Question

Nilgiri Tea Ltd. invited applications from the public for the issue of 1,00,000 Equity shares of ₹20 each payable as:
₹5 on Application 
₹7 on Allotment
Balance on Call
The public applied for 90,000 shares which were duly allotted by the company.
₹6,27,200 were received by the company on allotment and ₹7,12,800 on call.
The company forfeited those shares on which both, allotment and call money was not received.
Three-fourth of the forfeited shares were reissued as fully paid up at the maximum discount allowed by law.
The company paid share issue expenses of ₹50,000 which were completely written off at the end of the year.
The company had ₹60,000 in its Securities Premium Account.
You are required to prepare Cash Book and pass Journal Entries to record the above transactions in the books of the company.

Answer 1

Journal entries In the books of Nilgiri Tea Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		4,50,000
	To Share Application A/c			4,50,000
	(Application money received on 90,000 shares @ ₹5)
2.	Share Application A/c     ...Dr.		4,50,000
	To Share Capital A/c			4,50,000
	(Transferred to Capital A/c)
3.	Share Allotment A/c     ...Dr.		6,30,000
	To Share Capital A/c			6,30,000
	(Allotment due on 90,000 shares @ ₹7)
4.	Bank A/c     ...Dr.		6,27,200
	Calls in Arrears A/c     ...Dr.		2,800
	To Share Allotment A/c			6,30,000
	(Allotment received, ₹2,800 not received)
5.	Share Call A/c     ...Dr.		8,10,000
	To Share Capital A/c			8,10,000
	(Call due @ ₹8 on 90,000 shares)
6.	Bank A/c     ...Dr.		7,12,800
	Calls in Arrears A/c     ...Dr.		97,200
	To Share Call A/c			8,10,000
	(Call money received, ₹97,200 not received)
7.	Share Capital A/c     ...Dr.		8,000
	To Share Allotment A/c			2,800
	To Share Call A/c			3,200
	To Share Forfeiture A/c			2,000
	(400 shares forfeited for non-payment of allotment & call)
8.	Bank A/c     ...Dr.		4,500
	Share Forfeiture A/c     ...Dr.		1,500
	To Share Capital A/c			6,000
	(Reissue of 300 shares @ ₹15 each fully paid)
9.	Securities Premium A/c     ...Dr.		50,000
	To Share Issue Expenses A/c			50,000
	(Share issue expenses written off from premium)

Cash Book (Bank Column Only)

Date	Particulars	Amount (₹)
1.	To Share Application A/c	4,50,000
2.	To Share Allotment A/c	6,27,200
3.	To Share Call A/c	7,12,800
4.	To Reissue of 300 shares	4,500
	Total	₹17,44,500

Working Notes:

1) Total Shares Applied and Allotted: 90,000

2) Allotment Due (90,000 × ₹7): ₹6,30,000
Received: ₹6,27,200 → Arrears: ₹2,800

3) Call Due (₹8 per share): ₹7 + ₹8 = ₹15 unpaid
Total Call Due: ₹8 × 90,000 = ₹7,20,000
Received: ₹7,12,800 → Arrears: ₹97,200

4) Total Calls-in-Arrears: ₹2,800 (allotment) + ₹97,200 (call) = ₹1,00,000
Unpaid per share = ₹7 + ₹8 = ₹15 → Shares forfeited = ₹1,00,000 ÷ ₹25 = 400 shares

5) Reissue of 300 shares @ ₹15:
Face Value = ₹20, Discount = ₹5 (Max allowed)
Loss = ₹1,500 adjusted from forfeiture (300 × ₹5)

6) Remaining Forfeiture Balance: 100 shares × ₹5 = ₹500

7) No Capital Reserve since loss = discount = max allowed