Question

X Ltd. issued 40,000 Equity Shares of ₹10 each at a premium of ₹2.50 per share. The amount was payable as follows:

On Application	₹2 per share
On Allotment	₹4.50 per share (including premium)
On Call	₹6 per share

Owing to heavy subscription the allotment was made on pro-rata basis as follows:

1. Applicants for 20,000 shares were allotted 10,000 shares.
2. Applicants for 56,000 shares were allotted 14,000 shares.
3. Applicants for 48,000 shares were allotted 16,000 shares.

It was decided that excess amount received on applications would be utilised on allotment and the surplus would be refunded.
Ram, to whom 1,000 shares were allotted, who belong to category; (a), failed to pay allotment money. His shares were forfeited after the call.
Pass the necessary Journal entries in the books of X Ltd. for the above transactions.

Answer 1

Shares Applied (I)	Shares Allotted (II)	Application money received at Rs 2 per share (III)	Application money transferred to share capital A/c (IV = III - IV)	Excess Application Money (V)	Share Allotment Due (VI)
20,000	10,000	20,000 × ₹2 = 40,000	10,000 × ₹2 = 20,000	20,000	10,000 × ₹4.50 = 45,000
56,000	14,000	56,000 × ₹2 = 1,12,000	14,000 × ₹2 = 28,000	84,000	14,000 × ₹4.50 = 63,000
48,000	16,000	48,000 × ₹2 = 96,000	16,000 × ₹2 = 32,000	64,000	16,000 × ₹4.50 = 72,000
1,24,000 shares	40,000 shares	₹2,48,000	₹80,000	₹1,68,000	₹1,80,000

 

Journal entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Bank A/c     ...Dr.		2,48,000
	To Equity Share Application A/c			2,48,000
	(Being application money received at ₹2 per share on 1,24,000 shares)
2.	Equity Share Application A/c     ...Dr.		2,48,000
	To Equity Share Capital A/c			80,000
	To Equity Share Allotment A/c			1,47,000
	To Bank A/c			21,000
	(Being application money adjusted)
3.	Equity Share Allotment A/c     ...Dr.		1,80,000
	To Equity Share Capital A/c			80,000
	To Securities Premium A/c			1,00,000
	(Being allotment money due)
4.	Bank A/c     ...Dr.		30,500
	To Equity Share Allotment A/c			30,500
	(Being allotment money received (1,80,000 − 1,47,000 − 2,500))
5.	Equity Share First and Final Call A/c     ...Dr.		2,40,000
	To Equity Share Capital A/c			2,40,000
	(Being first and final call money due)
6.	Bank A/c     ...Dr.		2,34,000
	To Equity Share First and Final Call A/c			2,34,000
	(Being first and final call money received except on 1,000 shares)
7.	Equity Share Capital A/c (1,000 shares × ₹10)     ...Dr.		10,000
	Securities Premium A/c (1,000 shares × ₹2.5)     ...Dr.		2,500
	To Share Forfeiture A/c			4,000
	To Equity Share Allotment A/c			2,500
	To Equity Share First and Final Call A/c (1,000 shares × ₹6)			6,000
	(Being 1,000 shares forfeited due to non-payment of allotment and call)

Working Notes:

No. of shares allotted to Ram = 1,000 shares

∴ `"No of shares applied by Ram"=(1,000)/(10,000)xx20,000=2,000` Share

Particulars	Amount (₹)
Application money received from Ram (2,000 shares × ₹2)	4,000*
Less: Amount utilised on application (1,000 shares × ₹2)	2,000
Excess Application Money	2,000
Amount due on allotment (1,000 shares × ₹4.50)	4,500
Less: Excess application money adjusted	(2,000)
Amount on allotment not received from Ram	2,500