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Question
Concept Stationary Ltd. invited applications for issuing 3,00,000 shares of ₹ 10 each at a premium of ₹ 3 per share. The amounts were payable as follows:
On application and allotment – ₹ 7 per share.
On first & final call – balance (including a premium of ₹ 3)
Applications were received for 4,00,000 shares & allotment was made as follows:
(i) To applicants for 80,000 shares – 80,000 shares.
(ii) To applicants for 40,000 shares – nil
(iii) The balance of the applicants were allotted shares on a pro-rata basis.
Excess money received with applications was adjusted towards sums due on the first and final call.
Amit, who belonged to category (i) and was allotted 4,000 shares and Veni, who belonged to category (iii) and was allotted 4,400 shares failed to pay the first and final call money. Their shares were forfeited. The forfeited shares were re-issued at ₹ 7 per share fully paid-up.
Pass necessary journal entries for the above transactions in the books of the company.
Solution
In the books of Concept Stationary Ltd.
Journal
| Date | Particulars | L.F. |
Debit Amount(₹) |
Credit Amount(₹) |
|
| Bank A/c | Dr. |
28,00,000 |
|
||
| To Share Application & Allotment A/c |
|
28,00,000 |
|||
| (Received application money & allotment on 4,00,000 shares) |
|
|
|||
|
|
|
||||
| Share Application & Allotment A/c | Dr. |
28,00,000 |
|
||
| To Share Capital A/c |
|
21,00,000 |
|||
| To Share First Call A/c |
|
4,20,000 |
|||
| To Bank A/c |
|
2,80,000 |
|||
| (Transfer of application & allotment money to Share Capital) |
|
|
|||
|
|
|
||||
| Share First and Final Call A/c | Dr. |
18,00,000 |
|
||
| To Share Capital A/c |
|
9,00,000 |
|||
| To Security Premium Reserve A/c |
|
9,00,000 |
|||
| (Call money due on 3,00,000 shares) |
|
|
|||
|
|
|
||||
| Bank A/c | Dr. |
13,38,000 |
|
||
| Calls-in-Arrears A/c (18,000 + 24,000) | Dr. |
42,000 |
|
||
| To Share First and Final Call A/c |
|
13,80,000 |
|||
| (Received call money) |
|
|
|||
|
|
|
||||
| Share Capital A/c (8,400 x 10) | Dr. |
84,000 |
|
||
| Security Premium Reserve A/c (8,400 x 3) | Dr. |
25,200 |
|
||
| To Calls in Arrears A/c (18,000 + 24,000) |
|
42,000 |
|||
| To Share Forfeiture A/c |
|
67,200 |
|||
| (Forfeiture of 8400 shares for non-payment of call money) |
|
|
|||
|
|
|
||||
| Bank A/c (8,400 x 7) | Dr. |
58,800 |
|
||
| Share Forfeiture A/c | Dr. |
25,200 |
|
||
| To Share Capital A/c |
|
84,000 |
|||
| (Reissue of 8,400 shares at ₹7 per share) |
|
|
|||
|
|
|
||||
| Share Forfeiture A/c | Dr. |
42,000 |
|
||
| To Capital Reserve A/c |
|
42,000 |
|||
| (Profit on re-issue transferred to Capital Reserve Account) |
|
|
Working Notes
(1) Computation Table
| Categories | Shares Applied | Shares Allotted |
Money received on Application &Allotment @ ₹ 7 each |
Money transferred to Share Capital @ ₹ 7 each |
Excess Application &Allotment money | Amount adjusted on First call | Amount to be refunded |
| I | 80,000 | 80,000 | 5,60,000 | 5,60,000 | |||
| II | 40,000 | Nil | 2,80,000 | 2,80,000 | |||
| III | 2,80,000 | 2,20,000 | 19,60,000 | 15,40,000 | 4,20,000 | 4,20,000 | |
| 4,00,000 | 3,00,000 | 28,00,000 | 21,00,000 | 4,20,000 | 4,20,000 | 2,80,000 |
(2) Calculation of Shares applied to Amit: 4000 shares
Calls in arrears = 4,000 x ₹ 6 = ₹ 24,000
3) Calculation of Shares applied to Veni:
Shares applied by Veni = `(2,80,000)/(2,20,000) xx 4400 = 5600 "shares"`
| Amount unpaid by Veni | |
| Amount received on application (5600 × 7) |
39,200 |
| Less: actual transferred to share capital (4400 × 7) | 30,800 |
| Excess | 8,400 |
| Amount due on first call (4400 x 6) | 26,400 |
| Less: excess adjusted | (8,400) |
| Calls in arrears | 18,000 |
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|
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What is the amount of security premium reflected in the balance sheet at the end of the year?
A Company forfeited 1,000 shares of ₹ 10 each, ₹ 7 called up for non-payment of first call of ₹ 2 per share. All these shares were reissued at ₹ 5 per share ₹ 7 paid-up. The amount transferred to Capital Reserve Account was:
200 equity shares of ₹10 each issued at par were forfeited for non-payment of first call of ₹3 per share. Final call of ₹2 per share was not yet called. By which amount the share capital will be debited on forfeiture?
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