T.S. Grewal Class 12 Vol 2 Chapter 1 Q.55 - Share Capital

Question 55

Ajanta Ltd. invited applications for 5,00,000 equity shares of ₹10 each at a premium of 10%, payable: On Application ₹3; On Allotment (including premium) ₹5; On First and Final Call ₹3. Applications were received for 6,00,000 shares, and pro-rata allotment was made to all applicants; excess application money was adjusted towards allotment. All amounts were duly received except from Sumit, holder of 1,000 shares, who failed to pay the allotment and first and final call; his shares were forfeited. Pass the Journal entries, opening a Calls-in-Arrears Account where necessary. (CBSE 2023)

Solution

Premium = 10% of ₹10 = ₹1 per share, collected entirely at allotment (₹5 = ₹4 face + ₹1 premium). Total per share = ₹3 + ₹5 + ₹3 = ₹11 (₹10 face + ₹1 premium).

JOURNAL (Books of Ajanta Ltd.)

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Bank A/c (6,00,000 × ₹3)    Dr.		18,00,000
	To Share Application A/c			18,00,000
	Share Application A/c    Dr.		18,00,000
	To Share Capital A/c (5,00,000 × ₹3)			15,00,000
	To Share Allotment A/c			3,00,000
	(Application money transferred to Share Capital; entire excess adjusted against Allotment)
	Share Allotment A/c (5,00,000 × ₹5)    Dr.		25,00,000
	To Share Capital A/c (5,00,000 × ₹4)			20,00,000
	To Securities Premium Reserve A/c (5,00,000 × ₹1)			5,00,000
	(Allotment due, including ₹1 premium)
	Bank A/c    Dr.		21,95,000
	Calls-in-Arrears A/c (1,000 × ₹5)    Dr.		5,000
	To Share Allotment A/c			22,00,000
	(Allotment received except from Sumit’s 1,000 shares)
	Share First Call A/c (5,00,000 × ₹3)    Dr.		15,00,000
	To Share Capital A/c			15,00,000
	Bank A/c    Dr.		14,97,000
	Calls-in-Arrears A/c (1,000 × ₹3)    Dr.		3,000
	To Share First and Final Call A/c			15,00,000
	(First and final call received except from Sumit’s 1,000 shares)
	Share Capital A/c (1,000 × ₹10)    Dr.		10,000
	Securities Premium Reserve A/c (1,000 × ₹1)    Dr.		1,000
	To Share Forfeited A/c			3,600
	To Calls-in-Arrears A/c			7,400
	(1,000 shares forfeited for non-payment of allotment and first and final call; the premium, not having been received from Sumit, is reversed)

Working Notes: Sumit applied for 1,000 × (6,00,000 ÷ 5,00,000) = 1,200 shares, paying 1,200 × ₹3 = ₹3,600 on application, all of which is retained on forfeiture. His combined arrears on allotment and the final call, after netting the ₹600 excess application money carried forward from his 1,200 shares against his ₹5,000 allotment due, total ₹4,400 + ₹3,000 = ₹7,400.

Note: The individual ₹5,000 Calls-in-Arrears figure recorded at the allotment stage does not itself net Sumit’s ₹600 application excess (that netting only appears in the combined ₹7,400 figure used at forfeiture); the figures above are presented as given in the source.