Question

Sangita Limited invited applications for issuing 60,000 shares of ₹ 10 each at par. The amount was payable as follows: on application ₹ 2 per share; on allotment ₹ 3 per share; on first and final call ₹ 5 per share. Applications were received for 92,000 shares.

Allotment was made on the following basis: (a) to applicants for 40,000 shares: full; (b) to applicants for 50,000 shares: 40%; (c) to applicants for 2,000 shares: nil.

₹ 1,08,000 was realised on account of allotment (excluding the amount carried from application money) and ₹ 2,50,000 on account of call. The directors decided to forfeit shares of those applicants to whom full allotment was made and on which allotment money was overdue.

Pass Journal entries in the books of Sangita Limited to record the above transactions.

[Hints:

1. No. of shares forfeited = `"Allotment money not received"/"Allotment money per share"`

= `(1,80,000 - 60,000 ("Surplus Application Money") - 1,08,000)/3`

= 4,000 shares.

2. Journal Entry for forfeiture of shares:

Dr. Share Capital A/c - ₹ 40,000;
Cr. Shares Allotment A/c - ₹ 12,000; Shares First and Final Call A/c - ₹ 20,000 and Forfeited Shares A/c - ₹ 8,000.]

Answer 1

Journal Entries in the Books of Sangita Limited
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Bank A/c   ...Dr.		1,84,000
	To Shares Application A/c			1,84,000
	(Application money received on 92,000 shares @ ₹ 2 per share)
2.	Shares Application A/c   ...Dr.		1,84,000
	To Share Capital A/c			1,20,000
	To Shares Allotment A/c			60,000
	To Bank A/c			4,000
	(Application money transferred, excess adjusted towards allotment and money on rejected applications refunded)
3.	Shares Allotment A/c   ...Dr.		1,80,000
	To Share Capital A/c			1,80,000
	(Allotment money due on 60,000 shares @ ₹ 3 per share)
4.	Bank A/c   ...Dr.		1,08,000
	To Shares Allotment A/c			1,08,000
	(Allotment money received, excluding excess application money adjusted)
5.	Shares First and Final Call A/c   ...Dr.		3,00,000
	To Share Capital A/c			3,00,000
	(First and Final Call due on 60,000 shares @ ₹ 5 per share)
6.	Bank A/c   ...Dr.		2,50,000
	To Shares First and Final Call A/c			2,50,000
	(First and Final Call money received)
7.	Share Capital A/c   ...Dr.		40,000
	To Shares Allotment A/c			12,000
	To Shares First and Final Call A/c			20,000
	To Forfeited Shares A/c			8,000
	(4,000 shares forfeited for non-payment of allotment and First and Final Call)

Working Notes:

Shares issued: 60,000 shares

Application money: ₹ 2 per share

Allotment money: ₹ 3 per share

First and Final Call: ₹ 5 per share

1. Application Money Received

92,000 × ₹ 2 = ₹ 1,84,000

Category (a): 40,000 shares applied → 40,000 allotted: No excess.

Category (b): 50,000 shares applied → 40% allotted:

50,000 × 40% = 20,000 shares

Excess application money:

(50,000 − 20,000) × ₹ 2 = ₹ 60,000

This ₹ 60,000 is adjusted towards allotment.

Category (c): 2,000 shares rejected:

2,000 × ₹ 2 = ₹ 4,000

Refund = ₹ 4,000

2. Allotment Money

Total allotment due:

60,000 × ₹ 3 = ₹ 1,80,000

Less: Excess application money adjusted:

₹ 1,80,000 − ₹ 60,000 = ₹ 1,20,000

Cash actually received = ₹ 1,08,000

Therefore, allotment money unpaid:

₹ 1,20,000 − ₹ 1,08,000 = ₹ 12,000

Number of shares on which allotment was unpaid:

₹ 12,000 ÷ ₹ 3 = 4,000 shares​

3. First and Final Call

60,000 × ₹ 5 = ₹ 3,00,000

Amount received = ₹ 2,50,000

Call unpaid on the 4,000 shares forfeited:

4,000 × ₹ 5 = ₹ 20,000

4. Amount Credited to Forfeited Shares A/c

The 4,000 shares belonged to the category receiving full allotment, so only application money of ₹ 2 per share had been received:

4,000 × ₹ 2 = ₹ 8,000