Question

Visa Ltd. offered 10,000 shares of ₹ 100 each payable as follows: on application: ₹ 3, on allotment: ₹ 2, on first call: ₹ 3, on second call: ₹ 2. Public applied for 13,000 shares. Shares were allotted on pro rata to the applicants of 12,000 shares. All the shareholders have paid the amount up to allotment except Mohan, the allottee of 200 shares. His shares were forfeited. First call was then made. Forfeited shares were reissued @ ₹ 9 per share, ₹ 8 called-up. Second call has not yet been made. You are required to make the Cash Book and pass the Journal entries.

Answer 1

Journal Entries in the Books of Visa Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Bank A/c   ...Dr.		39,000
	To Shares Application A/c			39,000
	(Application money received on 13,000 shares @ ₹ 3 per share)
2.	Shares Application A/c   ...Dr.		39,000
	To Share Capital A/c			30,000
	To Shares Allotment A/c			6,000
	To Bank A/c			3,000
	(Application money transferred, excess adjusted towards allotment and rejected applications refunded)
3.	Shares Allotment A/c   ...Dr.		20,000
	To Share Capital A/c			20,000
	(Allotment money due @ ₹ 2 per share)
4.	Bank A/c   ...Dr.		13,720
	Calls-in-Arrears A/c   ...Dr.		280
	To Shares Allotment A/c			14,000
	(Allotment money received except from Mohan)
5.	Share Capital A/c   ...Dr.		1,000
	To Calls-in-Arrears A/c			280
	To Share Forfeiture A/c			720
	(Mohan's 200 shares forfeited for non-payment of allotment money)
6.	Shares First Call A/c   ...Dr.		29,400
	To Share Capital A/c			29,400
	(First Call due on 9,800 shares @ ₹ 3 per share)
7.	Bank A/c   ...Dr.		29,400
	To Shares First Call A/c			29,400
	(First Call money received)
8.	Bank A/c   ...Dr.		1,800
	To Share Capital A/c			1,600
	To Securities Premium A/c			200
	(200 forfeited shares reissued @ ₹ 9 per share as ₹ 8 called-up)
9.	Share Forfeiture A/c   ...Dr.		720
	To Capital Reserve A/c			720
	(Gain on reissue transferred to Capital Reserve)

 

Cash Book
Particulars	₹	Particulars	₹
To Shares Application A/c	39,000	By Bank A/c (Application Refund)	3,000
To Shares Allotment A/c	13,720	By Balance c/d	80,920
To Shares First Call A/c	29,400
To Share Capital A/c (Reissue)	1,800
Total	83,920	Total	83,920

Working Note:

Face value per share: ₹ 10

Shares issued: 10,000

Amount payable:

Application: ₹ 3

Allotment: ₹ 2

First Call: ₹ 3

Second Call: ₹ 2, not yet made

Applications received = 13,000 shares.

Applications for 12,000 shares were considered for pro rata allotment of 10,000 shares.

Therefore, applications rejected:

13,000 − 12,000 = 1,000 shares

Pro rata ratio:

12,000 : 10,000 = 6 : 5

1. Application Money

Application money received:

13,000 × ₹ 3 = ₹ 39,000

Application money required:

10,000 × ₹ 3 = ₹ 30,000

Refund on 1,000 rejected shares:

1,000 × ₹ 3 = ₹ 3,000

Excess application money adjusted towards allotment:

₹ 39,000 − ₹ 30,000 − ₹ 3,000 = ₹ 6,000

2. Mohan's Shares

Mohan was allotted 200 shares.

Shares applied for:

`200 xx 6/5 = 240` shares

Application money paid:

240 × ₹ 3 = ₹ 720

Application money required on 200 shares:

200 × ₹ 3 = ₹ 600

Excess application money adjusted:

₹ 720 − ₹ 600 = ₹ 120

Allotment due:

200 × ₹ 2 = ₹ 400

Allotment amount unpaid:

₹ 400 − ₹ 120 = ₹ 280

Amount credited to Share Forfeiture A/c:

₹ 1,000 − ₹ 280 = ₹ 720

where,

200 × (₹ 3 + ₹ 2) = ₹ 1,000

3. Allotment Money Received

Total allotment due:

10,000 × ₹ 2 = ₹ 20,000

Less: Excess application money:

₹ 20,000 − ₹ 6,000 = ₹ 14,000

Less: Mohan's unpaid amount:

₹ 14,000 − ₹ 280 = ₹ 13,720

4. First Call

After forfeiture of Mohan's 200 shares:

10,000 − 200 = 9,800 shares

First Call due and received:

9,800 × ₹ 3 = ₹ 29,400

5. Reissue of 200 Shares

Reissued @ ₹ 9 per share as ₹ 8 called-up.

Cash received:

200 × ₹ 9 = ₹ 1,800

Share Capital credited:

200 × ₹ 8 = ₹ 1,600

Premium on reissue:

₹ 1,800 − ₹ 1,600 = ₹ 200

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

₹ 720​