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Gaurav Applied for 5,000 Shares of ₹ 10 Each at a Premium of 2.50 per Share. but He Was Allotted Only 2,500 Shares on Pro Rata Basis . - Accountancy

Journal Entry

Gaurav applied for 5,000 shares of ₹ 10 each at a premium of 2.50 per share. But he was allotted only 2,500 shares on pro rata basis . After having paid ₹ 3 per share on application, he did not pay allotment money of ₹ 4.50 per share (including premium) and on his subsequent failure to pay the first call of ₹ 2 per share, his shares were forfeited. These shares were reissued at the rate of ₹ 8 per share credited as fully paid .
Pass journal entries to record the forfeiture and reissue of shares. 

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Solution

Journal

Date

Particulars

L.F.

Debit

Amount

(Rs)

Credit

Amount

(Rs)

 

Equity Share Capital A/c (2,500×7)

Dr.

 

17,500

 

 

Security Premium Reserve A/c

Dr.

 

3,750

 

 

  To Equity Share Allotment A/c

 

 

 

3,750

 

  To  Equity Share First Call A/c (2,500×2)

 

 

 

5,000

 

  To Share Forfeited A/c

 

 

 

12,500

 

( 2,500 shares forfeited)

 

 

 

 

 

 

 

 

 

 

 

Bank A/c (2,500×8)

Dr.

 

20,000

 

 

Share Forfeited A/c (2,500×2)

Dr.

 

5,000

 

 

  To Equity Share Capital A/c (2,500×10)

 

 

 

25,000

 

(Share reissued @Rs 8 per share fully paid-up)

 

 

 

 

 

 

 

 

 

 

 

Share Forfeited A/c (12,500 – 5,000)

Dr.

 

7,500

 

 

  To Capital Reserve A/c

 

 

 

7,500

 

( Profit on reissue transferred to Capital Reserve)

 

 

 

 

Working Notes:

WN 1Calculation of Amount unpaid on Allotment

Amount received on application (5,000×3)          = 15,000

Less: Amount adjusted on application (2,500×3) =  7,500

Excess amount received on application               =  7,500

Amount due on allotment (2,500×4.5)= 11,250

Amount unpaid on allotment               = 3,750 (11,250 – 7,500)

Note:

Rs 7,500 received on application will be transferred to allotment, but first of all we have to transfer such amount to Capital A/c and rest would be transferred to Securities Premium A/c. Capital on allotment is Rs 5,000 (2,500×2) that is fully received and balance amount of advance Rs 2,500 will be transferred to Securities Premium A/c. So, amount of premium unpaid is Rs 3,750 (2,500×2.5 –2,500). 

Concept: Accounting Treatment of Forfeiture and Re-issue of Share
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APPEARS IN

TS Grewal Class 12 Accountancy - Double Entry Book Keeping Volume 2
Chapter 1 Accounting for Share Capital
Exercise | Q 69 | Page 123
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