Question

New Company Ltd. has a nominal capital of ₹ 2,50,000 in shares of ₹ 10. Of these, 4,000 shares were issued as fully paid in payment of building purchased , 8,000 shares were subscribed by the public and during the first year ₹ 5 per share were called-up, payable ₹ 2 on application , ₹ 1 on allotment, ₹ 1 on first call and ₹ 1 on second call . The amounts received in respect of these shares were:

On 6,000 shares	Full amount called,
On 1,250 shares	₹ 4 per share,
On 500 shares	₹ 3 per share,
On 250 shares	₹ 2 per share.

The Directors forfeited the 750 shares on which less than ₹ 4 had been paid . The shares were subsequently reissued at ₹ 3 per share .
Pass journal entries recording the above transactions and prepare the company's Balance Sheet.

Answer 1

Authorised Capital 25,000 shares of Rs 10 each

Issued Capital:

4,000 shares to the vendor of building

8,000 shares issued to public

Share Issued to public payable as:

Application	Rs	2	Per Share	(6,000 + 1,250 + 500 + 250	=	8,000)
Allotment	Re	1	Per Share	(6,000 + 1,250, + 500	=	7,750)
First Call	Re	1	Per Share	(6,000 + 1,250	=	7,250)
Second Call	Re	1	Per Share	(6,000 +	=	6,000)
		5	Per Share

Shares to be forfeited (on which paid less then Rs 4) are as:

Shares on which paid Rs 3 per share	500
Shares on which paid Rs 2 per share	250
Number of shares to be forfeited      =	750

Books of New Company Ltd.
Journal

Date	Particulars		L.F.	Debit Amount Rs	Credit Amount Rs
	Building A/c	Dr.		40,000
	To Vendor				40,000
	(Building purchased)
	Vendor	Dr.		40,000
	To Share Capital A/c				40,000
	(4,000 shares of Rs 10 each issued to the vendor in consideration of building purchased)
	Bank A/c	Dr.		16,000
	To Share Application A/c				16,000
	(Share application money received for 8,000 shares at Rs 2 each)
	Share Application A/c	Dr.		16,000
	To Share Capital A/c				16,000
	(Share application of 8,000 shares transferred to Share Capital Account)
	Share Allotment A/c	Dr.		8,000
	To Share Capital A/c				8,000
	(Share allotment due on 8,000 shares at Re 1 each)
	Bank A/c	Dr.		7,750
	Calls-In-Arrears A/c	Dr.		250
	To Share Allotment A/c				8,000
	(Share Allotment of Re 1 each received from 7,750 shares and holders of 250 shares failed to pay it)
	Share First Call A/c	Dr.		8,000
	To Share Capital A/c				8,000
	(Share first call due on 8,000 shares at Re 1each)
	Bank A/c	Dr.		7,250
	Calls-In-Arrears A/c	Dr.		750
	To Share First-Call A/c				8,000
	(Share first call Re 1 received 7,250 shares and holders of 750 shares failed to pay it)
	Share Second Call A/c	Dr.		8,000
	To Share Capital A/c				8,000
	(Share final call due on 8,000 shares at Re 1 each)
	Bank A/c	Dr.		6,000
	Calls-In-Arrears A/c	Dr.		2,000
	To Share Second Call A/c				8,000
	(Share second call Re 1 received from 6,000 shares and holder of 2,000 share failed to pay it)
	Share Capital A/c (750 × 5)	Dr.		3,750
	To Share Forfeiture A/c ((500 × 3) + (250 × 2))				2,000
	To Calls in Arrears (500 × 2 + 250 × 3)				1,750
	(750 shares of Rs 10 each Rs 5 called-up on which less than Rs 4 had received, were forfeited)
	Bank A/c	Dr.		2,250
	Share Forfeiture A/c	Dr.		1,500
	To Share Capital A/c				3,750
	(750 shares re-issued at Rs 3 per share as Rs 5 paid-up)
	Share Forfeiture A/c	Dr.		500
	To Capital Reserve				500
	(Balance in Share Forfeiture Account transferred to Capital Reserve)

As per the Schedule III of Companies Act, 2013, the Company's Balance Sheet is presented as follows.

New Company Ltd.
Balance Sheet

Particulars	Note No.	Amount  (Rs)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital	1	78,750
b. Reserves and Surplus	2	500
2. Non-Current Liabilities
3. Current Liabilities
Total		79,250
II. Assets
1. Non-Current Assets
a. Fixed Assets
i. Tangible Assets	3	40,000
2. Current Assets
a. Cash and Cash Equivalents	4	39,250
Total		79,250

NOTES TO ACCOUNTS 

Note No.	Particulars		Amount (Rs)
1	Share Capital
	Authorised Share Capital
	25,000 shares of Rs 10 each		2,50,000
	Issued Share Capital
	12,000 shares of Rs 10 each		1,20,000
	Subscribed, Called-up and Paid-up Share Capital
	4,000 shares of Rs 10 each(for consideration other than cash)	40,000
	8,000 shares of Rs 10 each, Rs 5 Called-up	40,000
	Less: Calls in Arrears (1,250 shares × Re 1)	(1,250)	78,750
2	Reserves and Surplus
	Capital Reserve		500
3	Tangible Assets
	Building		40,000
4	Cash and Cash Equivalents
	Cash at Bank		39,250

Working Notes: 

1.

Calls-in-Arrears on Allotment (250 shares × Re 1)	250
Calls-in-Arrears on First Call (750 shares × Re 1)	750
Calls-in-Arrears on Second Call (2,000 shares × Re 1)	2,000
Total Calls-in-Arrears Debit	3,000
Less: Calls-in-Arrears Credit (at the time of forfeiture)	(1,750)
Calls-in-Arrears to be shown in the Balance Sheet	1250

2. Calculation of amount of share forfeiture credited on shares re-issued shares 

Share Forfeiture of 250 shares (on which  Rs 2 per share paid)	Rs	500	Cr.
Share Forfeiture of 500 shares (on which  Rs 3 per share paid)	Rs	1,500	Cr.
Total Share Forfeiture credit (on 750 shares)	Rs	2,000

Calculation of Capital Reserve

Total Share Forfeiture (on 750 shares) = Rs 2,000 credit

Less: Share Forfeiture (750 shares × Rs 2 per share) = Rs (1,500) debit

Capital Reserve = Rs 500