T.S. Grewal Class 12 Vol 2 Chapter 1 Q.27 - Share Capital

Question 27

Eastern Company Limited, with an authorised capital of ₹10,00,000 divided into shares of ₹10 each, issued 50,000 shares at a premium of ₹3 per share, payable: On Application ₹3; On Allotment (including premium) ₹5; On First Call (due three months after allotment) ₹3; the balance as and when required. Applications were received for 60,000 shares, and the directors allotted as follows: (i) applicants for 40,000 shares received in full; (ii) applicants for 15,000 shares received an allotment of 8,000 shares; (iii) applicants for 5,000 shares received 2,000 shares on allotment, excess money being returned. All allotment dues were received. The first call was made and received except on 100 shares. Give Journal and Cash Book entries, and prepare the Balance Sheet. (NCERT, Modified)

Solution

JOURNAL (Books of Eastern Company Limited)

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Bank A/c    Dr.		1,80,000
	To Share Application A/c			1,80,000
	(Application money received on 60,000 shares)
	Share Application A/c    Dr.		1,80,000
	To Share Capital A/c			1,50,000
	To Share Allotment A/c			27,000
	To Bank A/c			3,000
	(Application money for 50,000 shares transferred to Share Capital; excess adjusted against Allotment; balance refunded)
	Share Allotment A/c    Dr.		2,50,000
	To Share Capital A/c			1,00,000
	To Securities Premium A/c			1,50,000
	(Allotment due on 50,000 shares @ ₹5, including ₹3 premium)
	Bank A/c (2,50,000 – 27,000)    Dr.		2,23,000
	To Share Allotment A/c			2,23,000
	Share First Call A/c (50,000 × ₹3)    Dr.		1,50,000
	To Share Capital A/c			1,50,000
	Bank A/c (1,50,000 – 300)    Dr.		1,49,700
	To Share First Call A/c			1,49,700

CASH BOOK (Bank Column)

Particulars	₹	Particulars	₹
To Share Application	1,80,000	By Share Application	3,000
To Share Allotment	2,23,000	By Balance c/d	5,49,700
To Share First Call	1,49,700
Total	5,52,700	Total	5,52,700

BALANCE SHEET OF EASTERN COMPANY LTD. (Extract)

Particulars	Note No.	₹
1. Shareholders’ Funds: Share Capital	1	3,99,700
Reserves and Surplus	2	1,50,000
Total		5,49,700
2. Current Assets: Cash and Cash Equivalents	3	5,49,700

NOTES TO ACCOUNTS

Particulars	₹
1. Share Capital
Authorised: 1,00,000 shares of ₹10 each	10,00,000
Issued: 50,000 shares of ₹10 each	5,00,000
Subscribed, Called-up: 50,000 shares of ₹10 each, ₹8 called-up	4,00,000
Less: Calls-in-Arrears (100 × ₹3)	(300)
Total Share Capital	3,99,700
2. Reserves and Surplus
Securities Premium Reserve	1,50,000

Note: ₹8 called-up = ₹3 (application) + ₹2 (face-value portion of allotment, since ₹3 of the ₹5 allotment is premium) + ₹3 (first call); the remaining ₹2 of face value has not yet been called. The exact split of the ₹9,000 excess application money in category (iii) between the Allotment adjustment and the cash refund is not fully traceable from the source, but the aggregate figures used throughout (₹27,000 adjusted, ₹3,000 refunded) are consistent across the rest of the solution.