Question

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

On Application	Rs 3 per share
On Allotment (including premium)	Rs 5 per share
On the first call (due three months after allotment) and the balance as and when required.	Rs 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 5000 shares received on allotment of 2000 shares, excess money being returned.

All amounts due on allotment were received.

The first call was duly made, and the money was received with the exception of the call due 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 Ltd.
Date	Particulars	L.F	Debit (₹)	Credit (₹)
1.	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
	(Application money transferred to share capital account and excess money on share allotment )
2.	Share Allotment A/c   ...Dr.		2,50,000	-
	To Share Capital A/c		-	1,00,000
	To Securities Premium A/c		-	1,50,000
	(Share Allotment money due on 50,000 shares @ ₹ 5 per share, including premium of ₹ 3 per share)
3.	Share First and Final Call A/c   ...Dr.		1,50,000	-
	To Share Capital A/c		-	1,50,000
	(Share First Call due on 50,000 shares @ ₹ 3 per share)

 

Dr.	Cash Book (Bank column only)		Cr.
Receipts	Amount (₹)	Payments	Amount (₹)
To Share application A/c	1,80,000	By balance c/d	5,49,700
To Share Allotment A/c	2,20,000
To Share First Call A/c	1,49,700
	5,49,700		5,49,700

 

Balance Sheet (Extract)
Particulars	Note no.	Amount (₹)
I. Equity and Liabilities
1. Shareholders’ Funds
Share Capital		3,99,700
Reserves and Surplus		1,50,000
II Assets
1. Cash and cash equivalents		5,49,700

Notes to Accounts:

Note No.	Particulars	Amount (₹)	Amount (₹)
1.	Share Capital:
	Authorised Capital:
	1,00,000 Equity Shares of ₹ 10 each		10,00,000
	Issued Capital:
	50,000 Equity Shares of ₹ 10 each		5,00,000
	Subscribed, Called-up & Partly Paid-up Capital:
	50,000 Equity Shares of ₹ 10 each, ₹ 8 called-up	4,00,000
	Less: Calls-in-Arrears (on 100 shares @ ₹ 3)	300	3,99,700
2.	Reserves and Surplus:
	Securities Premium Account		1,50,000
3.	Cash and Cash Equivalents:
	Cash at Bank (from Cash Book closing balance)		5,49,700