Question

XYZ Ltd. invited applications for issuing 50,000 Equity Shares of  ₹ 10 each . The amount was payable as:

On application	₹ 3 per share
On allotment	₹ 4 per share
On first and final call	₹ 3 per share

Applications were received for 75,000 shares and pro rata allotment was made as:

Applicants for 40,000 shares were allotted 30,000 shares on pro rata basis. 
Applicants for 35,000 shares were allotted 20,000 shares on pro rata basis.

Ramu, to whom 1,200 shares were allotted out of the group applying for 40,000 shares, failed to pay the allotment money. His shares were forfeited immediately after allotment.

Shamu, who had applied for 700 shares out of the group applying for 35,000 shares, failed to pay the first and final call. His shares were also forfeited. Out of the forfeited shares, 1,000 shares were reissued @ ₹ 8 per share as fully paid-up. The reissued shares included all the forfeited shares of Shamu.

Pass necessary Journal entries to record the above transactions.

Answer 1

Journal Entries in the Books of XYZ Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Bank A/c   ...Dr.		2,25,000
	To Equity Shares Application A/c			2,25,000
	(Application money received on 75,000 shares @ ₹ 3 per share)
2.	Equity Shares Application A/c   ...Dr.		2,25,000
	To Equity Share Capital A/c			1,50,000
	To Equity Shares Allotment A/c			75,000
	(Application money transferred and excess adjusted towards allotment)
3.	Equity Shares Allotment A/c   ...Dr.		2,00,000
	To Equity Share Capital A/c			2,00,000
	(Allotment money due on 50,000 shares @ ₹ 4 per share)
4.	Bank A/c   ...Dr.		1,21,400
	Calls-in-Arrears A/c   ...Dr.		3,600
	To Equity Shares Allotment A/c			1,25,000
	(Balance allotment money received except from Ramu)
5.	Equity Share Capital A/c   ...Dr.		8,400
	To Calls-in-Arrears A/c			3,600
	To Share Forfeiture A/c			4,800
	(Ramu's 1,200 shares forfeited for non-payment of allotment money)
6.	Equity Shares First and Final Call A/c   ...Dr.		1,46,400
	To Equity Share Capital A/c			1,46,400
	(First and Final Call due on 48,800 shares @ ₹ 3 per share)
7.	Bank A/c   ...Dr.		1,45,200
	Calls-in-Arrears A/c   ...Dr.		1,200
	To Equity Shares First and Final Call A/c			1,46,400
	(First and Final Call received except from Shamu)
8.	Equity Share Capital A/c   ...Dr.		4,000
	To Calls-in-Arrears A/c			1,200
	To Share Forfeiture A/c			2,800
	(Shamu's 400 shares forfeited for non-payment of First and Final Call)
9.	Bank A/c   ...Dr.		8,000
	Share Forfeiture A/c   ...Dr.		2,000
	To Equity Share Capital A/c			10,000
	(1,000 forfeited shares reissued @ ₹ 8 per share as fully paid-up)
10.	Share Forfeiture A/c   ...Dr.		3,200
	To Capital Reserve A/c			3,200
	(Gain on reissue transferred to Capital Reserve)

Working Notes:

Face value per share: ₹ 10

Amount payable:

Application: ₹ 3

Allotment: ₹ 4

First and Final Call: ₹ 3

Applications received = 75,000 shares

Shares allotted = 50,000 shares

1. Application Money

75,000 × ₹ 3 = ₹ 2,25,000

Application money required:

50,000 × ₹ 3 = ₹ 1,50,000

Excess application money adjusted towards allotment:

₹ 2,25,000 − ₹ 1,50,000 = ₹ 75,000

2. Ramu's Shares

Category I ratio:

40,000 : 30,000 = 4 : 3

Ramu was allotted 1,200 shares. Therefore, shares applied for:

`1,200 xx 4/3 = 1,600` shares

Application money paid:

1,600 × ₹ 3 = ₹ 4,800

Application money required:

1,200 × ₹ 3 = ₹ 3,600

Excess application money:

₹ 4,800 − ₹ 3,600 = ₹ 1,200

Allotment due:

1,200 × ₹ 4 = ₹ 4,800

Amount not paid by Ramu on allotment:

₹ 4,800 − ₹ 1,200 = ₹ 3,600

Amount credited to Share Forfeiture A/c:

₹ 4,800

3. Money Received on Allotment

Total allotment due:

50,000 × ₹ 4 = ₹ 2,00,000

Less: Excess application money adjusted:

₹ 2,00,000 − ₹ 75,000 = ₹ 1,25,000

Less: Ramu's unpaid allotment:

₹ 1,25,000 − ₹ 3,600 = ₹ 1,21,400​

4. Shamu's Shares

Category II ratio:

35,000 : 20,000 = 7 : 4

Shamu applied for 700 shares. Therefore, shares allotted:

`700 xx 4/7 = 400` shares

First and Final Call unpaid:

400 × ₹ 3 = ₹ 1,200

Amount received and forfeited:

400 × ₹ 7 = ₹ 2,800

5. Reissue and Capital Reserve

Total forfeited shares reissued = 1,000 shares, including all 400 shares of Shamu.

Therefore, Ramu's shares reissued:

1,000 − 400 = 600 shares

Forfeited amount relating to Ramu's 600 shares:

`4,800 xx 600/(1,200) = 2,400`

Forfeited amount relating to Shamu's 400 shares:

₹ 2,800

Total forfeited amount relating to reissued shares:

₹ 2,400 + ₹ 2,800 = ₹ 5,200

Discount on reissue:

1,000 × (₹ 10 − ₹ 8) = ₹ 2,000

Capital Reserve:

₹ 5,200 − ₹ 2,000 = ₹ 3,200