Question

Hero Ltd. was registered with a capital of ₹5,00,000 divided into 20,000 shares of ₹25 each, payable as:

On Application	₹5 per share
On Allotment	₹10 per share
On Call	The Balance

The company offered to the public for subscription 10,000 shares. It received applications for 11,100 shares.

From amongst the applicants:

1. Vimal, who had applied for 1,200 shares, paid ₹6,000 on application but was allotted only 600 shares.
2. Mohan applied for 1,000 shares, paid the full amount of ₹25,000 with his application but was allotted only 500 shares.
3. Vineet, who had applied for 1,500 shares, paid his application and allotment money in order but did not pay the call money.
4. The remaining applicants paid as and when due.

The surplus money paid by both Vimal and Mohan was used towards allotment and call and any surplus beyond the call was refunded.
The company forfeited Vineet’s shares and later re-issued 500 of the forfeited shares @ ₹20 per share fully paid up.

You are required to pass journal entries in the books of Hero Ltd.

Answer 1

Journal Entries In the books of Hero Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		75,500
	To Share Application A/c			75,500
	(Being share application received)
2.	Share Application A/c     ...Dr.		75,500
	To Share Capital A/c			50,000
	To Share Allotment A/c			8,000
	To Calls-in-Advance A/c			5,000
	To Bank A/c			12,500
	(Being share application transferred to share capital and subsequent instalments)
3.	Share Allotment A/c     ...Dr.		1,00,000
	To Share Capital A/c			1,00,000
	(Being share allotment due)
4.	Bank A/c     ...Dr.		92,000
	To Share Allotment A/c			92,000
	(Being share allotment received)
5.	Share 1st & Final Call A/c     ...Dr.		1,00,000
	To Share Capital A/c			1,00,000
	(Being share capital due)
6.	Bank A/c     ...Dr.		80,000
	Calls-in-Advance A/c     ...Dr.		5,000
	Calls-in-Arrear A/c     ...Dr.		15,000
	To Share 1st & Final Call A/c			1,00,000
	(Being share final call received)
7.	Share Capital A/c     ...Dr.		37,500
	To Share Forfeiture A/c			22,500
	To Calls-in-Arrear A/c			15,000
	(Being 1,500 shares forfeited)
8.	Bank A/c     ...Dr.		10,000
	Shares Forfeiture A/c     ...Dr.		2,500
	To Share Capital A/c			12,500
	(Being 500 shares reissued)
9.	Share Forfeiture A/c     ...Dr.		5,000
	To Capital Reserve A/c			5,000
	(Being net gain on reissued shares transferred to Capital Reserve)

Working Notes:

1) 

	₹
Amount received on application: 11,100 × ₹5	55,500
Excess amount from Mohan 1,000 × ₹20	20,000
	75,500

2)
(i) Excess application money from Vimal:
1,200 shares − 600 shares: 600 shares × ₹5 = 3,000
This amount shall be adjusted on allotment.

(ii) 

Total application money paid by Mohan (1,000 × ₹25)	25,000
Less: Adjusted on application: 500 × ₹5	(2,500)
	22,500
Less: Adjusted on allotment: 500 × ₹10	(5,000)
	17,500
Less: Adjusted on 1st & Final Call (Transferred to Calls in Advance) 500 × ₹10	(5,000)
Excess application money returned	12,500