Question

Sona Ltd. invited applications for issuing 60,000 equity shares of ₹ 50 each. The amount was payable as follows:

On Application	₹ 20 per share
On Allotment	₹ 25 per share
On First and Final Call	Balance

Applications for 90,000 shares were received. Applications for 10,000 shares were rejected and application money refunded. Shares were allotted on pro rata basis to the remaining applicants. Excess money received with applications was adjusted towards sums due on allotment. Rahul, to whom 600 shares were allotted, failed to pay the allotment money and his shares were forfeited immediately. Afterwards, the first and final call was made. Mona, to whom 1,000 shares were allotted, failed to pay the first and final call. Her shares were also forfeited.

Pass necessary Journal entries in the books of Sona Ltd. for the above transactions.

Answer 1

Journal Entries in the Books of Sona Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Bank A/c   ...Dr.		18,00,000
	To Equity Shares Application A/c			18,00,000
	(Application money received on 90,000 shares @ ₹ 20 per share)
2.	Equity Shares Application A/c   ...Dr.		18,00,000
	To Equity Share Capital A/c			12,00,000
	To Equity Shares Allotment A/c			4,00,000
	To Bank A/c			2,00,000
	(Application money transferred, excess adjusted towards allotment and money on rejected applications refunded)
3.	Equity Shares Allotment A/c   ...Dr.		15,00,000
	To Equity Share Capital A/c			15,00,000
	(Allotment money due on 60,000 shares @ ₹ 25 per share)
4.	Bank A/c   ...Dr.		10,89,000
	Calls-in-Arrears A/c Dr.		11,000
	To Equity Shares Allotment A/c			11,00,000
	(Allotment money received except from Rahul)
5.	Equity Share Capital A/c   ...Dr.		27,000
	To Forfeited Shares A/c			16,000
	To Calls-in-Arrears A/c			11,000
	(600 shares of Rahul forfeited for non-payment of allotment money)
6.	Equity Shares First and Final Call A/c   ...Dr.		2,97,000
	To Equity Share Capital A/c			2,97,000
	(First and Final Call made on 59,400 shares @ ₹ 5 per share)
7.	Bank A/c   ...Dr.		2,92,000
	Calls-in-Arrears A/c   ...Dr.		5,000
	To Equity Shares First and Final Call A/c			2,97,000
	(First and Final Call received except on Mona's 1,000 shares)
8.	Equity Share Capital A/c   ...Dr.		50,000
	To Forfeited Shares A/c			45,000
	To Calls-in-Arrears A/c			5,000
	(1,000 shares of Mona forfeited for non-payment of First and Final Call)

Working Notes:

Shares issued: 60,000 shares

Application: ₹ 20 per share

Allotment: ₹ 25 per share

First and Final Call:

₹ 50 − ₹ 20 − ₹ 25 = ₹ 5 per share

Applications received = 90,000 shares
Applications rejected = 10,000 shares

Applications considered for pro rata allotment:

90,000 − 10,000 = 80,000 shares

Pro rata ratio:

80,000 : 60,000 = 4 : 3

1. Application Money

Application money received:

90,000 × ₹ 20 = ₹ 18,00,000

Refund on rejected applications:

10,000 × ₹ 20 = ₹ 2,00,000

Application money required on 60,000 shares:

60,000 × ₹ 20 = ₹ 12,00,000

Excess application money adjusted towards allotment:

₹ 18,00,000 − ₹ 2,00,000 − ₹ 12,00,000 = ₹ 4,00,000​

2. Allotment Money

Allotment due:

60,000 × ₹ 25 = ₹ 15,00,000

Less: Excess application money adjusted:

₹ 15,00,000 − ₹ 4,00,000 = ₹ 11,00,000

Rahul was allotted 600 shares. Under the ratio 4 : 3, he had applied for:

`600 xx 4/3 = 800` shares

Application money paid by Rahul:

800 × ₹ 20 = ₹ 16,000

Application money required on 600 shares:

600 × ₹ 20 = ₹ 12,000

Excess application money adjusted:

₹ 16,000 − ₹ 12,000 = ₹ 4,000

Allotment due on Rahul's shares:

600 × ₹ 25 = ₹ 15,000

Amount unpaid by Rahul:

₹ 15,000 − ₹ 4,000 = ₹ 11,000

Hence, allotment money actually received:

₹ 11,00,000 − ₹ 11,000 = ₹ 10,89,000

3. Forfeiture of Rahul's 600 Shares

Called-up amount:

600 × (₹ 20 + ₹ 25) = ₹ 27,000

Amount received: ₹ 16,000

Therefore:

Forfeited Shares A/c = ₹ 16,000

4. First and Final Call

Rahul's 600 shares had already been forfeited. Therefore, call is made on:

60,000 − 600 = 59,400 shares

Call due:

59,400 × ₹ 5 = ₹ 2,97,000

Mona did not pay call on 1,000 shares:

1,000 × ₹ 5 = ₹ 5,000

Call money received:

₹ 2,97,000 − ₹ 5,000 = ₹ 2,92,000