Question

X Ltd., issued 50,000 shares of Rs 10 each at a premium of Rs 2 per share payable as follows:

Rs 3 on application
Rs 6 on allotment (including premium) and
Rs 3 on call

Applications were received for 75,000 shares and a pro-rata allotment was made as follows:
To the applicants of 40,000 shares, 30,000 shares were issued and for the rest 20,000 shares were issued. All money due were received except the allotment and call money from Ram who had applied for 1,200 shares (out of the group of 40,000 shares). All his shares were forfeited. The forfeited shares were re-issued for Rs 7 per share fully paid up.
Pass necessary Journal Entries for the above transaction.

Answer 1

Journal entries In the books of X Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1	Bank A/c     ...Dr.		2,25,000
	To Share Application A/c			2,25,000
	(Being application @ ₹3 on 75,000 shares received)
2	Share Application A/c     ...Dr.		2,25,000
	To Share Capital A/c			1,50,000
	To Share Allotment A/c			75,000
	(Being application on 50,000 shares to Capital; excess to Allotment)
3.	Share Allotment A/c     ...Dr.		3,00,000
	To Share Capital A/c			2,00,000
	To Securities Premium Reserve A/c			1,00,000
	(Being allotment @ ₹6: Capital ₹4 + Premium ₹2)
4.	Bank A/c     ...Dr.		2,20,500
	Calls in Arrears (Allot.) A/c     ...Dr.		4,500
	To Share Allotment A/c			2,25,000
	(Being after adjusting ₹75,000 application excess; balance collected except Ram)
5.	Share First & Final Call A/c     ...Dr.		1,50,000
	To Share Capital A/c			1,50,000
	(Being first & Final Call due)
6.	Bank A/c     ...Dr.		1,47,300
	Calls in Arrears (Call) A/c     ...Dr.		2,700
	To Share First & Final Call A/c 1,50,000
	(Being call received; Ram unpaid ₹2,700)
7.	Equity Share Capital A/c     ...Dr.		9,000
	Securities Premium Reserve A/c     ...Dr.		1,800
	To Calls in Arrears (Allot.) A/c			4,500
	To Calls in Arrears (Call) A/c			2,700
	To Share Forfeiture A/c			3,600
	(Being forfeiture of Ram’s 900 shares)
8.	Bank A/c     ...Dr.		6,300
	Share Forfeiture A/c     ...Dr.		2,700
	To Equity Share Capital A/c			9,000
	(Being re‑issue at ₹3 discount adjusted from forfeiture)
9.	Share Forfeiture A/c     ...Dr.		900
	To Capital Reserve A/c			900
	(Being Surplus = Forfeiture on re‑issued shares ₹3,600 − discount used ₹2,700 = ₹900)

Working Note:

1) Pro‑rata scheme
Applied 75,000; Allotted 50,000 → two groups:
40,000 → 30,000 ⇒ ratio 4:3
35,000 → 20,000 ⇒ ratio 7:4

2) Application
Received = 75,000 × ₹3 = ₹2,25,000
Required for 50,000 × ₹3 = ₹1,50,000 → Excess = ₹75,000

3) Ram
Applied 1,200 → Allotted 900 (4:3)
Application paid = 1,200 × 3 = 3,600; required = 900 × 3 = 2,700 → Excess ₹900 (set‑off against allotment capital).
Allotment due (900 × ₹6) = ₹5,400 (Cap ₹4, Premium ₹2) → unpaid ₹4,500 (Cap ₹2,700 + Prem ₹1,800).
Call unpaid = 900 × ₹3 = ₹2,700.

4) Company totals
Allotment due = 50,000 × ₹6 = 3,00,000
Less: Application excess adj. 75,000 → net 2,25,000
Less: Ram arrears 4,500 → Bank (allotment) ₹2,20,500
Call due = 50,000 × ₹3 = 1,50,000
Less: Ram 2,700 → Bank (call) ₹1,47,300