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Question
Given Journal entries to record the following transaction of forfeiture and re-issue of shares and open share forfeited account in the books of the respective companies.
(i) C Ltd. forfeited 1,000 shares of Rs 100 each issued at a discount of 8%. On these shares the first call of Rs 30 per share was not received and the final call of Rs 20 per share was yet to be called. These shares were subsequently re-issued at Rs 70 per share Rs 80 paid up.
(ii) L Ltd. forfeited 470 equity share of Rs 10 each issued at a premium of Rs 5 per share for non-payment of allotment money of Rs 8 per share (including share premium Rs 5 per share) and the first and final call of Rs 5 per share. Out of these 60 Equity share were subsequently re-issued at Rs 14 per share.
Solution
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In the books of C Ltd. Journal |
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Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
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Share Capital A/c (1,000 shares × Rs 80) |
Dr. |
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80,000 |
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To Share Forfeiture A/c (1,000 shares × Rs 42) |
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42,000 |
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To Discount on Issue of Shares A/c (1,000 shares × Rs 8) |
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8,000 |
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To Share First Call A/c (1,000 shares × Rs 30) |
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30,000 |
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(1,000 shares forfeited due to non-payment of first call) |
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Bank A/c (1,000 shares × Rs 70) |
Dr. |
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70,000 |
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Discount on Issue of Shares A/c (1,000 shares × Rs 8) |
Dr. |
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8,000 |
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Share Forfeiture A/c (1,000 shares × Rs 2) |
Dr. |
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2,000 |
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To Share Capital A/c (1,000 shares × Rs 80) |
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80,000 |
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(1,000 shares re-issued at Rs 70 per share Rs 80 paid up) |
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Share Forfeiture A/c |
Dr. |
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40,000 |
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To Capital Reserve A/c |
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40,000 |
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(Profit on re-issue transferred to Capital Reserve) |
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Share Forfeiture Account |
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Dr. |
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Cr. |
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Particulars |
Amount Rs |
Particulars |
Amount Rs |
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Share Capital |
2,000 |
Share Capital |
42,000 |
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Capital Reserve |
40,000 |
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42,000 |
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42,000 |
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In the Books of L Ltd. Journal |
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Date |
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
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Equity Share Capital A/c (470 shares × Rs 10) |
Dr. |
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4,700 |
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Securities Premium A/c (470 shares × Rs 5) |
Dr. |
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2,350 |
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To Share Forfeiture A/c (470 shares× Rs 2) |
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940 |
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To Equity Share Allotment A/c (470 shares × Rs 8) |
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3,760 |
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To Equity Share First and Final Call A/c (470 shares × Rs 5) |
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2,350 |
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(470 shares forfeited due to not payment of allotment and call money) |
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Bank A/c (60 shares× Rs 14) |
Dr. |
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840 |
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To Equity Share Capital A/c (60 shares × Rs 10) |
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600 |
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To Securities Premium A/c (60 shares × Rs 4) |
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240 |
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(60 shares re-issued at of Rs 14 per share) |
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Share Forfeiture A/c |
Dr. |
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120 |
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To Capital Reserve A/c (WN) |
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120 |
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(Profit on re-issue transferred to Capital Reserve) |
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Share Forfeiture Account |
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Dr. |
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Cr. |
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Particulars |
Amount Rs |
Particulars |
Amount Rs |
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Capital Reserve |
120 |
Share Capital A/c |
940 |
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To Balance c/d |
820 |
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940 |
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940 |
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Notes
Working Note:
Calculation of amount transferred to Capital Reserve
Amount forfeited on 470 shares = Rs 940
∴Amount forfeited on 60 shares `(940/470xx60)=" Rs" 120`
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Reason (R): Reserve Capital can be called up only at the time of winding up of the company.
