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Ruchi Ltd. Issued for Public Subscription 40,000 Equity Shares of ₹ 10 Each at a Premium of ₹ 2 per Share Payable As: - Accountancy

Journal Entry

Ruchi Ltd. issued for public subscription 40,000 Equity Shares of ₹ 10 each at a premium of  ₹ 2 per share payable as:

       On application  ---  ₹ 2 per share;
       On allotment ---  ₹ 5 per share (including premium),
       On first call ---  ₹ 2 per share,
       On second and final call ---  ₹ 3 per share.

Applications were received for 60,000 shares. Allotment was made on pro rata basis to the applicants for 48,000 shares, the remaining applications being refused. Money overpaid on application was utilised towards sums due on allotment. Ram to whom 1,600 shares were allotted failed to pay the allotment money and Shyam to whom 2,000 shares were allotted failed to pay the two calls. These shares were subsequently forfeited after the second and final call was made. All the forfeited shares were reissued as fully paid-up @ ₹ 8 per share.
Give necessary Journal entries for the above transactions. 

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Solution

Issued capital 40,000 shares of ₹ 10 each at premium of ₹ 2

Applied ₹ 60,000 shares

Allotment made as:

 

Payable as:

Applied

 

Allotted

 

Application

₹ 2

 

48,000

 

40,000

 

Allotment

₹ 5

(3+2)

12,000

 

NIL

 

First Call

₹ 2

 

     

 

Second and Final Call

₹ 3

 

60000

 

40000 

 

 

₹12 

(10+2) per share

Books of Ruchi Limited
Journal Entries

Date

Particulars

L.F.

Debit

Amount

(₹)

Credit

Amount

(₹)

 

Bank A/c

Dr.

 

1,20,000

 

 

To Equity Share Application A/c

 

 

1,20,000

 

(Application money received for 60,000 shares at ₹ 2 each)

 

 

 

 

 

 

 

 

 

Equity Share Application A/c

Dr.

 

1,20,000

 

 

To Equity Share Capital A/c

 

 

80,000

 

To Equity Share Allotment A/c

 

 

16,000

 

To Bank A/c

 

 

24,000

 

(Share application of 40,000 shares transferred to share capital, Rs 16,000 adjusted on allotment and remaining ₹ 24,000 refunded)

 

 

 

 

 

 

 

 

 

Equity Share Allotment A/c

Dr.

 

2,00,000

 

 

To Equity Share Capital A/c

 

 

1,20,000

 

To Securities Premium A/c

 

 

80,000

 

(Share allotment due on 40,000 shares at ₹ 5 each including ₹ 2 premium)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

1,76,640

 

 

To Equity Share Allotment A/c

 

 

1,76,640

 

(Share allotment received on all shares except on 1,600 Shares held by Ram)

 

 

 

 

 

 

 

 

 

Equity Share First Call A/c

Dr.

 

80,000

 

 

To Equity Share Capital A/c

 

 

80,000

 

(First call due on 40,000 shares at ₹ 2 each)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

72,800

 

 

To Equity Share First Call A/c

 

 

72,800

 

(First call received on 36,400 shares and holders of 3,600 failed to pay it)

 

 

 

 

 

 

 

 

 

Equity Share Second and Final Call A/c

Dr.

 

1,20,000

 

 

To Equity Share Capital A/c

 

 

1,20,000

 

(Second and final call due on 40,000 shares at ₹ 3 each)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

1,09,200

 

 

To Equity Share second and Final Call A/c

 

 

1,09,200

 

(Second and final call received on 36,400 shares and holders of 3,600 shares failed to pay it)

 

 

 

 

 

 

 

 

 

Equity Share Capital A/c

Dr.

 

16,000

 

 

Securities Premium A/c

Dr.

 

3,200

 

 

To Share Forfeiture A/c

 

 

3,840

 

To Equity Share Allotment A/c

 

 

7,360

 

To Equity Share first Call A/c

 

 

3,200

 

To Equity Share Second and Final Call A/c

 

 

4,800

 

(1600 shares held by Ram forfeited for non-payment amount due including premium)

 

 

 

 

 

 

 

 

 

Equity Share Capital A/c

Dr.

 

20,000

 

 

To Equity Share Forfeiture A/c

 

 

10,000

 

To Equity Share First Call A/c

 

 

4,000

 

To Equity Share Second and Final Call A/c

 

 

6,000

 

(2,000 shares held by Shyam forfeited for non-payment of amount due)

 

 

 

 

 

 

 

 

 

Bank A/c

Dr.

 

28,800

 

 

Share Forfeiture A/c

Dr.

 

7,200

 

 

To Equity Share Capital A/c

 

 

36,000

 

(3,600 shares of ₹ 10 each re-issued at ₹ 8 per share fully paid-up)

 

 

 

 

 

 

 

 

 

Share Forfeiture A/c

Dr.

 

6,640

 

 

To Capital Reserve A/c 

 

 

6,640

 

(Balance in Share Forfeiture transferred to Capital Reserve)

 

 

 

Working Notes:

Ram’s shares

Number of shares applied by Ram =`48000/40000 xx 1600 = 1920 "shares"`

Money received on Application (1,920 shares × ₹ 2)

=

₹ 3,840

Less: Application money transferred to Share Capital (1,600 shares × ₹ 2)

=

₹ 3,200

Excess money on Application 

=

Rs 640

 

Share Allotment due (1,600 shares × ₹ 5)

8,000

Less: Excess money on Application

640

Calls-in-Arrears on Allotment

7,360

Share Allotment

Share Allotment due (40,000 shares × ₹ 5)

2,00,000

Less: Excess money on Application

16,000

 

1,84,000

Less: Calls-in-Arrears by Ram

7,360

Money received on Allotment

1,76,640

Share First Call

Share First Call due (40,000 shares × ₹ 2)

80,000

Less: Calls-in-Arrears by Ram and Shyam (3,600 shares ×₹ 2)

7,200

Money received on First Call

72,800

Share Final Call

Share Final Call due 40,000 Shares × ₹ 3

1,20,000

Less: Calls-in-Arrears by Ram and Shyam (3,600 shares × ₹ 3)

10,800

Money received on Second and Final Call

1,09,200

Capital Reserve 

Share Forfeiture on Ram’s shares (money received on application)

3,840

 

Share Forfeiture on Shyam’s shares (2,000 shares × ₹ 5)

10,000

 

 

13,840

Cr.

Less: Share Forfeiture

7,200

Dr.

Capital Reserve

6,640

 

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APPEARS IN

TS Grewal Class 12 Accountancy - Double Entry Book Keeping Volume 2
Chapter 1 Accounting for Share Capital
Exercise | Q 84 | Page 127
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