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Concept Stationary Ltd. Invited Applications for Issuing 3,00,000 Shares of ₹ 10 Each at a Premium of ₹ 3 per Share. the Amounts Were Payable as Follows: on Application and Allotment – ₹ 7 per Share - Accountancy

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Journal Entry

Concept Stationary Ltd. invited applications for issuing 3,00,000 shares of ₹ 10 each at a premium of ₹ 3 per share. The amounts were payable as follows:
On application and allotment – ₹ 7 per share.
On first & final call – balance (including a premium of ₹ 3)
Applications were received for 4,00,000 shares & allotment was made as follows:
(i) To applicants for 80,000 shares – 80,000 shares.
(ii) To applicants for 40,000 shares – nil
(iii) The balance of the applicants were allotted shares on a pro-rata basis.

Excess money received with applications was adjusted towards sums due on the first and final call.
Amit, who belonged to category (i) and was allotted 4,000 shares and Veni, who belonged to category (iii) and was allotted 4,400 shares failed to pay the first and final call money. Their shares were forfeited. The forfeited shares were re-issued at ₹ 7 per share fully paid-up.

Pass necessary journal entries for the above transactions in the books of the company.

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Solution

In the books of Concept Stationary Ltd. 
Journal  

Date Particulars   L.F.

Debit

Amount()

Credit

Amount()

  Bank A/c Dr.

































28,00,000

 

  To Share Application & Allotment A/c  

 

28,00,000

  (Received application money & allotment on 4,00,000 shares)  

 

 

     

 

 

  Share Application & Allotment A/c Dr.

28,00,000

 

   To Share Capital A/c  

 

21,00,000

  To Share First Call A/c  

 

4,20,000

   To Bank A/c  

 

2,80,000

  (Transfer of application & allotment money to Share Capital)  

 

 

     

 

 

  Share First and Final Call A/c Dr.

18,00,000

 

   To Share Capital A/c  

 

9,00,000

  To Security Premium Reserve A/c  

 

9,00,000

  (Call money due on 3,00,000 shares)  

 

 

     

 

 

  Bank A/c Dr.

13,38,000

 

  Calls-in-Arrears A/c (18,000 + 24,000) Dr.

42,000

 

  To Share First and Final Call A/c  

 

13,80,000

  (Received call money)  

 

 

     

 

 

  Share Capital A/c (8,400 x 10) Dr.

84,000

 

  Security Premium Reserve A/c (8,400 x 3) Dr.

25,200

 

  To Calls in Arrears A/c (18,000 + 24,000)  

 

42,000

  To Share Forfeiture A/c  

 

67,200

  (Forfeiture of 8400 shares for non-payment of call money)  

 

 

     

 

 

  Bank A/c (8,400 x 7) Dr.

58,800

 

  Share Forfeiture A/c Dr.

25,200

 

  To Share Capital A/c  

 

84,000

  (Reissue of 8,400 shares at ₹7 per share)  

 

 

     

 

 

  Share Forfeiture A/c Dr.

42,000

 

  To Capital Reserve A/c  

 

42,000

  (Profit on re-issue transferred to Capital Reserve Account)  

 

 

Working Notes

(1) Computation Table

Categories Shares  Applied Shares Allotted

Money received on Application &Allotment 

@ ₹ 7 each 

Money transferred to Share Capital

@ ₹ 7 each

Excess Application &Allotment money Amount adjusted on First call Amount to be refunded
I 80,000 80,000 5,60,000 5,60,000      
II 40,000 Nil 2,80,000       2,80,000
III 2,80,000 2,20,000 19,60,000 15,40,000 4,20,000 4,20,000  
  4,00,000 3,00,000 28,00,000 21,00,000 4,20,000 4,20,000 2,80,000

(2) Calculation of Shares applied to Amit: 4000 shares

Calls in arrears = 4,000 x ₹ 6 = 24,000

3) Calculation of Shares applied to Veni:

Shares applied by Veni = `(2,80,000)/(2,20,000) xx 4400 = 5600  "shares"`

Amount unpaid by Veni  
Amount received on application (5600 × 7)
39,200
Less: actual transferred to share capital (4400 × 7) 30,800
Excess 8,400
Amount due on first call (4400 x 6) 26,400
Less: excess adjusted (8,400)
Calls in arrears 18,000
Concept: Accounting Treatment of Forfeiture and Re-issue of Share
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