Question

Suprabhat Ltd. invited applications for issuing 5,00,000 equity shares of ₹10 each payable as follows:
On application and allotment ₹7 per share (including premium ₹4),
On first call ₹4 per share,
On second and final call ₹3 per share.
Applications for 6,00,000 shares were received and pro-rata allotment was made to all the applicants. Excess application money was adjusted on the sums due on calls. A shareholder who had applied for 18,000 shares did not pay the first, and the second and final call. His shares were forfeited. One-third of the forfeited shares were reissued as fully paid at 5% discount.
Pass necessary journal entries for the above transactions in the books of the company.

Answer 1

Journal entries In the books of Suprabhat Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		42,00,000
	To Share Application & Allotment A/c			42,00,000
	(Application & allotment money received)
2.	Share Application & Allotment A/c     ...Dr.		42,00,000
	To Share Capital A/c			15,00,000
	To Securities Premium Reserve A/c			20,00,000
	To Share First Call A/c			7,00,000
	(Transfer; excess adjusted towards first call)
3.	Share First Call A/c     ...Dr.		20,00,000
	To Share Capital A/c			20,00,000
	(First call due)
4.	Bank A/c     ...Dr.		12,61,000
	Calls in Arrears A/c     ...Dr.		5,39,000
	To Share First Call A/c			18,00,000
	(First call received; one shareholder unpaid)
5.	Share Second & Final Call A/c     ...Dr.		15,00,000
	To Share Capital A/c			15,00,000
	(Second & final call due)
6.	Bank A/c     ...Dr.		13,46,000
	Calls in Arrears A/c     ...Dr.		1,54,000
	To Share Second & Final Call A/c			15,00,000
	(Second call received; same shareholder unpaid)
7.	Share Capital A/c     ...Dr.		1,80,000
	To Calls in Arrears A/c			6,93,000
	To Share Forfeiture A/c			86,000
	(Forfeiture of 18,000 shares for non-payment of calls; premium not forfeited as received)
8.	Bank A/c     ...Dr.		4,56,000
	Share Forfeiture A/c     ...Dr.		24,000
	To Share Capital A/c			4,80,000
	(One-third forfeited shares reissued @ 5% discount)
9.	Share Forfeiture A/c     ...Dr.		19,500
	To Capital Reserve A/c			19,500
	(Profit on reissue transferred to Capital Reserve)

Working note:

1) Shares allotted to defaulting shareholder
Applied for = 18,000 shares
Allotted `= 18,000 xx 5/6 = 15,000` shares

2) Application Money received from defaulting shareholder
Application & allotment money = ₹7 per share
Applied shares = 18,000
Money received = 18,000 × ₹7 = ₹1,26,000

3) Adjustment of Excess Application Money
Money required on application & allotment = 15,000 × ₹7 = ₹1,05,000
Excess application money = ₹1,26,000 − ₹1,05,000 = ₹21,000

4) Second & Final Call Money Unpaid
Second call = ₹3 per share × 15,000 = ₹45,000

5) Total Unpaid by Defaulter
= ₹39,000 + ₹45,000 = ₹84,000

6) Amount Received on First Call
Total due on first call = 5,00,000 × ₹4 = ₹20,00,000
Less: Unpaid (₹39,000) = ₹19,61,000
Add: Excess application adjusted = ₹21,000
Amount actually received in cash = ₹12,61,000

7) Forfeiture Calculation
Amount received on forfeited shares: Application & allotment ₹1,05,000
Amount not received: First call ₹39,000 + Second call ₹45,000
Share Capital forfeited = ₹10 × 15,000 = ₹1,50,000
Securities Premium forfeited = ₹4 × 15,000 = ₹60,000

8) Reissue of 1/3rd Forfeited Shares
Shares reissued = 15,000 ÷ 3 = 5,000
Issued as fully paid ₹14 each (₹10 capital + ₹4 premium) at 5% discount on nominal value:
Discount = 5% of ₹10 × 5,000 = ₹2,500

9) Capital Reserve Calculation
Profit on reissue = Forfeited amount on reissued shares − Discount allowed
`= 1,65,000 xx (5,000)/(15,000) - 2,500`
= ₹55,000 − ₹2,500 = ₹52,500