T.S. Grewal Class 12 Vol 2 Chapter 1 Q.31 - Share Capital

Question 31

Pure Products Ltd. is registered with an authorised capital of ₹10,00,000 divided into 1,00,000 equity shares of ₹10 each. It issued 70,000 Equity Shares for subscription at a premium of ₹2 per share, payable ₹3 on application, ₹5 on allotment (of which ₹2 is premium), and the balance on first and final call. It received application money amounting to ₹1,89,000. (i) Determine whether the company should allot shares. (ii) If yes, pass the necessary Journal entries, assuming the company has received the amounts due on allotment and call.

Solution

Shares applied for = 1,89,000 ÷ 3 = 63,000, which equals the minimum subscription requirement (90% of 70,000 = 63,000). The company can therefore proceed to allot the shares.

JOURNAL (Books of Pure Products Ltd.)

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Bank A/c (63,000 × ₹3)    Dr.		1,89,000
	To Share Application A/c			1,89,000
	(Application money received on 63,000 shares)
	Share Application A/c    Dr.		1,89,000
	To Share Capital A/c			1,89,000
	(Application money transferred to Share Capital)
	Share Allotment A/c (63,000 × ₹5)    Dr.		3,15,000
	To Share Capital A/c (63,000 × ₹3)			1,89,000
	To Securities Premium Reserve A/c (63,000 × ₹2)			1,26,000
	(Allotment due on 63,000 shares @ ₹5, including ₹2 premium)
	Bank A/c    Dr.		3,15,000
	To Share Allotment A/c			3,15,000
	(Allotment money received)
	Share First and Final Call A/c (63,000 × ₹4)    Dr.		2,52,000
	To Share Capital A/c			2,52,000
	(First and final call due on 63,000 shares @ ₹4, being the balance of the ₹10 face value: ₹10 – ₹3 application – ₹3 face-value portion of allotment)
	Bank A/c    Dr.		2,52,000
	To Share First and Final Call A/c			2,52,000
	(Call money received)

Note: The source repeats the ₹5-per-share Allotment figure for the First and Final Call as well, but this double-counts the ₹2 premium and overstates the call. Since ₹3 (application) + ₹3 (face-value portion of the ₹5 allotment) = ₹6 of the ₹10 face value has already been collected, the correct final call is ₹4 per share (63,000 × ₹4 = ₹2,52,000), which is what is used above — confirmed by checking that total face value collected (1,89,000 + 1,89,000 + 2,52,000 = 6,30,000) exactly equals 63,000 × ₹10.