Question

K Limited has been registered with an authorised capital of ₹20,00,000 divided into 20,000 shares of ₹100 each, of which 10,000 shares were offered for public subscription at a premium of ₹5 per share, payable as under:

	₹
On application	30
On allotment	25 (including premium)
On first call	20
On final call	30

Applications were received for 18,000 shares, of which applications for 3,000 shares were rejected outright; the rest of the applications were allotted 10,000 shares on pro-rata basis. Excess application money was transferred to allotment.
All the moneys were duly received except from Sundar, holder of 200 shares, who failed to pay allotment and first call money. His shares were later forfeited, and re-issued to Shyam at ₹60 per share, ₹70 paid up. Final Call has not been made. Pass necessary Cash Book and Journal entries in the books of K Limited.

Answer 1

Dr.	Cash Book (Bank Column)		Cr.
Particulars	Amt. (₹)	Particulars	Amt. (₹)
To Share Application A/c	5,40,000	By Share Application A/c (Refund: 3,000 × ₹30)	90,000
To Share Allotment A/c	98,000
To Share First Call A/c	1,96,000
To Share Capital A/c (Re‑issue: 200 × ₹60)	12,000
To Balance c/d (Bank)	7,56,000

 

Journal entries In the books of K Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		5,40,000
	To Share Application A/c			5,40,000
	(Being application on 18,000 shares @ ₹30)
2.	Share Application A/c     ...Dr.		5,40,000
	To Share Capital A/c (10,000 × ₹30)			3,00,000
	To Share Allotment A/c			1,50,000
	To Bank A/c (refund 3,000 × ₹30)			90,000
	(Being pro‑rata on 15,000 → 10,000; excess to allotment; refund made)
3.	Share Allotment A/c     ...Dr.		2,50,000
	To Share Capital A/c (10,000 × ₹20)			2,00,000
	To Securities Premium Reserve A/c			50,000
	(Being allotment @ ₹25: capital ₹20 + premium ₹5)
4.	Bank A/c     ...Dr.		98,000
	Calls in Arrears (Allot.) A/c     ...Dr.		2,000
	To Share Allotment A/c			1,00,000
	(Being allotment due 2,50,000 − application excess 1,50,000 = 1,00,000; Sundar’s net unpaid ₹2,000)
5.	Share First Call A/c     ...Dr.		2,00,000
	To Share Capital A/c			2,00,000
	(Being first call @ ₹20 on 10,000 shares)
6.	Bank A/c     ...Dr.		1,96,000
	Calls in Arrears (Call) A/c     ...Dr.		4,000
	To Share First Call A/c			2,00,000
	(Being sundar’s first call unpaid: 200 × ₹20 = ₹4,000)
7.	Equity Share Capital A/c     ...Dr.		14,000
	Securities Premium Reserve A/c     ...Dr.		1,000
	To Calls in Arrears A/c			2,000
	To Calls in Arrears A/c			4,000
	To Share Forfeiture A/c			9,000
	(Being capital called ₹70/sh (30 + 20 + 20); premium on these shares unpaid; amount received credited to forfeiture)
8.	Bank A/c     ...Dr.		12,000
	Share Forfeiture A/c     ...Dr.		2,000
	To Equity Share Capital A/c			14,000
	(Being re‑issue at ₹10 discount; discount adjusted from forfeiture)
9.	Share Forfeiture A/c     ...Dr.		7,000
	To Capital Reserve A/c			7,000
	(Being forfeiture on these shares ₹9,000 − discount used ₹2,000 = ₹7,000)

Working Note:

1) Pro‑rata: 
Applied (eligible) 15,000 → Allotted 10,000 ⇒ ratio 3:2.
Application received = 18,000 × ₹30 = ₹5,40,000.
Refund = 3,000 × ₹30 = ₹90,000.
Excess (15,000 × ₹30 − 10,000 × ₹30) = ₹1,50,000 → to Allotment.

2) Allotment cash:
Allotment due = 10,000 × ₹25 = ₹2,50,000.
Less excess appn. = ₹1,50,000 → Net = ₹1,00,000.
Sundar (200 shares) applied 300; excess app = (300 − 200) × ₹30 = ₹3,000
His allotment due: capital ₹4,000 − excess ₹3,000 = ₹1,000; premium ₹1,000 unpaid
arrears ₹2,000.
Bank on allotment = 1,00,000 − 2,000 = ₹98,000

3) Forfeiture:
Capital Dr = 200 × ₹70 = ₹14,000
SPR Dr = 200 × ₹5 = ₹1,000
Calls in arrears: Allot ₹2,000; Call ₹4,000.
Share Forfeiture (amount actually received & retained on these shares) = Application received from him = 300 × ₹30 = ₹9,000.

4) Re‑issue:
200 shares @ ₹60 as ₹70 paid‑up → discount ₹10/sh = ₹2,000 (from forfeiture).
Capital Reserve = 9,000 − 2,000 = ₹7,000