Question

Eastern Company Limited, having an authorised capital of ₹ 10,00,000 divided into shares of ₹ 10 each, issued 50,000 shares at a premium of ₹ 3 per share payable as follows:

On Application	₹ 3 per share;
On Allotment (including premium)	₹ 5 per share;
On first call (due three months after allotment) and the balance as when required.	₹ 3 per share;

Applications were received for 60,000 shares and the directors allotted the shares as follows:

1. Applicants for 40,000 shares received in full.
2. Applicants for 15,000 shares received an allotment of 8,000 shares.
3. Applicants for 5,000 shares received 2,000 shares on allotment, excess money being returned.

All amounts due on allotment were received. The first call was made and the money was received except on 100 shares. Give journal and cash book entries to record these transactions of the company. Also prepare the Balance Sheet of the company.

Answer 1

Journal Entries In the books of Eastern Company Limited
Date	Particulars	L. F.	Debit Amount (₹)	Credit Amount (₹)
(i)	Share Application A/c   ...Dr.		1,80,000
	To Share Capital A/c (50,000 × 3)			1,50,000
	To Share Allotment A/c			30,000
	(Being share application money for 50,000 shares transferred to share capital account and the excess money transferred to share allotment account)
(ii)	Share Allotment A/c (50,000 × 5)   ...Dr.		2,50,000
	To Share Capital A/c (50,000 × 2)			1,00,000
	To Share Premium A/c (50,0003)			1,50,000
	(Bong allotment money due on 50,000 share @ ₹ 5 per share including ₹ 3 security premium)
(iii)	Share First Call A/c   ...Dr.		1,50,000
	To share Capital A/c			1,50,000
	(Being first call due on 50.000 share @ ₹ 3 per share)
(iv)	Arearon Fist Call A/c (100 × 3)   ...Dr.		300
	To Share First Call A/c			300
	(Being call-in-arrears on 100 share @ ₹ 3 per share)

 

NOTES TO ACCOUNTS
Note No.	Particulars	Amount (₹)	Amount (₹)
1	Share Capital:
(a)	Authorised Share Capital
	1,00,000 shares of ₹ 10 each		10,00,000
(b)	Issued Share Capital
	50,000 shares of ₹ 10 each		5,00,000
(c)	Subscribed, Called up and Paid up Share Capital
	50,000 shares of ₹ 10 each, ₹ 8 called–up	4,00,000
	Less: Calls–in–Arrears	300	3,99,700
2	Reserves and Surplus:
	Securities Premium Reserve (50,000 × ₹ 3)		1,50,000
3	Cash and Cash Equivalents:
	Cash at Bank		5,49,700

 

Eastern Company Limited Balance Sheet
Particulars		Note No.	Amount  (₹)
I	Equity and Liabilities:
1.	Shareholders Funds
a.	Share Capital	1	3,99,700
b.	Reserves and Surplus	2	1,50,000
2.	Non–Current Liabilities
3.	Current Liabilities
	Total		5,49,700
II.	Assets:
1.	Non-Current Assets
2.	Current Assets
a.	Cash and Cash Equivalents	3	5,49,700
	Total		5,49,700

 

Dr.	Cash Book (Bank Column)						Cr.
Date	Particulars	J. F.	Amount (₹)	Date	Particulars	J. F.	Amount (₹)
	To Share Application (60,000 × ₹ 3)		1,80,000		By Balance c/d		5,49,700
	To Share Allotment		2,20,000
	To Share First Call (49,900 × ₹ 3)		1,49,700
			5,49,700				5,49,700

Working Notes:

(i) Amount transferred to share capital on application:

Category A	= 40,000 × 3	= ₹ 1,20,000
Category B	= 8,000 × 3	= ₹ 24,000
Category C	= 2,000 × 3	= ₹ 6,000
Total		= ₹ 1,50,000

(ii) Amount transferred to share allotment on application:

Category B excess shares = 7,000 × 3	= ₹ 21,000
Category C excess shares = 3,000 × 3	= ₹ 9,000
	= ₹ 30,000

(iii) Amount Received on the allotment:

	Due	Advance	Received
(i)	40,000 × 5 = ₹ 2,00,000	−	₹ 2,00,000
(ii)	8,000 × 5 = ₹ 40,000	₹ 21,000	₹ 19,000
(iii)	2,000 × 5 = ₹ 10,000	₹ 9,000	₹ 1,000
			₹ 2,20,000