Question

Sangam Marbles Ltd. invited applications for 20,000 Equity Shares of ₹ 100 each issued at par payable on application. The issue was oversubscribed by 5,000 shares and allotment was made on pro rata basis. Pass necessary Journal entries.

[Hint: Shares applied are 25,000 (20,000 + 5,000.]

Answer 1

Journal Entries in the Books of Sangam Marbles Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Bank A/c   ...Dr.		25,00,000
	To Shares Application A/c			25,00,000
	(Application money received on 25,000 shares @ ₹100 per share)
2.	Shares Application A/c   ...Dr.		25,00,000
	To Share Capital A/c			20,00,000
	To Bank A/c			5,00,000
	(Application money transferred to Share Capital and excess application money refunded)

Working Note:

Shares issued = 20,000 shares

Oversubscription = 5,000 shares

Therefore, shares applied for:

20,000 + 5,000 = 25,000 shares

Application money received:

25,000 × ₹ 100 = ₹ 25,00,000

Application money required on shares allotted:

20,000 × ₹ 100 = ₹ 20,00,000

Excess application money refunded:

₹ 25,00,000 − ₹ 20,00,000 = ₹ 5,00,000