Question

Durga Ltd. invited applications for issuing 1,00,000 equity shares of ₹10 each at par. The amount was payable as follows:

On Application	₹2 per share.
On Allotment	₹3 per share.
On First and Final Call	₹5 per share.

Applications were received for 2,80,000 shares. Applications for 30,000 shares were rejected and the money refunded. Allotment was made to the remaining applicants as follows.

Category	No. of Shares Applied	No. of Shares Allotted
I	1,50,000	85,000
II	1,00,000	15,000

Excess money received with applications was adjusted towards sums due on allotment and first and final call. All calls were made and were duly received except the final call by a shareholder belonging to Category I who has applied for 300 shares. His shares were forfeited. The forfeited shares were re-issued at a premium of 30% fully paid up.
Pass necessary Journal entries for the above transactions in the book of Durga Ltd. Open calls in-arrears and calls in advance account wherever required.

Answer 1

Journal entries Durga Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		5,60,000
	To Share Application A/c			5,60,000
	(Application money received on 2,80,000 shares @ ₹2)
2.	Share Application A/c     ...Dr.		5,60,000
	To Share Capital A/c			2,00,000
	To Share Allotment A/c			3,00,000
	To Bank A/c (Refund)			60,000
	(Transfer of application money; excess adjusted to allotment; refund of 30,000 shares)
3.	Share Allotment A/c     ...Dr.		3,00,000
	To Share Capital A/c			3,00,000
	(Allotment due on 1,00,000 shares @ ₹3)
4.	Bank A/c     ...Dr.		1,25,000
	Calls in Advance A/c     ...Dr.		1,75,000
	To Share Allotment A/c			3,00,000
	(Allotment money received; surplus adjusted to calls in advance)
5.	Share First & Final Call A/c     ...Dr.		5,00,000
	To Share Capital A/c			5,00,000
	(Call money due @ ₹5 per share)
6.	Calls in Advance A/c     ...Dr.		1,75,000
	Bank A/c     ...Dr.		4,24,150
	Calls in Arrears A/c     ...Dr.		850
	To Share First & Final Call A/c			6,00,000
	(Call money received, adjusted with calls in advance; arrears from 300 shares)
7.	Share Capital A/c     ...Dr.		3,000
	To Share Forfeiture A/c			4,650
	To Calls in Arrears A/c			850
	(Forfeiture of 300 shares for non-payment of final call)
8.	Bank A/c     ...Dr.		3,000
	Securities Premium A/c     ...Dr.		900
	To Share Capital A/c			3,000
	To Securities Premium A/c			900
	(Re-issue of 300 forfeited shares @ ₹13 fully paid, premium ₹3)
9.	Share Forfeiture A/c     ...Dr.		850
	To Capital Reserve A/c			850
	(Profit on re-issue transferred to Capital Reserve)

Working Note:

1) Pro-Rata Ratios
Category I: 1,50,000 → 85,000 ⇒ 150:85 = 30:17
Category II: 1,00,000 → 15,000 ⇒ 100:15 = 20:3

2) Excess Application Money
Cat I: App money received = 85,000 × (30/17 × ₹2) = ₹3,00,000
= 85,000 × ₹2 = ₹1,70,000 ⇒ excess ₹1,30,000
Cat II: App money received = 15,000 × (20/3 × ₹2) = ₹2,00,000; required app money = ₹30,000 ⇒ excess ₹1,70,000.
Total excess = ₹3,00,000

3) Allotment Due & Adjustments
Allotment due = 1,00,000 × ₹3 = ₹3,00,000
Excess from application = ₹3,00,000 ⇒ balance on allotment from shareholders = ₹1,25,000

4) Final Call Due & Receipts
Final call due = 1,00,000 × ₹5 = ₹5,00,000.