Question

'Nigam Limited' invited applications for issuing 15,000 equity shares of  Rs 10 each at a discount of Rs 1 per share. The amount was payable as follows:
On application - Rs 2 per share
On allotment - Rs 3 per share
On first and final call - Rs 4 per share
Applications for 18,000 shares were received. Shares were issued proportionately to all applicants. Excess money received with applications was adjusted towards sums due on allotment. Ramesh who had applied for 360 shares failed to pay allotment and first and final call money. Naresh to whom 150 shares were allotted failed to pay the first and final call money. Shares of both Ramesh and Naresh were forfeited. Out of the forfeited shares, 200 shares were re-issued at `9 per share as fully paid up. The re-issued shares included all the shares of Naresh. Pass necessary journal entries for the above transactions in the books of 'Nigam Limited'.

Answer 1

In the books of Nigam Ltd Journal Entry
Date	Particulars	L.F.	Dr. Rs	Cr. Rs
	Bank A/c    Dr.       To Equity Share Application A/c (Being amount received on application 18,000 shares)		36,000	36,000
	Equity Share Application A/c  Dr.    To Equity Share Capital A/c    To Equity Share Allotment A/c (Being amount of application transferred to Share Capital and excess money is adjusted in allotment)		36,000	30,000 6,000
	Equity Share Allotment A/c    Dr. Discount on Issue of shares A/c  Dr.    To Equity Share Capital A/c (Being amount due on allotment)		45,000 15,000	60,000
	Bank A/c (45,000 – 6,000 - 780)     Dr.     To Equity Share Allotment A/c (Being amount received on share allotment)		38,220	38,220
	Equity Share First and Final Call A/c    Dr.      To Equity Share Capital A/c (Being amount due on first and final call)		60,000	60,000
	Bank A/c (60,000 – 1,200 – 600)   Dr.     To Equity Share first and final Call A/c (Being amount received on first and final call)		58,200	58,200
	Equity Share Capital A/c   Dr.    To Equity Share Forfeiture A/c    To Equity Share Allotment A/c    To Discount on Issue of shares A/c    To Equity Share First and Final Call A/c (Being shares of Ramesh and Naresh were forfeited)		4,500	1,470 780 450 1,800
	Bank A/c      Dr. Discount on Issue of Shares A/c   Dr.    To Equity Share Capital A/c (Being forfeited shares were reissued for 9 as fully paid – up)		1,800 200	2,000
	Equity Share Forfeiture A/c    Dr.    To Capital Reserve A/c (Being excess amount on forfeiture is transferred to capital reserve)		670	670

Working Notes:

WN 1: Calculation of Amount not received on Allotment and First and Final Call

Shares allotted to Ramesh = `15000/18000 xx 360 = 300 " shares"`

Amount received on 360 shares of Rs 2 each = 720
Amount transferred to Share Capital A/c (300 x 2) = 600
Excess money received on application = 120
Amount due on Allotment @ Rs 3 each = 900
Amount not received on allotment = 780
Amount not received on first and final call = 1,200 (300 x 4)

WN 2: Calculation of amount not received on the first and final call

Amount not received on first and final call = 600 (150 x 4)

WN 3: Calculation of amount transferred to Capital Reserve

Out of the forfeited shares of Ramesh, only 50 shares were reissued

The proportionate amount credited in share forfeiture Account on 50 shares = `720/300 xx 50 =120`

Thus, amount transferred to Capital Reserve Account = 120 + 750 = 870