Question

Ganesh Ltd. issued a prospectus inviting applications for 20,000 shares of ₹10 each at a premium of ₹4 per share, payable as follows

On Application	₹4 (including premium ₹1)
On Allotment	₹3 (including premium ₹1)
On First Call	₹3 (including premium ₹1)
On Second and Final Call	₹4 (including premium ₹1)

Applications were received for 30,000 shares and pro-rata allotment was made on the applications for 24,000 shares. It was decided to utilise excess application money towards the sums due on allotment.
X, who was allotted 500 shares, failed to pay the allotment money and on his subsequent failure to pay the first call, his share were forfeited.
Y, who applied for 1,800 shares, failed to pay the two calls and his shares were forfeited after the second call.
Of the shares forfeited, 1,700 shares were re-issued as fully paid up for ₹8 per share, the whole of Y's shares being included.
Prepare Cash Book, Journal and Balance Sheet.

Answer 1

Journal entries In the books of Ganesh Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		1,20,000
	To Share Application A/c			1,20,000
	(Being application on 30,000 shares @ ₹4)
2.	Share Application A/c     ...Dr.		1,20,000
	To Share Capital A/c (20,000 × ₹3)			60,000
	To Securities Premium Reserve A/c (20,000 × ₹1)
	To Share Allotment A/c			16,000
	To Bank A/c (refund 6,000 × ₹4)			24,000
	(Being pro‑rata; excess to Allotment; refund made)
3.	Share Allotment A/c     ...Dr.		60,000
	To Share Capital A/c (20,000 × ₹2)			40,000
	To Securities Premium Reserve A/c (20,000 × ₹1)			20,000
	(Being allotment @ ₹3 incl. ₹1 premium)
4.	Bank A/c     ...Dr.		42,900
	Calls‑in‑Arrears (Allot.) A/c     ...Dr.		4,200
	To Share Allotment A/c			47,100
	(Being allotment due 60,000 − appn excess 16,000 = 44,000; Vijay’s net unpaid ₹4,200; hence bank ₹42,900)
5.	Share First & Final Call A/c     ...Dr.		2,40,000
	To Share Capital A/c 2,40,000
	(Being call @ ₹3 on 80,000 shares)
6.	Bank A/c     ...Dr.		2,35,200
	Calls‑in‑Arrears (Call) A/c     ...Dr.		4,800
	To Share First & Final Call A/c			2,40,000
	(Being all call money received except on Vijay’s 1,600 shares)
7.	Equity Share Capital A/c     ...Dr.		16,000
	To Share Allotment A/c			4,200
	To Share First & Final Call A/c			4,800
	To Share Forfeiture A/c			7,000
	(Being capital called ₹10 per share; amount actually received & retained on these shares credited to Forfeiture)
8.	Bank A/c     ...Dr.		18,400
	To Equity Share Capital A/c (1,600 × ₹10)			16,000
	To Securities Premium Reserve A/c			2,400
	(Being re‑issued above par by ₹1.50 per share; premium on re‑issue → SPR)
9.	Share Forfeiture A/c     ...Dr.		7,000
	To Capital Reserve A/c			7,000
	(Being no discount on re‑issue; entire forfeiture on these shares transferred)

 

Dr.	In the books of Ganesh Ltd. Cash Book				Cr.
Particulars	Amt. (₹)	Amt. (₹)	Particulars	Amt. (₹)	Amt. (₹)
To Share Application A/c (30,000 × ₹4)		1,20,000	By Bank – Refund (6,000 × ₹4)		24,000
To Share Allotment A/c		42,900
To Share First Call A/c		54,000
To Share Second & Final Call A/c		72,000
To Bank (Re‑issue 1,700 × ₹8)		13,600
To Balance c/d (Bank)		2,78,500

 

Balance Sheet
Liabilities	Amt. (₹)	Amt. (₹)	Assets	Amt. (₹)	Amt. (₹)
Share Capital			Bank Balance		2,78,500
Paid‑up: 19,700 shares @ ₹10	1,97,000
Add: Forfeited Shares A/c	1,140	1,98,140
Reserves & Surplus
Securities Premium Reserve		75,500
Capital Reserve (on re‑issue)		7,000
		2,78,500			2,78,500

Working Note:

1) Pro‑rata & excess on application
Eligible apps: 24,000 → Allotted 20,000 ⇒ ratio 6:5.
Application received = 30,000 × ₹4 = ₹1,20,000.
Refund to 6,000 = ₹24,000.
24,000×₹4 − 20,000 × ₹4 = ₹16,000

2) Allotment
Allotment due = 20,000 × ₹3 = ₹60,000.
Less excess appn = 16,000 → ₹44,000.
Vijay (1,600 shares): applied 1,700; paid appn = 1,700 × ₹4 = ₹6,800; required 1,600 × ₹4 = ₹6,400 ⇒ excess ₹400 set‑off against his allotment.
His allotment due = 1,600 × ₹3 = ₹4,800 → unpaid ₹4,200.
Bank on allotment = 44,000 − 4,200 = ₹42,900

3) Forfeiture credit
Capital received @ ₹3/share for 1,600 = ₹4,800; plus excess ₹400 adjusted to capital on allotment ⇒ Share Forfeiture = ₹7,000.

4) Re‑issue
1,600 shares re‑issued for ₹18,400 (₹11.50 each) fully paid.
No discount on re‑issue ⇒ entire forfeiture ₹7,000 → Capital Reserve.
Credits when due: Application ₹20,000; Allotment ₹20,000; First Call ₹20,000; Second Call on 19,500 shares (X’s 500 already forfeited) = ₹19,500 ⇒ total ₹79,500.
Less reversals at forfeiture: X ₹1,000 (₹500 allot + ₹500 1st call), Y ₹3,000 (1st + 2nd call) ⇒ ₹4,000.
Closing SPR = ₹79,500 − ₹4,000 = ₹75,500