T.S. Grewal Class 12 Vol 2 Chapter 1 Q.77 - Share Capital

Question 77

Slow & Steady Ltd. invited applications for 10,000 Equity Shares of ₹10 each for public subscription. The amount was payable as: on application ₹1 per share, on allotment ₹2 per share, on first call ₹3 per share, and on second and final call ₹4 per share. All sums payable on application, allotment and calls were duly received, with the following exceptions: (i) A, who held 200 shares, failed to pay the money on allotment and calls. (ii) B, to whom 150 shares were allotted, failed to pay the money on first call and final call. (iii) C, who held 50 shares, did not pay the amount of the second and final call. The shares of A, B and C were forfeited and were subsequently reissued for cash, as fully paid-up, at a discount of 5%. Pass the necessary Journal entries to record these transactions in the books of the company.

Solution

JOURNAL (Books of Slow & Steady Ltd.)

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Bank A/c    Dr.		10,000
	To Equity Share Application A/c			10,000
	(Application money received on 10,000 shares at ₹1 each)
	Equity Share Application A/c    Dr.		10,000
	To Equity Share Capital A/c			10,000
	(Application money transferred to Share Capital)
	Equity Share Allotment A/c    Dr.		20,000
	To Equity Share Capital A/c			20,000
	(Allotment due on 10,000 shares at ₹2 each)
	Bank A/c    Dr.		19,600
	Calls-in-Arrears A/c    Dr.		400
	To Equity Share Allotment A/c			20,000
	(Allotment received on 9,800 shares; A’s 200 shares in arrears)
	Equity Share First Call A/c    Dr.		30,000
	To Equity Share Capital A/c			30,000
	(First call due on 10,000 shares at ₹3 each)
	Bank A/c    Dr.		28,950
	Calls-in-Arrears A/c    Dr.		1,050
	To Equity Share First Call A/c			30,000
	(First call received on 9,650 shares; A’s and B’s 350 shares in arrears)
	Equity Share Final Call A/c    Dr.		40,000
	To Equity Share Capital A/c			40,000
	(Final call due on 10,000 shares at ₹4 each)
	Bank A/c    Dr.		38,400
	Calls-in-Arrears A/c    Dr.		1,600
	To Equity Share Final Call A/c			40,000
	(Final call received on 9,600 shares; A’s, B’s and C’s 400 shares in arrears)
	Equity Share Capital A/c    Dr.		2,000
	To Share Forfeiture A/c (200 × ₹1)			200
	To Calls-in-Arrears A/c (200 × ₹9)			1,800
	(200 shares held by A, on which only application money was received, forfeited)
	Equity Share Capital A/c    Dr.		1,500
	To Share Forfeiture A/c (150 × ₹3)			450
	To Calls-in-Arrears A/c (150 × ₹7)			1,050
	(150 shares of ₹10 each held by B forfeited for non-payment of the first and final call)
	Equity Share Capital A/c    Dr.		500
	To Share Forfeiture A/c (50 × ₹6)			300
	To Calls-in-Arrears A/c (50 × ₹4)			200
	(50 shares of ₹10 each held by C forfeited for non-payment of the ₹4 final call)
	Bank A/c (400 × ₹9.50)    Dr.		3,800
	Share Forfeiture A/c (400 × ₹0.50)    Dr.		200
	To Equity Share Capital A/c			4,000
	(400 shares reissued at ₹9.50 per share, fully paid-up, being a 5% discount)
	Share Forfeiture A/c    Dr.		750
	To Capital Reserve A/c			750
	(Balance in Share Forfeiture Account after reissue transferred to Capital Reserve)

Working Note:

Share Forfeiture of 200 shares held by A	₹200 Cr.
Share Forfeiture of 150 shares held by B	₹450 Cr.
Share Forfeiture of 50 shares held by C	₹300 Cr.
Total Share Forfeiture credit (at forfeiture)	₹950

Capital Reserve = Total Share Forfeiture at forfeiture (₹950) − Discount on reissue (₹200) = ₹750.