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Question
'Software Ltd.' invited applications of issuing 70,000 equity share of Rs 10 each on which Rs 7 per share were called up, which were payable as follows:
On application - Rs 2 per share
On allotment - Rs 3 per share
On first call - The balance
The amount was received as follows:
On 40,000 shares - Rs 7 per share
On 20,000 shares - Rs 5 per share
On 10,000 share - Rs 2 per share
The directors forfeited 30,000 shares on which less than Rs 7 per share were received. Later on, the forfeited share was re-issued at Rs 5 per share, as Rs 7 per share paid up
Pass necessary journal entries for the above transactions in the books of the company.
Solution
| In the Books of Software Ltd Journal |
||||
| Date | Particulars | L.F. |
Dr. Rs |
Cr. Rs |
|
Bank A/c Dr. To Equity Share Application A/c (Being application money received on 70,000 shares) |
1,40,000
|
1,40,000
|
||
|
Equity Share Application A/c Dr. To Equity Share Capital A/c (Being amount of application transferred to Share Capital) |
1,40,000
|
1,40,000
|
||
|
Equity Share Allotment A/c Dr. To Equity Share Capital A/c (Being amount due on share allotment) |
2,10,000
|
2,10,000
|
||
|
Bank A/c (2,10,000 – 30,000) Dr. To Equity Share Allotment A/c (Being amount received on share allotment on 10,000 shares) |
1,80,000
|
1,80,000
|
||
|
Equity Share First Call A/c Dr. To Equity Share Capital A/c (Being amount due on share first call) |
1,40,000
|
1,40,000
|
||
|
Bank A/c (1,40,000 – 40,000 – 20,000) Dr. To Equity Share First Call A/c (Being amount received on share first call except on |
80,000
|
80,000
|
||
|
Equity Share Capital A/c Dr. To Equity Share forfeiture A/c To Share Allotment A/c To Equity Share first, call A/c (Being 30,000 shares forfeited) |
2,10,000
|
1,20,000 30,000 60,000
|
||
|
Bank A/c Dr. Equity Share Forfeiture A/c To Equity Share Capital A/c (Being forfeited shares were reissued for 5; Rs 7 called – up) |
1,50,000 60,000
|
2,10,000 | ||
|
Equity Share forfeiture A/c Dr. To Capital Reserve A/c (Being excess amount on forfeiture is transferred to capital reserve) |
60,000
|
60,000
|
||
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Following is an extract of the Journal of Roxy Ltd.
| Journal of Roxy Ltd. (an extract) | ||||
| Date | Particulars | L. F. | Dr. (₹) | Cr. (₹) |
| 1. | Share First Call A/c ...Dr. | 28,000 | ||
| To Share Capital A/c | 28,000 | |||
| (Being first call due on ___??___ shares @ ₹ 2 each) | ||||
| 2. | Bank A/c ...Dr. | ?? | ||
| Calls in arrears A/c ...Dr. | 2,000 | |||
| To Share First Call A/c | 28,000 | |||
| (Being first call received on ___??___ shares) | ||||
| 3. | Share Capital A/c ...Dr. | ?? | ||
| To Shares Forfeited A/c | 4,000 | |||
| To Calls in Arrears A/c | ?? | |||
| (Being ___??___ shares of ₹ 10 each forfeited for non-payment of first call) | ||||
| 4. | Share Second & Final Call A/c ...Dr. | 52,000 | ||
| To Share capital A/c | 52,000 | |||
| (Being second & final call due on ___??___ shares @ ₹ 4 each) | ||||
| 5. | Bank A/c ...Dr. | ?? | ||
| Calls in Arrears A/c ...Dr. | 10,000 | |||
| To Share Second & Final Call A/c | 52,000 | |||
| (Being second call received on ___??___ shares) | ||||
| 6. | Share capital A/c ...Dr. | ?? | ||
| To Shares Forfeited A/c | ?? | |||
| To Calls in Arrears A/c | 10,000 | |||
| (Being ___??___ shares of ₹ 10 each forfeited for non payment of final call) | ||||
| 7. | Bank A/c ...Dr. | ?? | ||
| Share Forfeited A/c ...Dr. | ?? | |||
| To Share Capital A/c | ?? | |||
| (Being 1,500 forfeited shares including those on which the first call was not received reissued @ ₹ 6 per shares fully called) | ||||
| 8. | Share Forfeiture A/c (1,000 × 0) + (500 × 2) ...Dr. | ?? | ||
| To Capital Reserve A/c | ?? | |||
| (Being ___??___) | ||||
You are required to complete the journal entries by filling up the missing information represented by '??', including the number of shares and narration, if any.
Assertion: A company can reissue a forfeited share at an amount which is less than the amount not received on it.
Reason: A company can write off the net loss made on the reissue of a forfeited share from its capital reserve.
Which one of the following is correct?
