applications were placed under four categories and allotment was made as follows:

Category A:	to applicants of 4,000 shares	in full
Category B:	to applicants of 6,000 shares	4,000 shares
Category C:	to applicants of 3,000 shares	2,000 shares
Category D:	to applicants of 2,000 shares	Nil

Except in the cases where applications were wholly rejected, excess application money was not to be refunded but to be adjusted against moneys due on allotment and calls.
A, an applicant under category B to whom 400 shares were allotted failed to pay the allotment money and on his failure to pay the first call his shares were forfeited.
B, an applicant under category C to whom 300 shares were allotted failed to pay both the calls and ms shares were also forfeited.
500 of the shares thus forfeited were re-issued to C as fully paid for ₹8 per share.
Show Cash Book, Journal entries and prepare the Balance Sheet in the books of the company; you are to assume that the whole of the A's shares were issued to C.

Answer 1

Dr.	Cash Book (Bank Column)		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Share Application A/c	45,000	By Bank (refund Category D: 2,000 × 3)	6,000
To Share Allotment A/c	30,000
To Share First Call A/c	28,500
To Share Second & Final Call A/c	22,500
To Share Capital A/c (Re-issue 500 × 8)	4,000
Balance c/d (Bank)	1,19,500

 

Journal entries In the books of X ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		45,000
	To Share Application A/c     ...Dr.			45,000
	(Being application money received on 15,000 shares @ ₹3 each)
2.	Share Application A/c     ...Dr.		45,000
	To Share Capital A/c (10,000 × 3)			30,000
	To Share Allotment A/c			9,000
	To Bank A/c			6,000
	(Being application transferred to share capital, excess to allotment, refunds made)
3.	Share Allotment A/c     ...Dr.		40,000
	To Share Capital A/c (10,000 × 2)			20,000
	To Securities Premium Reserve A/c			20,000
	(Being allotment due @ ₹4 per share, incl. premium ₹2)
4.	Bank A/c     ...Dr.		30,000
	Calls in Arrears A/c     ...Dr.		1,000
	To Share Allotment A/c			31,000
	(Being allotment received, except A’s 400 shares defaulting ₹1,000)
5.	Share First Call A/c     ...Dr.		30,000
	To Share Capital A/c			30,000
	(Being 1st call due @ ₹3 on 10,000 shares)
6.	Bank A/c     ...Dr.		28,500
	Calls in Arrears A/c     ...Dr.		1,500
	To Share First Call A/c			30,000
	(Being first call received; A (400 × 3 = 1,200) + B (300 × 3 = 900) unpaid)
7.	Share Second & Final Call A/c     ...Dr.		20,000
	To Share Capital A/c			20,000
	(Being final call due @ ₹2 on 10,000 shares)
8.	Bank A/c     ...Dr.		22,500
	Calls in Arrears A/c     ...Dr.		1,500
	To Share Second & Final Call A/c			24,000
	(Being final call received; B (300 × 2 = 600) unpaid)
9.	Share Capital A/c     ...Dr.		4,000
	Securities Premium Reserve A/c     ...Dr.		800
	To Calls in Arrears A/c			2,200
	To Share Forfeiture A/c			2,600
	(Being forfeiture of A’s 400 shares for non-payment of allotment & call; premium reversed)
10.	Share Capital A/c     ...Dr.		3,000
	To Calls in Arrears A/c			1,500
	To Share Forfeiture A/c			1,500
	(Being forfeiture of B’s 300 shares for non-payment of two calls)
11.	Bank A/c     ...Dr.		4,000
	Share Forfeiture A/c     ...Dr.		1,000
	To Share Capital A/c			5,000
	(Being 500 forfeited shares re-issued @ ₹8 fully paid, discount ₹2/share adjusted from forfeiture)
12.	Share Forfeiture A/c     ...Dr.		1,300
	To Capital Reserve A/c			1,300
	(Being surplus forfeiture on re-issued shares transferred to Capital Reserve)

 

Balance Sheet of X Ltd.
Liabilities	Amt. (₹)	Amt. (₹)	Assets	Amt. (₹)	Amt. (₹)
Share Capital	1,00,000		Bank Balance		1,19,500
Less: Forfeited Shares (700)	(7,000)	93,000
Securities Premium Reserve		19,200
Capital Reserve		1,300
Total		1,19,500	Total		1,19,500

Working Note:

1) Application:
15,000 × 3 = ₹45,000 received.
Refund: Cat. D (2,000 × 3) = ₹6,000.
Transferred: Capital 10,000 × 3 = ₹30,000; Balance ₹9,000 → Allotment.

2) Allotment:
Due = 10,000 × 4 = ₹40,000
Less excess application (₹9,000).
Cash actually received = ₹30,000

3) Forfeitures:
A (400 shares): Paid only application = ₹1,200; Forfeiture credit = ₹2,600. Premium (400 × 2 = ₹800) unpaid
B (300 shares): Paid application + allotment = 900 + 600 = 1,500; Forfeiture credit = ₹1,500.

4) Re-issue:
500 shares @ ₹8 (discount ₹2 × 500 = ₹1,000 adjusted from Forfeiture).
Balance Forfeiture left = 2,600 + 1,500 − 1,000 − 1,800 (not reissued) = ₹1,300 transferred to Capital Reserve

5) Securities Premium Reserve:
Total = ₹20,000 − 800 (A’s unpaid) = ₹19,200.