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'Software Ltd.' Invited Applications of Issuing 70,000 Equity Share of Rs 10 Each on Which Rs 7 per Share Were Called Up, Which Were Payable as Follows: Pass Necessary Journal Entries for the Above Transactions in the Books of the Company. - Accountancy

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ConceptAccounting Treatment of Forfeiture and Re-issue of Share

Question

'Software Ltd.' invited applications of issuing 70,000 equity share of Rs 10 each on which Rs 7 per share were called up, which were payable as follows:

On application - Rs 2 per share
On allotment - Rs 3 per share
On first call - The balance

The amount was received as follows:
On 40,000 shares - Rs 7 per share
On 20,000 shares - Rs 5 per share
On 10,000 share - Rs 2 per share

The directors forfeited 30,000 shares on which less than Rs 7 per share were received. Later on, the forfeited share was re-issued at Rs  5 per share, as Rs 7 per share paid up

Pass necessary journal entries for the above transactions in the books of the company.

Solution

In the Books of Software Ltd
Journal
Date Particulars L.F.

Dr.

Rs

Cr.

Rs

 

Bank A/c    Dr.

    To Equity Share Application A/c

(Being application money received on 70,000 shares)

 

1,40,000

 

 

 

1,40,000

 

 

Equity Share Application A/c   Dr.

   To Equity Share Capital A/c

(Being amount of application transferred to Share Capital)

 

1,40,000

 

 

 

1,40,000

 

 

Equity Share Allotment A/c  Dr.

   To Equity Share Capital A/c

(Being amount due on share allotment)

 

2,10,000

 

 

 

2,10,000

 

 

Bank A/c (2,10,000 – 30,000)   Dr.

   To Equity Share Allotment A/c

(Being amount received on share allotment on 10,000 shares)

 

1,80,000

 

 

 

 

1,80,000

 

 

 

Equity Share First Call A/c   Dr.

   To Equity Share Capital A/c

(Being amount due on share first call)

 

1,40,000

 

 

 

1,40,000

 

 

Bank A/c (1,40,000 – 40,000 – 20,000)   Dr.

   To Equity Share First Call A/c

(Being amount received on share first call except on
30,000 shares)

 

80,000

 

 

 

 

80,000

 

 

 

Equity Share Capital A/c   Dr.

   To Equity Share forfeiture A/c

   To Share Allotment A/c

   To Equity Share first, call A/c

 (Being 30,000 shares forfeited)

 

2,10,000

 

 

 

 

 

1,20,000

30,000

60,000

 

 

Bank A/c   Dr.

Equity Share Forfeiture A/c

   To Equity Share Capital A/c

(Being forfeited shares were reissued for 5; Rs 7 called – up)

 

1,50,000

60,000

 

 

 

2,10,000
 

Equity Share forfeiture A/c   Dr.

    To Capital Reserve A/c

(Being excess amount on forfeiture is transferred to capital reserve)

 

60,000

 

 

 

60,000

 

 

  Is there an error in this question or solution?

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Solution 'Software Ltd.' Invited Applications of Issuing 70,000 Equity Share of Rs 10 Each on Which Rs 7 per Share Were Called Up, Which Were Payable as Follows: Pass Necessary Journal Entries for the Above Transactions in the Books of the Company. Concept: Accounting Treatment of Forfeiture and Re-issue of Share.
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