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Jy Ltd. Invited Applications for Issuing 70,000 Equity Shares of Rs 10 Each at a Discount of 10%. the Amount Was Payable as Follows: Pass Necessary Journal Entries for the Above Transactions in the Books of Jy Ltd. - Accountancy

JY Ltd. invited applications for issuing 70,000 equity shares of Rs 10 each at a discount of 10%. The amount was payable as follows:
On applications and allotment - Rs 4 per share
On first and final call - the balance amount
Application for 2,00,000 shares were received. Applications for 60,000 shares were rejected and money refunded. Shares were allotted on pro-rata basis to the remaining applicants. The first and final call was made. All money was received except on 1,400 shares applied by Naresh. His shares were forfeited. The forfeited shares were re-issued at the maximum discount permissible under the law.

Pass necessary journal entries for the above transactions in the books of JY Ltd.

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Solution

Journal Entries
Date Particulars L.F

Debit

Rs

Credit

Rs

 

Bank A/c                        Dr.

     To share application and allotment A/c

(Being share application and allotment received on 2,00,000 of Rs 4 each including premium of Rs 1 each)

 

8,00,000

 

 

 

 

8,00,000

 

 

 

Share application and allotment A/c                 Dr.

Discount on issue A/c                             Dr.

     To share capital A/c

     To Bank A/c

     To share First and Final Call A/c

(Being share application of 70,000 shares transferred to share capital, share application and allotment on 60,000 shares refunded and rest is adjusted on share first and final call)

 

8,00,000

70,000

 

 

 

 

 

 

 

3,50,000

2,40,00

2,80,000

 

 

 

 

Share First and Final Call A/c              Dr.

    To share capital A/c

(Being share first and final Call due on 70,000 shares of  Rs 5 each)

 

3,50,000

 

 

 

3,50,000

 

 

Bank A/c                  Dr.

    To Share First and Final Call A/c

(Being share first and final call received)

 

69,300

 

 

 

69,300

 

 

Share Capital A/c        Dr.

    To Share Forfeiture A/c

    To Discount on issue A/c

    To Share First and Final Call A/c

(Being 700 share were forfeited for non-payment of share first and final of Rs 5 each)

 

7,000

 

 

 

 

 

5,600

700

700

 

 

Bank A/c                                    Dr.

Discount on issue A/c                    Dr.

Share forfeited A/c                       Dr.

     To share capital A/c

(Being 700 forfeited share were re-issued at a discount of  Rs 8 per Share)

 

700

700

5,600

 

 

 

 

7,000

 

 

Share Forfeiture A/c            Dr.

     To capital Reserve A/c

(Being share forfeiture transferred to capital reserve)

 

Nil

 

 

 

Nil

 

 

 
Category Share
Applied
Share
Allotted
Money
received
on
Application
and
Allotment
@ Rs 4 each
including
premium
of Rs 1 each
Money
transfers
to share
capital@
Rs 5 each
Money
transfer
to
securities
premium
@ Rs 1 each
Excess
Application
on and
Allotment
money
Share
first and
final call
due @Rs 5
each
Amount
receivable
on share
first and
final call
after
adjustment

Money
Refunded
I 60,000 Nil 2,40,000           2,40,000
II 1,40,000 70,000 5,60,000 3,50,000 70,000 2,80,000 3,50,000 69,300  
  2,00,000 70,000 8,00,000 3,50,000 70,000 2,80,000 3,50,000 69,300 2,40,000

Working Note:

Those who applied for 1,40,000 shares, allotted = 70,000 Shares

Those who applied for 1,400 shares, allotted = `70000xx 1400/140000` = 700 share

Share Application and Allotment received on 1,400 glares of Rs 4 each = Rs 5,600

Shares Allotted (700 × 4) =Rs 2,800

Excess Application and Allotment money received = Rs 2,800

Share First and Final Call due on 700 shares of  Rs 5 each = Rs 3,500

Excess Application and Allotment money received = Rs 2,800

Share First and Final Call not received = Rs 700 (3,500-2,800)

Therefore, Share First and final Call received = Rs 69,300 (70,000 - 700)

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