T.S. Grewal Class 12 Vol 2 Chapter 1 Q.93 - Share Capital

Question 93

Telecom Ltd. issued 20,000 Equity Shares of ₹10 each at a premium of ₹5 per share, payable: ₹7 (including premium) on application, ₹5 on allotment, and the balance after three months of allotment. A shareholder to whom 200 shares were allotted failed to pay the allotment and call money, and his shares were forfeited. 160 of the forfeited shares were reissued for ₹1,600. Give the necessary entries in the company’s Journal and the Balance Sheet.

Solution

Application ₹7 (₹2 + ₹5 premium), Allotment ₹5, First and Final Call ₹3 (total ₹15, i.e. ₹10 face value + ₹5 premium).

JOURNAL (Books of Telecom Ltd.)

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Bank A/c    Dr.		1,40,000
	To Equity Share Application A/c			1,40,000
	(Application money received on 20,000 shares at ₹7 each)
	Equity Share Application A/c    Dr.		1,40,000
	To Equity Share Capital A/c			40,000
	To Securities Premium Reserve A/c			1,00,000
	(Application money of 20,000 shares transferred: ₹2 per share to Share Capital and ₹5 per share to Securities Premium)
	Equity Share Allotment A/c    Dr.		1,00,000
	To Equity Share Capital A/c			1,00,000
	(Allotment due on 20,000 shares at ₹5 each)
	Bank A/c    Dr.		99,000
	Calls-in-Arrears A/c    Dr.		1,000
	To Equity Share Allotment A/c			1,00,000
	(Allotment received on 19,800 shares; a holder of 200 shares failed to pay)
	Equity Share First and Final Call A/c    Dr.		60,000
	To Equity Share Capital A/c			60,000
	(First and final call due on 20,000 shares at ₹3 each)
	Bank A/c    Dr.		59,400
	Calls-in-Arrears A/c    Dr.		600
	To Equity Share First and Final Call A/c			60,000
	(First and final call received on 19,800 shares; a holder of 200 shares failed to pay)
	Equity Share Capital A/c    Dr.		2,000
	To Share Forfeiture A/c (200 × ₹2)			400
	To Calls-in-Arrears A/c			1,600
	(200 shares of ₹10 each forfeited for non-payment of the ₹8 due per share)
	Bank A/c    Dr.		1,600
	To Equity Share Capital A/c			1,600
	(160 shares reissued, at par, for ₹1,600)
	Share Forfeiture A/c    Dr.		320
	To Capital Reserve A/c			320
	(Balance in Share Forfeiture of the 160 reissued shares transferred to Capital Reserve)

As per Schedule III of the Companies Act, 2013, the Balance Sheet is presented as follows:

Telecom Ltd. Balance Sheet

Particulars	Note No.	₹
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital	1	1,99,680
b. Reserves and Surplus	2	1,00,320
Total		3,00,000
II. Assets
2. Current Assets
a. Cash and Cash Equivalents	3	3,00,000
Total		3,00,000

NOTES TO ACCOUNTS

Note No.	Particulars	₹
1	Share Capital
	Issued: 20,000 Equity Shares of ₹10 each	2,00,000
	Subscribed, Called-up and Paid-up: 19,960 Equity Shares of ₹10 each	1,99,600
	Add: Shares Forfeited (40 shares × ₹2)	80
	Total	1,99,680
2	Reserves and Surplus
	Securities Premium	1,00,000
	Capital Reserve	320
	Total	1,00,320
3	Cash and Cash Equivalents — Cash at Bank	3,00,000

Working Notes:

1. Share Forfeiture of reissued shares: forfeiture credit (application face value, excluding ₹5 premium) = ₹2/share × 160 reissued shares = ₹320 (no discount on reissue, since reissued at par).

2. Balance remaining in Share Forfeiture Account (for the 40 shares not reissued): forfeiture at time of forfeiture (200 × ₹2) = ₹400, less amount used on the 160 reissued shares (₹320) = ₹80, shown added to Called-up Capital per Schedule III.