Question

XYZ Limited has an Authorised Capital of ₹4,00,000 divided into shares of ₹20 each, the whole of which is issued and subscribed at a premium of ₹2 per share. The amount was payable as follows: On Application and Allotment: ₹10 per share; On 1st Call ₹4 per share (including premium) and the balance as and when required.
The company made both the calls. The application and allotment money was duly received. But a shareholder holding 2,000 shares failed to pay both the calls and his shares were forfeited. These shares were later re-issued at ₹14 per share as fully paid. Give journal entries regarding the above.

Answer 1

Journal entries In the books of XYZ Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		2,00,000
	To Share Application & Allotment A/c			2,00,000
	(Receipt of Application & Allotment money: 20,000 × ₹10)
2.	Share Application & Allotment A/c     ...Dr.		2,00,000
	To Share Capital A/c			2,00,000
	(Transfer of Application & Allotment to Capital)
3.	Share First Call A/c     ...Dr.		80,000
	To Share Capital A/c			40,000
	To Securities Premium Reserve A/c			40,000
	(First Call due: 20,000 × ₹4 incl. premium)
4.	Bank A/c     ...Dr.		72,000
	Calls in Arrears A/c     ...Dr.		8,000
	To Share First Call A/c			80,000
	(First Call received, except 2,000 shares)
5.	Share Final Call A/c     ...Dr.		1,60,000
	To Share Capital A/c			1,60,000
	(Final Call due: 20,000 × ₹8)
6.	Bank A/c     ...Dr.		1,44,000
	Calls in Arrears A/c     ...Dr.		16,000
	To Share Final Call A/c			1,60,000
	(Final Call received, except 2,000 shares)
7.	Share Capital A/c     ...Dr.		36,000
	Securities Premium Reserve A/c     ...Dr.		4,000
	To Calls in Arrears A/c			24,000
	To Share Forfeiture A/c			20,000
	(Forfeiture of 2,000 shares for non-payment of calls; ₹20,000 received)
8.	Bank A/c     ...Dr.		28,000
	Share Forfeiture A/c     ...Dr.		12,000
	To Share Capital A/c			40,000
	(Re-issue of 2,000 forfeited shares @ ₹14 fully paid; discount ₹12,000 adjusted)
9.	Share Forfeiture A/c     ...Dr.		8,000
	To Capital Reserve A/c			8,000
	(Profit on re-issue transferred to Capital Reserve)

Working note:

Default by shareholder (2,000 shares):
Application & Allotment received = 2,000 × ₹10 = ₹20,000.
1st Call unpaid = 2,000 × ₹4 = ₹8,000 (including ₹2 premium = ₹4,000).
Final Call unpaid = 2,000 × ₹8 = ₹16,000.

On forfeiture of 2,000 shares:
Capital called = ₹18/share (10 + 4 + 4 [excl. premium]) = ₹36,000.
Securities Premium unpaid = ₹4,000.
Calls in arrears = ₹24,000 (₹8,000 1st call + ₹16,000 final call).
Share Forfeiture = ₹20,000

Re-issue:
2,000 shares re-issued @ ₹14 fully paid.
Discount allowed = ₹6/share × 2,000 = ₹12,000
Profit = 20,000 − 12,000 = ₹8,000 → Capital Reserve.