Question

'Venus Ltd.' was registered with an authorised capital of ₹ 40,00,000 divided into 4,00,000 equity shares of ₹ 10 each. 70,000 of these shares were issued as fully paid to 'M/s. Star Ltd.' for building purchased from them. 2,00,000 shares were issued to the public and the amounts were payable as follows:

On Application	₹ 3 per share	On Allotment	₹ 2 per share
On First Call	₹ 2 per share	On Second and Final Call	₹ 3 per share

The amounts received on these shares were as follows:

On 1,00,000 shares	Full amount called	On 60,000 shares	₹ 7 per share
On 30,000 shares	₹ 5 per share	On 10,000 shares	₹ 3 per share

The directors forfeited 10,000 shares on which only ₹ 3 per share were received. These shares were reissued at ₹ 12 per share fully paid. Pass necessary Journal entries for the above transactions in the books of Venus Ltd.

[Hint: For forfeiture of shares:

Dr. Equity Share Capital A/c - ₹ 1,00,000;

Cr. Forfeited Shares A/c - ₹ 30,000, Equity Shares Allotment A/c - ₹ 20,000,

Equity Shares First Call A/c - ₹ 20,000 and Equity Shares Second and Final Call A/c - ₹ 30,000.]

Answer 1

Journal Entries in the Books of Venus Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Building A/c   ...Dr.		7,00,000
	To M/s. Star Ltd. A/c			7,00,000
	(Building purchased from M/s. Star Ltd.)
2.	M/s. Star Ltd. A/c   ...Dr.		7,00,000
	To Equity Share Capital A/c			7,00,000
	(70,000 Equity Shares of ₹ 10 each issued as fully paid-up to M/s. Star Ltd.)
3.	Bank A/c   ...Dr.		6,00,000
	To Equity Shares Application A/c			6,00,000
	(Application money received on 2,00,000 shares @ ₹ 3 per share)
4.	Equity Shares Application A/c   ...Dr.		6,00,000
	To Equity Share Capital A/c			6,00,000
	(Application money transferred to Equity Share Capital)
5.	Equity Shares Allotment A/c   ...Dr.		4,00,000
	To Equity Share Capital A/c			4,00,000
	(Allotment money due @ ₹ 2 per share)
6.	Bank A/c   ...Dr.		3,80,000
	To Equity Shares Allotment A/c			3,80,000
	(Allotment money received)
7.	Equity Shares First Call A/c   ...Dr.		4,00,000
	To Equity Share Capital A/c			4,00,000
	(First Call due @ ₹ 2 per share)
8.	Bank A/c   ...Dr.		3,20,000
	To Equity Shares First Call A/c			3,20,000
	(First Call money received)
9.	Equity Shares Second and Final Call A/c   ...Dr.		6,00,000
	To Equity Share Capital A/c			6,00,000
	(Second and Final Call due @ ₹ 3 per share)
10.	Bank A/c   ...Dr.		3,00,000
	To Equity Shares Second and Final Call A/c			3,00,000
	(Second and Final Call money received)
11.	Equity Share Capital A/c   ...Dr.		1,00,000
	To Forfeited Shares A/c			30,000
	To Equity Shares Allotment A/c			20,000
	To Equity Shares First Call A/c			20,000
	To Equity Shares Second and Final Call A/c			30,000
	(10,000 shares forfeited on which only ₹ 3 per share had been received)
12.	Bank A/c   ...Dr.		1,20,000
	To Equity Share Capital A/c			1,00,000
	To Securities Premium A/c			20,000
	(10,000 forfeited shares reissued @ ₹ 12 per share as fully paid-up)
13.	Forfeited Shares A/c   ...Dr.		30,000
	To Capital Reserve A/c			30,000
	(Gain on reissue transferred to Capital Reserve)

Working Note:

Authorised Capital:

4,00,000 × ₹ 10 = ₹ 40,00,000

1. Shares issued to M/s. Star Ltd.

70,000 shares of ₹ 10 each issued as fully paid-up:

70,000 × ₹ 10 = ₹ 7,00,000​

2. Public Issue: 2,00,000 Shares

Application Money:

2,00,000 × ₹ 3 = ₹ 6,00,000

Allotment Money due:

2,00,000 × ₹ 2 = ₹ 4,00,000

Allotment was not paid on 10,000 shares:

10,000 × ₹ 2 = ₹ 20,000

Therefore, amount received:

₹ 4,00,000 − ₹ 20,000 = ₹ 3,80,000

First Call due:

2,00,000 × ₹ 2 = ₹ 4,00,000

First Call was paid on 1,60,000 shares:

1,60,000 × ₹ 2 = ₹ 3,20,000

Second and Final Call due:

2,00,000 × ₹ 3 = ₹ 6,00,000

It was paid on 1,00,000 shares:

1,00,000 × ₹ 3 = ₹ 3,00,000

3. Forfeiture of 10,000 Shares

Only ₹ 3 per share had been received:

10,000 × ₹ 3 = ₹ 30,000

Unpaid Allotment:

10,000 × ₹ 2 = ₹ 20,000

Unpaid First Call:

10,000 × ₹ 2 = ₹ 20,000

Unpaid Second and Final Call:

10,000 × ₹ 3 = ₹ 30,000

4. Reissue

10,000 shares reissued @ ₹ 12 as fully paid-up:

10,000 × ₹ 12 = ₹ 1,20,000

Share Capital:

10,000 × ₹ 10 = ₹ 1,00,000

Securities Premium:

10,000 × ₹ 2 = ₹ 20,000

As no discount is allowed on reissue, the entire forfeited amount is transferred to Capital Reserve:

₹ 30,000​