Question

Eastern Company Limited, having an authorised capital of ₹ 10,00,000 divided into shares of ₹ 10 each, issued 50,000 shares at a premium of ₹ 3 per share payable as follows:

On Application	₹ 3 per share;
On Allotment (including premium)	₹ 5 per share;
On first call (due three months after allotment) and the balance as when required.	₹ 3 per share;

Applications were received for 60,000 shares and the directors allotted the shares as follows:
(i) Applicants for 40,000 shares received in full.
(ii) Applicants for 15,000 shares received an allotment of 8,000 shares.
(iii) Applicants for 5,000 shares received 2,000 shares on allotment, excess money being returned.
All amounts due on allotment were received.
The first call was made and the money was received except on 100 shares.
Give journal and cash book entries to record these transactions of the company. Also prepare the Balance Sheet of the company.

Answer 1

In the books of Eastern Company Limited

Journal Entries
Date	Particulars		L. F.	Debit Amount (₹)	Credit Amount (₹)
	Bank A/c	Dr.		1,80,000
	To Share Application A/c				1,80,000
	(Amount received on application for 60,000 shares @ Rs. 3 per share)
	Share Application A/c (60,000 × ₹ 3)	Dr.		1,80,000
	To Share Capital A/c (50,000 × ₹ 3)				1,50,000
	To Share Allotment A/c (10,000 × ₹ 3)				30,000
	(Share Application money for 50,000 shares transferred To Share Capital Account and the excess money transferred To Share Allotment Account)
	Share Application A/c	Dr.		30,000
	To Bank A/c				30,000
	(Application of excess money returned)
	Share Allotment A/c  (50,000 × ₹ 5)	Dr.		2,50,000
	To Share Capital A/c (50,000 × ₹ 2)				1,00,000
	To Security Premium Reserve A/c  (50,000 × ₹ 3)				1,50,000
	(Allotment money due on 50,000 shares @ Rs 5 per share including Rs 3 security premium)
	Bank A/c	Dr.		2,20,000
	To Share Allotment A/c				2,20,000
	(Allotment money received)
	Share First Call Account A/c	Dr.		1,50,000
	To Share Capital A/c				1,50,000
	(First call due on 50,000 shares @ Rs 3 per share)
	Bank A/c	Dr.		1,49,700
	Call in Arrears A/c			300
	To  Share First Call Account A/c				1,50,000
	(First call money received except that of 100 shares @ Rs 3 per share)
	Share Final Call A/c	Dr.		1,00,000
	To Share Capital A/c				1,00,000
	(Money due on call on 50,000 shares @ Rs. 2 per share)
	Bank A/c	Dr.		1,00,000
	To Share Final Call A/c				1,00,000
	(Call money received on 50,000 shares @ Rs. 2 per share)

                                                                                

Dr.	Cash Book (Bank Column)						Cr.
Date	Particulars	J.  F.	Amount (₹)	Date	Particulars	J. F.	Amount (₹)
	To Share Application (60,000 × ₹ 3)		1,80,000		By Balance c/d		5,49,700
	To Share Allotment		2,20,000
	To Share First Call (49,900 × ₹ 3)		1,49,700
			5,49,700				5,49,700

Eastern Company Limited
Balance Sheet

Particulars	Note No.	Amount  (₹)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital	1	3,99,700
b. Reserves and Surplus	2	1,50,000
2. Non–Current Liabilities
3. Current Liabilities
Total		5,49,700
II. Assets
1. Non–Current Assets
2. Current Assets
a. Cash and Cash Equivalents	3	5,49,700
Total		5,49,700

NOTES TO ACCOUNTS

Note No.	Particulars		Amount (₹)
1	Share Capital:
(a)	Authorised Share Capital
	1,00,000 shares of ₹ 10 each		10,00,000
(b)	Issued Share Capital
	50,000 shares of Rs 10 each		5,00,000
(c)	Subscribed, Called up and Paid up Share Capital
	50,000 shares of Rs 10 each, Rs 8 called–up	4,00,000
	Less: Calls–in–Arrears	(300)	3,99,700
2	Reserves and Surplus:
	Securities Premium Reserve (50,000 × ₹ 3)		1,50,000
3	Cash and Cash Equivalents:
	Cash at Bank		5,49,700

Working Notes:

(i) Amount transferred to share capital on application:

Category A	= 40,000 × 3	= ₹ 1,20,000
Category B	= 8,000 × 3	= ₹ 24,000
Category C	= 2,000 × 3	= ₹ 6,000
Total		= ₹ 1,50,000

(ii) Amount transferred to share allotment on application:

Category B excess shares = 7,000 × 3	= ₹ 21,000
Category C excess shares = 3,000 × 3	= ₹ 9,000
	= ₹ 30,000

(iii) Amount Received on the allotment:

	Due	Advance	Received
(i)	40,000 × 5 = ₹ 2,00,000	−	₹ 2,00,000
(ii)	8,000 × 5 = ₹ 40,000	₹ 21,000	₹ 19,000
(iii)	2,000 × 5 = ₹ 10,000	₹ 9,000	₹ 1,000
			₹ 2,20,000