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'Bmy Ltd.' Invited Applications for Issuing 1,00,000 Equity Shares of Rs 10 Each at a Premium of `10 per Share. the Amount Was Payable as Follows : Pass Necessary Journal Entries for the Above Transaction in the Books of Bmy Ltd. - Accountancy

'BMY Ltd.' invited applications for issuing 1,00,000 equity shares of Rs 10 each at a premium of `10 per share. The amount was payable as follows :

On application - Rs 10 per share (including Rs 5 premium)
On allotment - The balance

The issue was fully subscribed. A shareholder holding 300 shares paid the full share money with
an application. Another shareholder holding 200 shares failed to pay the allotment money. His shares were forfeited. Later on, these shares were re-issued for Rs 4,000 as fully paid up.
Pass necessary journal entries for the above transaction in the books of BMY Ltd.

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Solution

In the books of BMY Ltd
Journal Entry
Date Particulars L.F.

Dr.

Rs

Cr.

Rs

 

Bank A/c  Dr.

     To Equity Share Application and Allotment A/c

(Being amount received on an application for 1,00,000 shares along with allotment money on 300 shares)

 

10,03,000

 

 

 

 

10,03,000

 

 

 

Equity Share Application and Allotment A/c Dr.

    To Equity Share Capital A/c

    To Securities Premium A/c

    To Calls-in-Advance A/c

(Being amount of application transferred to Share Capital and securities premium)

 

10,03,000

 

 

 

 

 

 

5,00,000

5,00,000

3,000

 

 

 

Equity Share Allotment A/c   Dr.

   To Equity Share Capital A/c

   To Securities Premium A/c

(Being amount due on allotment)

 

10,00,000

 

 

 

 

5,00,000

5,00,000

 

 

Bank A/c (10,00,000 – 3,000 – 2,000)   Dr.

Calls – in – Advances A/c   Dr.

    To Equity Share Allotment A/c

(Being amount received on share allotment)

 

9,95,000

3,000

 

 

 

 

9,98,000

 

 

Equity Share Capital A/c   Dr.

Securities Premium A/c   Dr.

    To Equity Share Forfeiture A/c

    To Equity Share Allotment A/c

(Being 200 shares forfeited)

 

2,000

1,000

 

 

 

 

 

1,000

2,000

 

 

Bank A/c    Dr.

   To Equity Share Capital A/c]

   To Securities Premium A/c

(Being forfeited shares were reissued for Rs.4,000)

 

4,000

 

 

 

 

2,000

2,000

 

 

Equity Share Forfeiture A/c   Dr.

   To Capital Reserve A/c

(Being excess amount on forfeiture is transferred to capital reserve)

 

1,000

 

 

 

 

1,000

 

 

Working Notes:

WN1: Calculation of Amount received on Application

Application amount received on 1,00,000 share  = 1000000

Shareholders of 300 shares paid in advance (300 x 10) = 3000

Total amount = 10,03,000

Concept: Accounting Treatment of Forfeiture and Re-issue of Share
  Is there an error in this question or solution?
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