# 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.

#### 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