Question

Metalic Ltd. invited applications for 1,00,000 equity shares of ₹ 10 each, payable as ₹ 2 on application, ₹ 3 on allotment and the balance on first and final call. Applications were received for 3,00,000 shares and the shares were allotted on a pro rata basis. The excess application money was to be adjusted against allotment money. Mohan, a shareholder, who had applied for 3,000 shares failed to pay the call money accordingly his shares were forfeited and reissued at ₹ 8 per share as fully paid.

Pass necessary Journal entries assuming that Calls-in-Arrears Account is maintained.

Answer 1

Journal Entries in the books of Metalic Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Bank A/c (3,00,000 × ₹ 2)   ...Dr.		6,00,000
	To Equity Shares Application A/c			6,00,000
	(Application money received)
2.	Equity Shares Application A/c    ...Dr.		6,00,000
	To Equity Share Capital A/c (1,00,000 × ₹ 2)			2,00,000
	To Equity Shares Allotment A/c (1,00,000 × ₹ 3)			3,00,000
	To Bank A/c			1,00,000
	(Application money adjusted and the balance refunded)
3.	Equity Shares Allotment A/c   ...Dr.		3,00,000
	To Equity Share Capital A/c			3,00,000
	(Allotment money due)
4.	Equity Shares First and Final Call A/c (1,00,000 × ₹ 5)   ...Dr.		5,00,000
	To Equity Share Capital A/c			5,00,000
	(First and final call due)
5.	Bank A/c   ...Dr.		4,95,000
	Calls-in-Arrears A/c   ...Dr.		5,000
	To Equity Shares First and Final Call A/c			5,00,000
	(Call money received except on 1,000 shares)
6.	Equity Share Capital A/c   ...Dr.		10,000
	To Forfeited Shares A/c			5,000
	To Calls-in-Arrears A/c			5,000
	(6,000 shares forfeited for non payment of call money)
7.	Bank A/c   ...Dr.		8,000
	Forfeited Shares A/c   ...Dr.		2,000
	To Equity Share Capital A/c			10,000
	(1,000 shares reissued @ ₹ 8 per share)
8.	Forfeited Shares A/c   ...Dr.		3,000
	To Capital Reserve A/c (₹ 5,000 – ₹ 2,000)			3,000
	(Gain on reissue transferred to Capital Reserve)

Note: No. of shares allotted to Mohan = `(1,00,000)/(3,00,000) xx 3,000 = 1,000` shares