Question

R.K. Ltd. invited applications for issuing 70,000 Equity Shares of ₹10 each at a premium of ₹35 per share. The amount was payable as follows:

On Application ₹15 per share (including ₹12 Premium)
On Allotment ₹10 per share (including ₹8 Premium)
On First and Final Call − Balance

Applications for 65,000 shares were received and allotment was made to all the application. A shareholder, Ram who was allotted 2,000 shares were failed to pay the allotment money. His shares were forfeited immediately after allotment. Afterwards the first and final call was made. Sohan, who had 3000 shares failed to pay the first and final call. His shares were also forfeited. Out of the forfeited shares 4,000 shares were re-issued at ₹50 per share fully paid up. The re-issued shares included all the shares of Ram.

Pass necessary Journal Entries for the above transactions in the books of R.K. Ltd.

Answer 1

Journal entries In the books of R.K. Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		9,75,000
	To Share Application			9,75,000
	(Share Application received for 65,000 shares)
2.	Share Application A/c     ...Dr.		9,75,000
	To Equity Share Capital A/c			1,95,000
	To Securities Premium A/c			7,80,000
	(Share Application of 65,000 shares transferred to equity share capital and securities premium)
3.	Share Allotment A/c     ...Dr.		6,50,000
	To Equity Share Capital A/c			1,30,000
	To Securities Premium A/c			5,20,000
	(Share Allotment due)
4.	Bank A/c     ...Dr.		6,30,000
	Calls-in-Arrears A/c     ...Dr.		20,000
	To Share Allotment A/c			6,50,000
	(Share allotment received on all shares except 2,000 shares)
5.	Equity Share Capital A/c     ...Dr.		10,000
	Securities Premium A/c     ...Dr.		16,000
	To Share Forfeiture A/c			6,000
	To Calls-in-Arrears A/c			20,000
	(2,000 shares forfeited for the non-payment of allotment)
6.	Share First and Final Call A/c     ...Dr.		12,60,000
	To Equity Share Capital A/c			3,15,000
	To Securities Premium A/c			9,45,000
	(Share first and final call due on 3,000 shares)
7.	Bank A/c     ...Dr.		12,00,000
	Calls in Arrears A/c     ...Dr.		60,000
	To Share First and Final Call A/c			12,60,000
	(Share First and Final Call received on all shares except 3000 shares)
8.	Equity Share Capital A/c     ...Dr.		30,000
	Securities Premium A/c     ...Dr.		45,000
	To Share Forfeiture A/c			15,000
	To Calls in Arrears A/c			60,000
	(3000 Shares forfeited for the no non-payment of First and Final Call)
9.	Bank A/c     ...Dr.		2,00,000
	To Share Capital A/c			40,000
	To Securities Premium A/c			1,60,000
	(4,000 shares forfeited share were-issued)
10.	Share Forfeiture A/c     ...Dr.		16,000
	To Capital Reserve A/c			16,000
	(Balance of 4000 reissued transferred to Capital Reserve)

Explanation:

Ram
Share forfeiture credit 3 per share
Share forfeiture debit NIL per share
Share forfeiture credit after time 3 per share
Capital Reserve on reissue of Ram share = Share forfeiture credit after re-issue × No. of shares 
re-issued
= 3 × 2,000
= Rs. 6,000

Sohan
Share forfeiture credit 5 per share
Share forfeiture Debit NIL per share
Share forfeiture credit after 5 per share re-issue
Capital Reserve on re-issue of Sohan’s 1,000 shares = Share forfeiture after issue × No. of shares 
re-issued
= 5 × 2,000
= Rs 10,000
Total capital Reserve = 6,000 + 10,000
= Rs 16,000