T.S. Grewal Class 12 Vol 2 Chapter 1 Q.90 - Share Capital

Question 90

Gaurav applied for 5,000 shares of ₹10 each at a premium of ₹2.50 per share, but was allotted only 2,500 shares on a pro-rata basis. After paying ₹3 per share on application, he did not pay the allotment money of ₹4.50 per share (including premium), and on his subsequent failure to pay the first call of ₹2 per share, his shares were forfeited. These shares were reissued at ₹8 per share, credited as fully paid. Pass Journal entries to record the forfeiture and reissue of shares.

Solution

JOURNAL

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Equity Share Capital A/c (2,500 × ₹7)    Dr.		17,500
	Securities Premium Reserve A/c    Dr.		3,750
	To Equity Share Allotment A/c			3,750
	To Equity Share First Call A/c (2,500 × ₹2)			5,000
	To Share Forfeiture A/c			12,500
	(2,500 shares forfeited)
	Bank A/c (2,500 × ₹8)    Dr.		20,000
	Share Forfeiture A/c (2,500 × ₹2)    Dr.		5,000
	To Equity Share Capital A/c (2,500 × ₹10)			25,000
	(Shares reissued at ₹8 per share, fully paid-up)
	Share Forfeiture A/c (12,500 − 5,000)    Dr.		7,500
	To Capital Reserve A/c			7,500
	(Balance in Share Forfeiture Account transferred to Capital Reserve)

Working Notes:

WN 1: Calculation of amount unpaid on allotment
Amount received on application (5,000 × ₹3) = ₹15,000
Less: Amount adjusted on application (2,500 × ₹3) = ₹7,500
Excess amount received on application = ₹7,500
Amount due on allotment (2,500 × ₹4.50) = ₹11,250
Amount unpaid on allotment = ₹11,250 − ₹7,500 = ₹3,750

Note: The ₹7,500 excess received on application is first adjusted against the face value due on allotment (2,500 × ₹2 = ₹5,000, fully covered), and the remaining ₹2,500 of the excess is adjusted against the Securities Premium due (2,500 × ₹2.50 = ₹6,250). So the unpaid premium is ₹6,250 − ₹2,500 = ₹3,750.