Question

X Ltd. invited applications for issuing 80,000 equity shares of ₹10 each at a premium of ₹2 per share. The amount was payable as follows:
On application ₹6 (including premium) per share.
On allotment ₹3 per share.
Balance on first and final call.
Applications for 90,000 shares were received. Applications for 5,000 shares were rejected and pro-rata allotment was made to the remaining applicants. Over payments received on application was adjusted towards sums due on allotment. All calls were made and were duly received except the allotment and final call on 1,600 shares allotted to Vijay. These shares were forfeited and the forfeited shares were re-issued for ₹18,400 fully paid up.
Pass necessary journal entries in the books of the company.

Answer 1

Journal entries In the books of X Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		5,40,000
	To Share Application A/c			5,40,000
	(Being application on 90,000 shares @ ₹6 each received)
2.	Share Application A/c     ...Dr.		5,40,000
	To Equity Share Capital A/c (80,000 × ₹4)			3,20,000
	To Securities Premium Reserve A/c (80,000 × ₹2)			1,60,000
	To Share Allotment A/c			30,000
	To Bank A/c			30,000
	(Being application adjusted: capital + premium on 80,000 shares; excess to allotment; refunds made)
3.	Share Allotment A/c     ...Dr.		2,40,000
	To Equity Share Capital A/c			2,40,000
	(Being allotment due @ ₹3 on 80,000 shares, no premium here)
4.	Bank A/c     ...Dr.		2,05,800
	Calls in Arrears (Allot.) A/c     ...Dr.		4,200
	To Share Allotment A/c			2,10,000
	(Being allotment cash received; excess application ₹30,000 set‑off; Vijay (1,600 sh) unpaid ₹4,200)
5.	Share First & Final Call A/c     ...Dr.		2,40,000
	To Equity Share Capital A/c			2,40,000
	(Being call due @ ₹3 on 80,000 shares)
6.	Bank A/c     ...Dr.		2,35,200
	Calls in Arrears (Call) A/c     ...Dr.		4,800
	To Share First & Final Call A/c			2,40,000
	(Being call money received except on Vijay’s 1,600 shares)
7.	Equity Share Capital A/c     ...Dr.		16,000
	To Share Allotment A/c			4,200
	To Share First & Final Call A/c			4,800
	To Share Forfeiture A/c			7,000
	(Being forfeiture after full call)
8.	Bank A/c     ...Dr.		18,400
	To Equity Share Capital A/c (1,600 × ₹10)			16,000
	To Securities Premium Reserve A/c			2,400
	(Being re‑issued @ ₹11.50 per share, fully paid)
9.	Share Forfeiture A/c     ...Dr.		7,000
	To Capital Reserve A/c			7,000
	(Being entire forfeiture on these shares transferred)

Working Note:

1) Pro‑rata & excess on application
Applied 90,000; Rejected 5,000; Pro‑rata on 85,000 → 80,000 allotted ⇒ ratio 17:16.
Application received = 90,000 × ₹6 = ₹5,40,000.
80,000 allotted = 80,000 × ₹6 = ₹4,80,000.
Excess = ₹30,000 → adjusted to Allotment; refund 5,000 × ₹6 = ₹30,000.

2) Allotment cash
Allotment due = 80,000 × ₹3 = ₹2,40,000.
Less application excess = ₹30,000 → ₹2,10,000.
Vijay’s allotment unpaid after set‑off = ₹4,200
Bank on allotment = ₹2,10,000 − ₹4,200 = ₹2,05,800

3) Vijay
Applied = `1,600×17/16 = 1,700` shares.
Application paid = 1,700 × ₹6 = ₹10,200.
Application needed for 1,600 = 1,600 × ₹6 = ₹9,600 → excess ₹600 set‑off against his allotment.
Allotment due = 1,600 × ₹3 = ₹4,800 → unpaid ₹4,200.
Call due = 1,600 × ₹3 = ₹4,800 unpaid.

4) Forfeiture credit
Application ₹6 includes ₹4 capital + ₹2 premium.
On 1,600 shares, capital received at application = 1,600 × ₹4 = ₹6,400.
Plus his excess ₹600
Share Forfeiture = ₹6,400 + 600 = ₹7,000

5) Re‑issue figure
Re‑issue proceeds given ₹18,400 for all 1,600 shares ⇒ ₹11.50 per share.
Securities Premium on re‑issue = ₹1.50 × 1,600 = ₹2,400.