T.S. Grewal Class 12 Vol 2 Chapter 1 Q.106 - Share Capital

Question 106

Janta Ltd. invited applications for 5,00,000 equity shares of ₹10 each, at a premium of ₹4 per share. The amount was payable as follows: on Application ₹6 (including ₹2 premium), on Allotment ₹6 (including ₹2 premium), and the balance on First and Final Call. Applications for 7,50,000 shares were received. Allotment was made to all the applicants on a pro-rata basis. Mohan, to whom 1,000 shares were allotted, did not pay the allotment and call money. Vikram, to whom 500 shares were allotted, did not pay the call money. These shares were forfeited and afterwards reissued at ₹8 per share, fully paid-up. Pass the necessary Journal entries.

Solution

JOURNAL

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Bank A/c (7,50,000 × ₹6)    Dr.		45,00,000
	To Share Application A/c			45,00,000
	(Application money received)
	Share Application A/c    Dr.		45,00,000
	To Share Capital A/c (5,00,000 × ₹4)			20,00,000
	To Securities Premium Reserve A/c (5,00,000 × ₹2)			10,00,000
	To Share Allotment A/c (2,50,000 × ₹6)			15,00,000
	(Application money transferred to Share Capital and Securities Premium; excess adjusted against Allotment)
	Share Allotment A/c (5,00,000 × ₹6)    Dr.		30,00,000
	To Share Capital A/c (5,00,000 × ₹4)			20,00,000
	To Securities Premium Reserve A/c (5,00,000 × ₹2)			10,00,000
	(Allotment due on 5,00,000 shares, including ₹2 premium)
	Bank A/c    Dr.		14,97,000
	Calls-in-Arrears A/c    Dr.		3,000
	To Share Allotment A/c			15,00,000
	(Allotment received, except on Mohan’s 1,000 shares net of his own excess application money)
	Share Capital A/c (1,500 × ₹10)    Dr.		15,000
	Securities Premium Reserve A/c (1,000 × ₹2)    Dr.		2,000
	To Forfeited Shares A/c (4,000 + 7,000)			11,000
	To Share Allotment A/c			3,000
	To Share First and Final Call A/c			3,000
	(1,500 shares forfeited: Mohan’s 1,000 for non-payment of allotment and call, Vikram’s 500 for non-payment of call)
	Bank A/c (1,500 × ₹8)    Dr.		12,000
	Forfeited Shares A/c (1,500 × ₹2)    Dr.		3,000
	To Share Capital A/c (1,500 × ₹10)			15,000
	(1,500 forfeited shares reissued at ₹8 per share, fully paid-up)
	Forfeited Shares A/c    Dr.		8,000
	To Capital Reserve A/c			8,000
	(Full amount forfeited on the 1,500 reissued shares transferred to Capital Reserve)

Working Note: Mohan applied for 1,500 shares (7,50,000 ÷ 5,00,000 × 1,000); application money paid (1,500 × ₹6) = ₹9,000, retained for his 1,000 allotted shares (1,000 × ₹6) = ₹6,000, excess = ₹3,000, adjusted against his allotment due (1,000 × ₹6 = ₹6,000), leaving ₹3,000 still unpaid.