Question

Raunak Cotton Ltd. issued a prospectus inviting applications for 6,000 equity shares of Rs 100 each at a premium of Rs 20 per share, payable as follows:

On application	Rs. 20
On allotment	Rs. 50 [including premium]
On first call	Rs. 30
On final call	Rs. 20

Applications were received for 10,000 shares, and allotment was made pro rata to the applicants of 8,000 shares, the remaining applications being refused. Money received in excess of the application was adjusted toward the amount due on allotment.

Rohit, to whom 300 shares were allotted, failed to pay the allotment and call money; his shares were forfeited. Itika, who applied for 600 shares, failed to pay the two calls and her shares were also forfeited. All these shares were sold to Kartika for a fully paid price of Rs 80 per share.

Give journal entries in the books of the company.

Answer 1

Journal of Raunak Cotton Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		2,00,000	-
	To Share Application A/c		-	2,00,000
	(Share Application money received on 10,000 shares)
2.	Share Application A/c   ...Dr.		2,00,000	-
	To Share Capital A/c		-	1,20,000
	To Share Allotment A/c		-	40,000
	To Bank		-	40,000
	(Share Application money adjusted)
3.	Share Allotment A/c   ...Dr.		3,00,000	-
	To Share Capital A/c		-	1,80,000
	To Share Premium A/c		-	1,20,000
	(Share allotment money due)
4.	Bank A/c   ...Dr.		2,47,000	-
	To Share Allotment A/c		-	2,47,000
	(Allotment money received except 300 shares)
5.	Share First Call A/c   ...Dr.		1,80,000	-
	To Share Capital A/c		-	1,80,000
	(Share First Call money due)
6.	Bank A/c   ...Dr.		1,57,500	-
	To Share First Call A/c		-	1,57,500
	(Share First Call money received except 750 (300 + 450 shares)
7.	Share Final Call A/c   Dr.		1,20,000	-
	To Share Capital A/c		-	1,20,000
	(Share Final Call money is due)
8.	Bank A/c   ....Dr.		1,05,000	-
	To Share Final Call		-	1,05,000
	(Share Final Call money received except 750 shares)
9.	Share Capital A/c (750 × 100)		75,000	-
	Securities Premium A/c (300 × 20)		6,000	-
	To Share Allotment A/c		-	13,000
	To Share first call A/c (750 × 30)		-	22,500
	To Share final call A/c (750 × 20)		-	15,000
	To Share Forfeiture A/c		-	30,500
	(750 shares were forfeited)
10.	Bank A/c   ...Dr.		60,000	-
	Share Forfeiture A/c   ...Dr.		15,000	-
	To Share Capital A/c		-	75,000
	(Forfeited shares reissued @ 80 per share)
11.	Share Forfeiture A/c   ...Dr.		15,500	-
	To Capital Reserve A/c		-	15,500
	(Share Forfeiture Account transferred capital reserve)

Working Note:

Number of shares applied by Rohit = `(8,000)/(6,000) xx 300`

= 400 Shares

Number of shares allotted to Itika = `(6,000)/(8,000) xx 600`

= 450 shares  allotted

Calculation of the amount not received from Rohit on allotment:

Amount received on application (400 × ₹ 20)	8,000
Less: amount transferred on application. (300 × ₹ 20)	6,000
Advance of allotment received on application	2,000
Money due on allotment (300 × ₹ 50)	15,000
Less: excess already received with the application	2,000
Amount not received from Rohit on allotment	13,000

Calculation of money received on allotment:

Total amount due on allotment	3,00,000
Less: received on application as an advance	40,000
	2,60,000
Less: Amount not received from Rohit	13,000
Amount received on allotment	2,47,000

Amount transferred to forfeiture account = Amount received from Rohit + Amount received from Itika

= ₹ 8,000 + ₹ 22,500 (₹ 12,000 + ₹ 10,500)

= ₹ 30,500