Question

A company issued for public subscription 40,000 equity shares of ₹10 each at a premium of ₹2 per share payable as under:

On Application	₹3 per share
On Allotment	₹4 per share (including premium)
On First Call	₹2 per share
On Second Call	₹3 per share

Applications were received for 70,000 shares. Allotment was made pro-rata to the applicants for 50,000 shares, the remaining applications being refused. Money overpaid on application was applied towards sum due on allotment. A, to whom 1,600 shares were allotted failed to pay the allotment and calls money. B, to whom 2,000 shares were allotted failed to pay the two calls. The shares of A and B were subsequently forfeited after the second call was made. 3,000 of the forfeited shares were re-issued at ₹8 per share fully paid. The re-issued shares included all of A's shares.
Pass journal entries in the books of the company to record the above transactions.

Answer 1

Journal entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		2,10,000
	To Share Application A/c			2,10,000
	(Application money received on 70,000 shares @ ₹3)
2.	Share Application A/c     ...Dr.		2,10,000
	To Share Capital A/c			1,20,000
	To Share Allotment A/c			30,000
	To Bank A/c (refund)			60,000
	(Application money transferred; excess to allotment; refund on 20,000 shares)
3.	Share Allotment A/c     ...Dr.		1,60,000
	To Share Capital A/c			80,000
	To Securities Premium Reserve A/c			80,000
	(Allotment due @ ₹4 on 40,000 shares incl. premium ₹2)
4.	Bank A/c     ...Dr.		1,24,800
	Calls in Arrears A/c     ...Dr.		5,200
	To Share Allotment A/c			1,30,000
	(Allotment received; A’s unpaid cash ₹5,200; ₹30,000 already adjusted from application)
5.	Share First Call A/c     ...Dr.		80,000
	To Share Capital A/c			80,000
	(First call due @ ₹2)
6.	Bank A/c     ...Dr.		72,800
	Calls in Arrears A/c     ...Dr.		7,200
	To Share First Call A/c			80,000
	(First call received; A & B unpaid on 1,600 & 2,000 shares)
7.	Share Second Call A/c     ...Dr.		1,20,000
	To Share Capital A/c			1,20,000
	(Second call due @ ₹3)
8.	Bank A/c     ...Dr.		1,09,200
	Calls in Arrears A/c     ...Dr.		10,800
	To Share Second Call A/c			1,20,000
	(Second call received; A & B unpaid on 1,600 & 2,000 shares)
9.	Share Capital A/c     ...Dr.		36,000
	Securities Premium Reserve A/c     ...Dr.		3,200
	To Share Allotment A/c			5,200
	To Calls in Arrears A/c			18,000
	To Share Forfeiture A/c			16,000
	(Forfeiture of A:1,600 shares,unpaid allotment & both calls; B:2,000 shares,two calls. SPR debited for A’s unpaid premium.)
10.	Bank A/c     ...Dr.		24,000
	Share Forfeiture A/c     ...Dr.		6,000
	To Share Capital A/c			30,000
	(Reissue of 3,000 forfeited shares @ ₹8 fully paid; discount from forfeiture)
11.	Share Forfeiture A/c     ...Dr.		7,000
	To Capital Reserve A/c			7,000
	(Profit on reissue transferred to Capital Reserve)

Working Notes:

1) Application Money Received:
70,000 × ₹3 = ₹2,10,000

2) Application Money Adjustment:
Transfer to Capital: 40,000 × ₹3 = ₹1,20,000
Refund (20,000 shares) = ₹60,000
Excess applied to Allotment = ₹2,10,000 − ₹1,20,000 − ₹60,000 = ₹30,000

3) Allotment Money Due:
40,000 × ₹4 = ₹1,60,000 (₹2 Capital + ₹2 Premium)

• Less excess from application: ₹30,000

• Cash due: ₹1,30,000

• A (1,600 shares) unpaid cash = ₹5,200

• Bank received = ₹1,24,800

4) First Call:
40,000 × ₹2 = ₹80,000
A (1,600) & B (2,000) unpaid = ₹7,200
Bank received = ₹72,800

5) Second Call:
40,000 × ₹3 = ₹1,20,000
A & B unpaid = ₹10,800
Bank received = ₹1,09,200

6) Forfeiture:
A’s shares = 1,600 (no allotment or calls paid) → unpaid premium ₹3,200 (debit SPR)
B’s shares = 2,000 (calls unpaid)
Total capital forfeited = 3,600 × ₹10 = ₹36,000
Share Forfeiture amount = ₹16,000

7) Reissue:
3,000 shares @ ₹8 fully paid → discount ₹6,000
Forfeiture attached to these = ₹13,000
Capital Reserve = ₹13,000 − ₹6,000 = ₹7,000
Balance in Share Forfeiture = ₹3,000