Advertisements
Advertisements
Question
Pass necessary journal entries for the forfeiture and reissue of forfeited shares in the following case:
Advertisements
Solution
| Journal Entries in the Books of Ashoka Ltd. | ||||
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
| 1. | Equity Share Capital A/c ... Dr. (2,000 × 80) |
1,60,000 | ||
| Securities Premium A/c ... Dr. (2,000 × 10) |
20,000 | |||
| To Equity Share Allotment A/c (2,000 × 60) |
1,20,000 | |||
| To Share Forfeiture A/c (2,000 × 30) |
60,000 | |||
| (Being 2,000 shares forfeited for non-payment of allotment money) | ||||
| 2. | Bank A/c ... Dr. (2,000 × 70) |
1,40,000 | ||
| Share Forfeiture A/c ... Dr. (2,000 × 30) |
60,000 | |||
| To Equity Share Capital A/c (2,000 × 100) |
2,00,000 | |||
| (Being forfeited shares reissued @ ₹ 70 as fully paid up) | ||||
| 3. | Share Forfeiture A/c ... Dr. | Nil | ||
| To Capital Reserve A/c | Nil | |||
| (Being no gain left to transfer, as the total forfeited amount was used as a discount) | ||||
Working Note:
1. Called-up value = Total face value – Uncalled call
= ₹ 100 – ₹ 20
= ₹ 80 per share
2. Premium amount:
10% of ₹ 100 = ₹ 10 per share. (Since allotment was not paid, this premium is unpaid).
3. Amount Paid-up (To be Forfeited):
Total allotment money (including premium) = ₹ 60
Allotment money (Face Value part) = ₹ 60 – ₹ 10 (Premium)
= ₹ 50
Amount paid by shareholder (Application) = Called-up Value – Allotment
= ₹ 80 – ₹ 50
= ₹ 30 per share
Total amount forfeited = 2,000 × 30
= 60,000
4. Calculation of Discount on Reissue:
Reissue Price = ₹ 70 per share
Reissued as = Fully paid up (i.e., ₹ 100)
Discount on Reissue = ₹ 100 – ₹ 70
= ₹ 30 per share
Total Discount Allowed = 2,000 × 30
= 60,000
5. Transfer to Capital Reserve:
Amount available in Share forfeiture A/c = ₹ 60,000
Less: Discount used during reissue = ₹ 60,000
Amount Transferred to capital reserve = Nil (₹ 0)
