Question

Khushboo Ltd. issued for Public subscription 50,000 equity shares of ₹10 each at a premium of 30% payable as under:

₹4	on application
₹5	on allotment (including premium)
₹4	on first & final call

Applications were received for 1,00,000 shares. Allotment was made pro-rata to the applicants for 80,000 shares, the remaining applications being refused. Money overpaid on application was utilised towards sums due on allotment.
Chatterjee, to whom 1,000 shares were allotted, failed to pay the allotment and call money and the shares were subsequently forfeited. Half of the forfeited shares were reissued as fully paid at a discount of 10%. Show the journal entries to record the above transactions.

Answer 1

Journal entries In the books of Khushboo Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c (100000 × 4)     ...Dr.		4,00,000
	To Equity Share Application A/c			4,00,000
	(application money received on 100000 @ ₹4 per share)
2.	Equity Share Application A/c     ...Dr.		4,00,000
	To Equity Share capital A/c (50000 × 4)			2,00,000
	To Equity Share Allotment A/c			1,20,000
	To Bank A/c			80,000
	(application money transferred to share capital account)
3.	Equity Share Allotment A/c     ...Dr.		2,50,000
	To Equity Share capital A/c (50000 × 2)			1,00,000
	To Securities Premium A/c (50000 × 3)			1,50,000
	(allotment money due)
4.	Bank A/c     ...Dr.		1,27,400
	To Equity Share Allotment A/c			1,27,400
	(allotment money received except on 1000 shares)
5.	Equity Share First & Final Call A/c     ...Dr.		2,00,000
	To Equity Share capital A/c (50000 × 4)			2,00,000
	(Final call due)
6.	Bank A/c     ...Dr.		1,96,000
	To Equity Share First & Final Call A/c			1,96,000
	(first call money received except on 600 shares)
7.	Equity Share Capital A/c (1000 shares @ ₹10)     ...Dr.		10,000
	Securities premium A/c     ...Dr.		2,600
	To Equity Share Allotment A/c			2,600
	To Equity Share First & Final call A/c			4,000
	To Forfeited Share A/c			6,000
	(1,000 shares forfeited)
8.	Bank A/c (500 × 9)     ...Dr.		4,500
	Forfeited Share A/c (500 × 1)     ...Dr.		500
	To Equity Share capital A/c			5,000
	(500 shares reissued)
9.	Forfeited Share A/c (3000 − 500)     ...Dr.		2,500
	To Capital Reserve A/c			2,500
	(gain on 500 shares transferred to capital reserve)

Working note:

1) 

Total Application money	4,00,000
Less: rejected (20,000 × 4)	80,000
Less: Shares issued (50,000 × 4)	2,00,000
Adjusted in allotment	1,20,000

2) 

Allotment money due	2,50,000
Less: received advance	1,20,000
	1,30,000

3) 

Applications	Allotted
80,000	50,000
?	1,000

 

`= (80,000)/(50,000) xx 1,000 = 1,600` share applications
Received money on 1600 applications (1600 × 4)		6,400
Less: application money on 1000 shares (1000 × 4)		(4,000)
Advance of Allotment		2,400
Allotment due on 1000 shares (1,000 × 5)
Face value demanded on allotment (1,000 × 2)	2,000
Premium (1,000 × 3)	3,000	5,000
Advance allotment received	2,400
Face value	2,000
Premium	400	(2,400)
Balance not paid (5,000 − 2,400)		2,600

4) 

Forfeited Amount
Received 1600 applications (1600 × 4)	6,400
Less: premium received	(400)
	6,000