Question

Quality Stationers Ltd. registered with authorised capital of ₹ 20,00,000 divided into 1,00,000 equity shares of ₹ 20 each. 50,000 Equity Shares were issued for subscription at par, issue price being payable along with application. It received application money of ₹ 4,40,000.

You are required to pass the necessary Journal entries and show share capital in the Balance Sheet of the company.

Answer 1

Journal Entries in the Books of Quality Stationers Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Bank A/c Dr.		4,40,000
	To Shares Application A/c			4,40,000
	(Application money received)
2.	Shares Application A/c Dr.		4,40,000
	To Bank A/c			4,40,000
	(Application money refunded due to non-receipt of minimum subscription)

 

Balance Sheet
Particulars	Note No.	₹
EQUITY AND LIABILITIES
Shareholders' Funds
Share Capital	1	Nil

 

Notes to Accounts
Particulars	₹
Note 1: Share Capital
Authorised Capital:
1,00,000 Equity Shares of ₹ 20 each	20,00,000
Issued Capital:
50,000 Equity Shares of ₹ 20 each	10,00,000
Subscribed Capital:	Nil

Working note:

Shares issued: 50,000 shares

Issue price: ₹ 20 per share, payable fully on application

Application money received:

₹ 4,40,000

Number of shares applied for:

`(4,40,000)/20 = 22,000` shares

Minimum subscription required:

50,000 × 90% = 45,000 shares

Since:

22,000 < 45,000

the company has not received the minimum subscription. Therefore, the entire application money is refunded.