Question

Excel Company Limited made an issue of 1,00,000 Equity Shares of Rs.10 each, payable as follows:

On Application	Rs. 2.50 per share
On Allotment	Rs. 2.50 per share
On First and Final Call	Rs. 5.00 per share

X, the holder of 400 shares, did not pay the call money and his shares were forfeited. 200 of the forfeited shares were reissued as fully paid at Rs. 8 per share. Draft necessary journal entries and prepare Share Capital and Share Forfeiture accounts in the books of the company.

Answer 1

Journal Entries in the Books of Excel Company Limited
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c ... Dr.		2,50,000	-
	To Equity Share Application A/c		-	2,50,000
	(Being share application money received on 1,00,000 shares @ Rs. 2.50 each)
2.	Equity Share Application A/c   ...Dr.		2,50,000	-
	To Equity Share Capital A/c		-	2,50,000
	(Being share application money transferred to Share Capital Account)
3.	Equity Share Allotment A/c   ...Dr.		2,50,000	-
	To Equity Share Capital A/c		-	2,50,000
	(Being share allotment money due on 1,00,000 shares @ Rs. 2.50 each)
4.	Bank A/c   ...Dr.		2,50,000	-
	To Equity Share Allotment A/c		-	2,50,000
	(Being share allotment money received in full)
5.	Equity Share First & Final Call A/c  ...Dr.		5,00,000	-
	To Equity Share Capital A/c		-	5,00,000
	(Being share call money due on 1,00,000 shares @ Rs. 5.00 each)
6.	Bank A/c   ...Dr.		4,98,000	-
	To Equity Share First & Final Call A/c		-	4,98,000
	(Being call money received on 99,600 shares except on 400 shares held by X)
7.	Equity Share Capital A/c (400 × Rs. 10)   ...Dr.		4,000	-
	To Equity Share First & Final Call A/c (400 × Rs. 5)		-	2,000
	To Share Forfeiture A/c (400 × Rs. 5)		-	2,000
	(Being 400 equity shares forfeited for non-payment of call money)
8.	Bank A/c (200 × Rs. 8)    ...Dr.		1,600	-
	Share Forfeiture A/c (200 × Rs. 2)   ...Dr.		400	-
	To Equity Share Capital A/c (200 × Rs. 10)		-	2,000
	(Being 200 forfeited shares reissued as fully paid @ Rs. 8 per share)
9.	Share Forfeiture A/c   ...Dr.		600	-
	To Capital Reserve A/c		-	600
	(Being profit on reissue of 200 forfeited shares transferred to Capital Reserve)

 

Dr.	Equity Share Capital Account				Cr.
Date	Particulars	Amount (₹)	Date	Particulars	Amount (₹)
	To Share Forfeiture A/c (Forfeiture)	4,000		By Share Application A/c	2,50,000
	To Balance c/d	9,98,000		By Share Allotment A/c	2,50,000
				By Share First & Final Call A/c	5,00,000
				By Bank A/c (Reissue)	1,600
				By Share Forfeiture A/c (Reissue discount)	400
		10,02,000			10,02,000

 

Dr.	Share Forfeiture Account				Cr.
Date	Particulars	Amount (₹)	Date	Particulars	Amount (₹)
	To Equity Share Capital A/c (Discount)	400		By Equity Share Capital A/c (Forfeiture)	2,000
	To Capital Reserve A/c (Profit)	600
	To Balance c/d	1,000
		2,000			2,000

Working Note:

Forfeited amount on 400 shares = Rs. 2,000 (i.e., Rs. 5 per share)

Forfeited amount on 200 reissued shares = 200 × Rs. 5

= Rs. 1,000

Less: Discount allowed on reissue = 200 × Rs. 2

= 400

Net Profit Transferred to Capital Reserve = Rs. 1,000 − Rs. 400

= Rs. 600