Question

The Orient Company Limited offered for public subscription 20,000 equity shares of Rs 10 each at a premium of 10% payable at Rs 2 on application; Rs 4 on allotment, including premium; Rs 3 on First Call, and Rs 2 on Second and Final call. Applications for 26,000 shares were received. Applications for 4,000 shares were rejected. Pro-rata allotment was made to the remaining applicants. Both the calls were made, and all the money was received except the final call on 500 shares, which were forfeited. 300 of the forfeited shares were later on issued as fully paid at Rs 9 per share. Give journal entries and prepare the balance sheet.

Answer 1

Journal Entries in the book of Orient Company Limited
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c   ...Dr.		52,000	-
	To Share Application A/c		-	52,000
	(Share Application Money received for 26,000 shares @ Rs 2 per share)
2.	Share Application A/c   ...Dr.		52,000	-
	To Share Capital A/c		-	40,000
	To Share Allotment A/c		-	4,000
	To Bank A/c		-	8,000
	(Application money  @ Rs 2 per share of 20,000 shares transferred to Share Capital Account and money of 4,000 shares returned, remaining to Share Allotment)
3.	Share Allotment A/c   ...Dr.		80,000	-
	To Share Capital A/c		-	60,000
	To Securities Premium A/c		-	20,000
	(Share Allotment money due on 20,000 shares @ Rs 4 per share, including Rs 1 Securities Premium)
4.	Bank A/c   ...Dr.		76,000	-
	To Share Allotment A/c		-	76,000
	(Share Allotment Money received for all the shares after adjustment of money transferred from Share Application)
5.	Share First Call A/c   ...Dr.		60,000	-
	To Share Capital A/c		-	60,000
	(Share First Call money due on 20,000 shares @ Rs 2 per share)
6.	Bank A/c   ...Dr.		60,000	-
	To Share First Call A/c		-	60,000
	(Share First Call received for 20,000 shares @ Rs 2 per share)
7.	Share Second and Final Call A/c   ...Dr.		40,000	-
	To Share Capital A/c		-	40,000
	(Share Second and Final  Call money due on 20,000 shares @ Rs 2 per share)
8.	Bank A/c   ...Dr.		39,000	-
	To Share Second and Final Call A/c		-	39,000
	(Share Second and Final Call money received for 19,500 shares @ Rs 2 per share, and 500 shares failed to pay)
9.	Share Capital A/c   ...Dr.		5,000	-
	To Share Second and Final Call A/c		-	1,000
	To Share Forfeiture A/c		-	4,000
	(500 shares  of Rs 10 per share fully called-up forfeited for non-payment of Second and Final Call Rs 2 per share)
10.	Bank A/c   ...Dr.		2700	-
	Share Forfeiture A/c   ...Dr.		300	-
	To Share Capital A/c		-	3,000
	(300 shares @ Rs 10 each reissued for Rs 9 per share fully paid-up)
11.	Share Forfeiture A/c   ...Dr.		2,100	-
	To Capital Reserve A/c		-	2,100
	(Balance of 300 shares in Share Forfeiture Account transferred to Capital Reserve Account, after adjustment)

 

Balance Sheet of Orient Company Limited
Particulars	Note No.	Amount
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital	1	1,99,600
b. Reserves and Surplus	2	22,100
2. Non-Current Liabilities
3. Current Liabilities
Total		2,21,700
II. Assets
1. Non-Current Assets
2. Current Assets
(a) Cash and Cash Equivalents	3	2,21,700
Total		2,21,700

Note to Account:

Note No.	Particulars	Amount (₹)	Amount (₹)
1	Share Capital
	Authorised Equity Share Capital
	…….. Equity Shares of Rs 10 each		-
	Issued Equity Share Capital
	20,000 Equity Shares of Rs 10 each		2,00,000
	Subscribed, Called-up and Paid-up Equity Share Capital
	19,800 Equity Shares of Rs 10 each	1,98,000	1,99,600
	Add: Shares Forfeiture	1,600
2	Reserves and Surplus
	Securities Premium	20,000	22,100
	Capital Reserve	2,100
3	Cash and Cash Equivalents
	Cash at Bank		2,21,700

Working Notes:

Share Forfeiture Account  credited	Rs 8 per share
Less: Share Forfeiture Account debited	Rs 1 per share
Amount  transferred to Capital Reserve Account, after adjustment	Rs 7 per share

Amount transferred to Capital Reserve Account, after adjustment for 300 shares = 300 Shares @ Rs 7 per share = Rs 2,100