NCERT Solutions Class 12 Accountancy Part 2 Chapter 1 Accounting for Share Capital

Last Updated: August 25, 2024Categories: NCERT Solutions

Class 12 Accountancy Part 2 NCERT Solutions

SimplyAcad has brought the best NCERT Solutions for Class 12 Accountancy Part 2 Chapter 1 Accounting for Share Capital. The solutions provided have proved to be great help to students preparing for their upcoming 12th board examinations. The solutions of Accounting For Share Capital avail in depth knowledge of the concepts, functions and calculations related to share capital.

Students can use the solution as a guide to write their answers in the paper, these detailed answers boost confidence in students and allow them to strengthen their problem solving ability. Our subject experts have compiled all the solutions at one place for the ease of students. Go below to find the explanation of each solution laid in an organised way.

Access NCERT Solutions for Class 12 Accountancy Part 2 Chapter 1 Accounting for Share Capital

Question 1

What is a public company? Accounting For Share Capital

Answer: The company which is not a private company and is different from them in various respects is known as a public company. The public companies can thus issue the shares to the general public and there are no restrictions as far as the transfer of shares is concerned. The value of the public company is determined through the daily trading of its shares. The public company uses the word ‘limited’ at the end of its name.

Question 2

What is a private company? Accounting For Share Capital

Answer: A business entity that is not owned by nongovernmental organisations and which comprises few numbers of shareholders and thus can no sell or purchase the share of the concerned company is a public company A private company is a business entity that is owned by a non-governmental organisation or by a relatively smaller number of shareholders or members who do not sell purchase its shares to the general public on the stock market. Instead, the company’s shares are owned, offered, exchanged, and traded privately. The total number of members is restricted to a maximum of 200 in the case of a private company. It has to incorporate the word “private limited” at the end of its name.

Question 3

When can share be forfeited? Accounting For Share Capital

Answer: The forfeiture of shares occurs when the shareholders of any company fail to pay the amount of call money when it is demanded by any company. The forfeiture of shares thus amounts to the cancellation of the membership of the concerned shareholder in the company.

Question 4

What is meant by Call in Arrears? Accounting For Share Capital

Answer: Calls in Arrears occur when the shareholders fail to pay the amount of the sum of the allotment and the call money and it thus becomes due. Any company that issues shares may decide to consider the payment of the amount against the full price or else may decide to consider it based on the allotment and the call money. The shareholders in the latter cases have to pay the amount of the sum in exchange for the allotment made to them. In the cases when the shareholders fail to pay the amount of the sum as and when it becomes due, the amount is considered to be the calls in arrears.

Question 5

What do you mean by a listed company? Accounting For Share Capital

Answer: Listed company refers to a company that is listed and recognized by the National Stock Exchange or the Bombay Stock Exchange. In other words, when the stock exchange of the country recognises the existence of the company, it is known to be listed. The listed companies have the responsibility to adhere to the requirements of the stock exchange.

Question 6

What are the uses of a securities premium? Accounting For Share Capital

Answer: The uses of the securities premium are as follows:

1. To write off the preliminary expense.

2. To write off the expenses such as commission, or discount allowed on the issue of shares and debentures.

3. To issue fully paid-up bonus shares

4. To provide premium payable on the redemption of preference shares and debentures

5. To buy back the share owned by us.

Question 7

What is meant by Calls in Advance? Accounting For Share Capital

Answer: During the time of the call of the shares by the company, the shareholders pay the whole or he part of the sum called by the company in advance, i.e. before even when the company calls for the amount. This amount is a liability for the company and such amount has to be adjusted towards the payment of the call as and when it becomes due. For example: A company has made a breakup of Rs. 100 per share in the following manner: Rs. 50 (On Application), Rs. 20 (On Allotment), and Rs. 30 (On 1 Call). A person may pay more than Rs. 50 during the time of the application or the allotment which results in the deposition of the additional amount in the company which is recorded as the calls in advance in the books of the account.

Question 8

Write a brief note on “Minimum Subscription”. Accounting For Share Capital

Answer: The ‘Minimum Subscription’ refers to the minimum amount of issue that must be subscribed to on the date of the closure by the public. The Security Exchange Board of India guidelines suggest that the minimum subscription of the share must be 90% of the size of the issue. In the case when the public fails to achieve the amount of minimum subscription then the shares by the company cannot be issued and they have to repay the money called on the application.

Question 9

What is meant by the word ‘Company’? Describe its characteristics.

Accounting For Share Capital

Answer: A company is referred to as a legal entity which is created under the due procedure of law and has its spate legal existence under the common seal and with the perpetual succession. The characteristics of the company are as follows:

1. Artificial Person which is created by Law: A company is also known as the artificial person which is created by the law. Thus it enjoys all the rights of the natural person.

2. Separate Legal Entity: A company is considered to be an artificial person. It is a legal entity that has a separate and distinct identity from its members. Thus the company being a separate legal entity has its own name and seal. The assets and liabilities of the company are distinct and separate from its members.

3. Perpetual Succession: The perpetual succession of the company infers that the company is not related to the life of its members and it is created by the law and thus can be dissolved by the law only. Hence the existence of the company is unaffected by the death of any of its members, or the insolvency of any of the members, or the transfer of the shares of its members.

4. Common Seal: The company being a legal entity having its separate and distinct identity has a common seal which acts as the signature of the company.

5. Limited Liability: The Limited liability feature of the company is important for any company as it provides the security of the company when anything goes wrong in the company. If anything goes wrong with the company, the risk is only to the extent of the number of his shares and nothing more. Thus it is a condition in which the shareholders of the company are liable to the company for their part of share only.

6. Transferability of Shares: The transferability of the shares infers that the shares can be transferred to another member with or without the consent of the members of the company. There can be certain limitations put upon this feature of the shares under the Articles of Association. The private companies on the other hand have more limitations than the public companies when it comes to the transfer of the shares. But it is however important to note that the transferability of shares cannot be repealed and stopped and it is done in some or the other manner.

Question 10

Explain in brief the main categories in which the share capital of a company is divided.

Accounting For Share Capital

Answer: The main categories in which the share capital of the company is divided are as follows:

1. Authorised Capital:It refers to the amount which is stated under the Memorandum of Association. The authorised capital is the maximum amount that any company can raise by issuing shares. This amount is laid down by the procedures which are stated in the Company Act.

2. Issued capital: It is referred to as the amount that is a part of authorised capital and is offered to the general public by the company in order to achieve subscription.

3. Subscribed capital: It is the part of the issued capital for which the applications are received from the public and hence the subscriptions are made.

4. Unissued Capital: It is the amount under the authorised capital that is not issued by the company but can be issued in the future to the general public

5. Unsubscribed Capital: The unsubscribed capital is the part of the issued capital that is not subscribed by the public.

6. Called-up capital: It is referred to as the part of the subscribed capital which is called by the company to pay.

7. Paid-up capital: It is the part of the subscribed capital which is paid up by the shareholders.

8. Uncalled up Capital: Uncalled up capital is the part of the subscribed capital which is not called in the routine course of the business but which may be called as the need for the winding of the company arises.

9. Reserved capital: Any limited company may call up any proportion of the share capital which is uncalled for in the cases when the company has to wind up and pay its creditors. Thus, the amount of the uncalled capital is reserved in order to pay back the creditors and hence this amount is not used by the company to meet any other purpose. Thus, the proportion of such the amount which is reserved is known as the reserve capital.

Question 11

What do you mean by the term ‘share’? Discuss the types of shares, which can be issued under the Companies Act, 2013 as amended to date.

Accounting For Share Capital

Answer: Share is referred to as the amount of the capital which is divided into the definite value units. The people who hold such shares are called shareholders.

Any company issues two types of shares:

1. Preference Shares: Those shares in which the shareholders have the preference over payment of the dividend or the repayment of the capital in the case when the company winds up. The dividend to such shareholders is paid at a fixed rate

2. Equity Shares: Equity shares are the type of shares in which the shareholders have the right to participate in the profits of the organisation after the claims of the preference shareholders are settled. The rate of dividend of such shareholders is not fixed and they vary from year to year. The shareholders have the right to vote and control the affairs of the business.

Question 12

Discuss the process for the allotment of shares of a company in case of over-subscription.

Accounting For Share Capital

Answer: The oversubscription is referred to as the situation in which the company receives the excess of the application that is called by the company. In the case of the allotment of the shares, the allotments can be made in three cases:

i) In the case when the amount received in excess of the application is returned back to the applicants after they are refused.

Share Application A/cDr.

To Share Capital A/c

To Bank A/c (Excess application money returned)

ii) In the case when the company allots the shares on a pro-rata basis to all the applicants of shares. The excess of the amount which is received on the application of the shares is adjusted during the allotment.

Share Application A/cDr.

To Share Capital A/c

To Share Allotment A/c

(Adjustment of application money on allotment)

iii) In the case when the companies follow the combination of both the refund of the money and the adjustment through a pro-rata basis on the excess of the amount received.

Share Application A/cDr.

To Share Capital A/c

To Share Allotment A/c

To Bank A/c (Application money transferred to Share Capital Account and the balance amount is transferred to Share Allotment Account and the excess application money is refunded)

Question 13

What is a ‘Preference Share’? Describe the different types of preference shares.

Accounting For Share Capital

Answer: Preference Shares refer to the types of shares which get preferential treatment over equity shares when it comes to the payment of the dividend and the repayment of the capital in the case when the company winds up itself. The preference shares entitle the owner to get the dividend at a fixed rate. The following are the types of preference shares:

1. Callable: The companies have the right to call back such shares at the certain price on any certain date.

2. Convertible: The preference shareholders have the option of converting their shares to the company’s common stock at any conversion ratio.

3. Cumulative: The preferred shareholders which have this type of shares have the right to receive the dividend on the shares even when the company does not have the financial resources for the same. The companies are thus liable for the payment of such dividend as the dividend gets accrued.

4. Non-cumulative: The preferred shareholders do not pay the liability upon the company to pay the dividend in the future years if they fail to pay the scheduled dividend to them.

5. Participating: This is the type of preference share in which the company is required to pay an increasing amount of dividend if there is a participation clause for the same in the share agreement.

Question 14

Describe the provisions of laws relating to ‘Calls in Arrears’ and ‘Calls in Advance’

Accounting For Share Capital

Answer:

Calls in Arrears: The calls in arrears occur when the shareholder fails to pay the sum of the allotment and the call money when it is due. The rate of interest on call in arrears is 10% and this will have to be paid for the period from the fixed date of the payment to the time of the actual payment.

Calls in Advance: The calls in advance happen in the situation in which the shareholders pay the amount wholly or partly when the call was not yet demanded from the company. This amount is the liability for the company and the rate of interest on the calls in advance is 12% per annum.

Question 15
Explain the terms ‘Oversubscription’ and ‘Under subscription’. How are they dealt with in accounting records?

Accounting For Share Capital

Answer:

Oversubscription: The situation of oversubscription occurs when the company issues more shares than are offered by the company. In the case of the oversubscription of the shares the company can opt for any of the three situations:

i) In the case when the amount received in excess of the application is returned back to the applicants after they are refused.

Share Application A/c Dr.

To Share Capital A/c

To Bank A/c

(Excess application money

returned)

ii) In the case when the company allots the shares on a pro-rata basis to all the applicants of shares. The excess of the amount which is received on the application of the shares is adjusted during the allotment.

Share Application A/c Dr.

To Share Capital A/c

To Share Allotment A/c

(Adjustment of application money on allotment)

iii) In the case when the companies follow the combination of both the refund of the money and the adjustment through pro-rata basis on the excess of the amount received.

Share Application A/c Dr.
To Share Capital A/c
To Share Allotment A/c
To Bank A/c
(Application money is transferred to the Share Capital Account the balance amount is transferred to the Share Allotment Account and the excess application

money is refunded)

Under subscription: Under subscription of the shares is the case in which the application for the shares is less than the shares issued by the company. For instance, a company issued 1,000 shares to the public and the company received applications for 900 shares only from the public. This situation is called under-subscription.

In such cases the allotment of the shares to the number of people who have subscribed for it is 900 shares. It is thus important to note that any company cannot be allowed to make the allotment of the shares if the minimum subscription is below at least 90%. In such cases the company is not allowed to allot the shares and they will be required to pay back the money they have received from the applicants.

Question 16

Describe the purposes for which a company can use the amount of Securities Premium.

Accounting For Share Capital

Answer: The purposes for which the company may use the amount of the securities premium wholly or in part are as follows:

  • It orders to issue the fully paid bonus shares of the company.
  • It orders to write off the preliminary expenses of the company.
  • It orders to write off the expenses such as discount allowed, and commission paid on the issue of any shares or debentures.
  • it orders to purchase its own shares this is also termed as Buy Back.
  • It orders to provide the premiums payable upon the redemption of the preference shares or debentures.

Question 17

State clearly the conditions under which a company can issue shares at a discount.

Accounting For Share Capital

Answer: The issue of shares at a discount means that any company is issuing the share at a price that is lower than the face value of the share. For example: If a share of Rs 1000 is issued at Rs 850, then Rs 150 (i.e. Rs 1000-850) is the amount of discount.

The conditions in which the shares are issued at discount are as follows:

  • The rate of discount of shares should not exceed 10%.
  • The shares must belong to a class that has already been issued by the company.
  • The discount must be provided when at least one year from the date of which the company was allowed to commence its business has passed.
  • The issue of such discount is sanctioned by the Company Law Board and is authorised by the passing of the resolution passed by the company in their general meeting.
  • The court may allow the issue of such shares within the two months of the sanction by the court or within the extended time as allowed by the court.

Question 18

Explain the term ‘Forfeiture of Shares’ and give the accounting treatment on the forfeiture.

Accounting For Share Capital

Answer: The forfeiture of shares happens when at the time of the allotment of the shares they fail to pay money and further fail to pay the subsequent amount of the call money by the company concerned demanded by the company. The shareholders are liable to pay the amount of the allotment money and the amount of the call when it is called by the company. Hence the failure to pay such an amount makes the companies forfeit the shares of such shareholders.

The Accounting Treatment for Forfeiture is given below:

Share capital A/c DR

To Share Forfeiture A/c

To Share Allotment/Call A/c

(Being Shares forfeited for non-payment)

Questions 19

Anish Limited issued 30,000 equity shares of Rs 100 each payable at Rs 30 on application, Rs 50 on allotment and Rs 20 on Ist and final call. All money was duly received. Record these transactions in the journal of the company.

Answer:

Books of Anish Limited

Date Particulars L.F Debit Amount Rs Credit Amount Rs
Bank A/c Dr. To Equity Share Application A/c

(Application money received on application for 30,000 equity shares @ Rs 30 per share)

 9,00,000

9,00,000

15,00,000

15,00,000

6,00,000

 9,00,000

9,00,000

15,00,000

15,00,000

6,00,000
Equity Share Application A/c Dr. To Equity Share Capital A/c

(Share application money transferred to Share Capital Account)
Equity Share Allotment A/c Dr. To Equity Share Capital A/c

(Allotment money due on 30,000 @ Rs 50 per share)
Bank A/c Dr. To Equity Share Allotment A/c

(Share allotment money received for 30,000 shares @ Rs 50 per share)

 6,00,000 6,00,000
Equity Share First and Final Call A/c Dr.

To Equity Share Capital A/c

(Share First and Final Call money received for 30,000 shares @ Rs 20 per share)
Bank A/c Dr.

To Equity Share First and Final Call A/c (Share First and Final Call Money received for 30,000 shares @ Rs 20 per share)

Question 20

The Adarsh Control Device Ltd. was registered with an authorised capital of Rs.3,00,000 divided into 30,000 shares of Rs.10 each, which were offered to the public. The amount payable as Rs.3 per share on the application, Rs.4 per share on the allotment, and Rs.3 per share on the first and final call. These shares were fully subscribed and all money was duly received. Prepare a journal and Cash Book.

Answer:

Books of Adarsh Control Device Ltd.

Date Particulars L.F. Debit Amount Rs Credit Amount Rs
Equity Share Application A/c Dr.

To Equity Share Capital A/c

(Share Application money for 30,000 shares @ Rs 3 per share transferred to Share Capital Account)

 90,000

1,20,000

 90,000

1,20,000
Equity Share Allotment A/c Dr.
To Equity Share Capital A/c

(Share Allotment money due on 30,000 @ Rs 4 per share)

 90,000 90,000
Equity Share First and Final Call A/c Dr.

To Equity Share Capital A/c

(Share First and Final Call due on 30,000 @ Rs 3 per share)

Cash Book (Bank Column)

Dr. Cr.

Date Particulars J.F Amount Rs Date Particulars J.F Amount Rs
Equity 90,000 By Balance 30,00,000
Share 1,20,000 c/d
Application 90,000
Equity

Share
30,00,000 30,00,000
Allotment
Equity
Share First
and Final
Call

Question 21

Software solution India Ltd invites applications for 20,000 equity shares of Rs 100 each, payable Rs 40 on application, Rs 30 on allotment and Rs 30 on call. The company received applications for 32,000 shares. Applications for 2,000 shares were rejected and money returned to Applicants. Applications for 10,000 shares were accepted in full and applicants for 20,000 shares allotted half of the number of shares applied and excess application money adjusted into allotment. All money received due on allotment and call. Prepare a journal and cash book.

Answer:

Books of Software Solution India Ltd. Journal

Date Particulars L. F Debit Amount Rs Credit Amount Rs
Equity Share Application 120,00,000
A/c Dr. 8,00,000
To Equity Share Capital 4,00,000
A/c
To Equity Share
Allotment A/c
(Application money
transferred to Equity
Share Capital for 20,000 6,00,000
shares @ Rs 40 and Rs 4,00,000 is adjusted towards allotment) 6,00,000 6,00,000

6,00,000
Equity Share Allotment A/c Dr.

To Equity Share Capital A/c

(Equity Share Allotment money due on 20,000 @ Rs 30 per share)
Equity Share First and Final Call A/c Dr.

To Equity Share Capital A/c

(Equity Share on First and Final Call due on 20,000 @ Rs 30 per share)

Cash Book (Bank Column)

Dr. Cr.

Date Particulars J.F Amount Rs Date Particulars J.F Amount Rs
Equity Share Application 12,80,000

2,00,000

6,00,000

 Equity Share Application 80,000

20,00,000
Equity Share Allotment Equity Share First and Final Call 20,80,000 By Balance c/d 20,80,000

Working Note:

Amount due on Allotment for 6,00,000
20,000 shares @ Rs 30 per share 4,00,000
Money Adjusted on application

10,000 shares @ Rs 40 each

Money to be received on Allotment
2,00,000

Question 22

Rupak Ltd. issued 10,000 shares of Rs 100 each payable Rs 20 per share on application, Rs 30 per share on allotment and balance in two calls of Rs 25 per share. The application and allotment money were duly received. On the first call all members paid their dues except one member holding 200 shares, while another member holding 500 shares paid for the balance due in full. Final call was not made.

Give journal entries and prepare a cash book.

Answer:

Books of Rupak Ltd Journal

Date Particulars L.F Debit Amount Rs Credit Amount Rs
Share Application A/c 2,00,000
Dr. 2,00,000
To Share Capital A/c
(Application money for
10,000 shares
transferred to Share
Account Capital) 3,00,000
3,00,000
Share Allotment A/c
Dr.
To Share Capital A/c

(Allotment money due on 10,000 shares @ Rs 30 per share)

 2,50,000 2,50,000
Share First Call A/c Dr. To Share Capital A/c

(Share First Call due on

 5,000 5,000
10,000 @ Rs 25 per
share)
Calls in Arrears A/c Dr.
To Share First Call A/c (Call in arrears on 200 shares @ Rs 25 per share)

Cash Book (Bank Column)

Dr. Cr.

Date Particulars J. F Amount Rs Date Particulars J. F Amount Rs
Share Application 2,00,000 By 7,57,500
Share Allotment Balance
Share First Call 3,00,000 c/d
Calls in Advance
2,45,000
12,500
7,57,500 7,57,500

Working Note:

Money due on First Call for 10,000 2,50,000
shares @ Rs 25 per share (5000)
Less: Calls in Arrear for 200 shares @ Rs 25 per share 2,45,000

12,500
Money Revised on First Call 2,57,500
Add: Calls received in advance on
500 share @ Rs 25 per share

Question 23

Mohit Glass Ltd. issued 20,000 shares of Rs 100 each at Rs 110 per share, payable Rs 30 on application, Rs 40 on the allotment (including Premium), Rs 20 on first call and Rs 20 on final call. The applications were received for 24,000 shares and allotted 20,000 shares and rejected 4,000 shares and amount returned thereon. The money was duly received.

Give journal entries.

Answer:

Books of Mohit Glass Ltd. Journal

Date Particulars L.F Debit Amount Rs Credit Amount Rs
Bank A/c Dr.

To Share Application A/c (Application money received on application for 24,000 shares @ Rs 30 per share)

 7,20,000

7,20,000

 7,20,000

6,00,000

1,20,000
Share Application A/c Dr. To Share Capital A/c(Bank Column)

To Bank A/c
(Share Application of 20,000 shares @ Rs 30 transferred to Share Capital

Account and the Balance returned)

 8,00,000

8,00,000

4,00,000

4,00,000

4,00,000

4,00,000

 6,00,000

2,00,000

8,00,000

4,00,000

4,00,000

4,00,000
Share Allotment A/c Dr. To Share Capital A/c

To Share Premium A/c (Allotment money due on 20,000 shares @ 40 per share including Rs 10 for premium)
Bank A/c Dr.

To Share Allotment A/c (Allotment money received on 20,000 shares @ Rs 20 per share)
Share First Call A/c Dr. To Share Capital A/c (Share Final Call Money due on 20,000 @ Rs 20 per share)
Bank A/c Dr.

To Share First Call A/c
(Share First Call money received on 20,000 shares @ Rs 20 per Share) 4,00,000
Share Final Call A/c Dr. To Share Capital A/c (Share Final Call money due on 20,000 shares @ Rs 20 per share)
Bank A/c Dr.

To Share Final Call A/c (Share Final Call money received on 20,000 shares @ Rs 20 per share)

Question 24

A limited company offered for subscription of 1,00,000 equity shares of Rs 10 each at a premium of Rs 2 per share. 2,00,000. 10% Preference shares of Rs 10 each at par.

The amount on share was payable as under:

  Equity Shares Preference Shares
On Application Rs 3 per share Rs 3 per share
On Allotment Rs 5 per share(including a

premium)

 Rs 4 per share
On First Call Rs 4 per share Rs 3 per share

All the shares were fully subscribed, called-up and paid. Record these transactions in the journal and cash book of the company:

Answer:

Books of the limited company Journal

Date Particulars L.F Debit Amount Rs Credit Amount Rs
Equity Share Application 3,00,000
A/c Dr. 6,00,000
10% preference Share 3,00,000
Application A/c Dr. 6,00,000
To Equity Share Capital
A/c
To 10% preference Share
Capital A/c 5,00,000
(Application money 8,00,000
transferred to Equity Share 3,00,000
Capital) 2,00,000
8,00,000
Equity Share Allotment
A/c Dr.
10% preference Share
Allotment A/c Dr. 4,00,000
To Equity Share Capital 6,00,000
A/c
To Securities Premium A/c 4,00,000
To 10% preference Share 6,00,000
Allotment A/c
(Amount due on
allotment)
Equity Share First and
Final Call A/c Dr.
10% preference Share first
and Final Call A/c Dr.
To Equity Share Capital
A/c
To 10% preference Share
Allotment A/c
(Amount on First and
Final Call due)

Cash Book (Bank Column)

Dr. Cr.

Date Particulars J. F Amount Rs Date Particulars J. F Amount Rs
Equity Share 3,00,00,0 By 32,00,0
Application Balance 00
10% Preference 6,00,000 c/d
Share
Application
Equity Share 5,00,000
Allotment
10% Preference 8,00,000
Share Allotment
Equity Share
First and Final 4,00,000
Call
10% Preference
Share First and 6,00,000
Final Call
32,00,000 32,00,000

Questions 25

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

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

Applications were received for 60,000 shares and the directors allotted the shares as follows:

(a) Applicants for 40,000 shares received shares, in full.

(b) Applicants for 15,000 shares received an allotment of 8,000 shares.

(c) Applicants for 500 shares received 200 shares on allotment, excess money being returned.

All amounts due on allotment were received.

The first call was duly made and the money was received with the exception of the call due 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:

Note: In order to solve this question, the applicant of category C has been assumed as 5000 instead of 500 and allotment to the applicant of this category has been taken as 2000 in place of 200.

 

Books of Eastern Company Ltd

Date Particulars L.F Debit Amount Rs Credit Amount Rs
Share Application A/c Dr. 1,80,000
To Share Capital A/c 1,50,000
To Share allotment A/c 30,000
(Share Application
money for 50,000 shares
transferred to Share
Capital Account and the
excess money transferred
to share Allotment 2,50,000
Account) 1,00,000
1,50,000
Share Allotment A/c Dr.
To Share Capital A/c
To Share Premium A/c
(Allotment money due on

50,000 shares @ Rs 5 per share including Rs 3

 1,50,000 1,50,000
security premium)
Share First Call A/c
To Share Capital A/c
(First Call due on 50,000
share @ Rs.3 per share)

Cash Book (Bank Column)

Dr. Cr.

Date Particulars J.F Amount Rs Date Particulars J.F Amount Rs
Share 1,80,000 By Balance 5,49,700
Application 2,20,000 c/d
Share 1,49,700
Allotment

Share First
5,49,700 5,49,700
Call

Eastern Company Limited Balance Sheet

Particulars Note No. Amount (Rs)
I. Equity and Liabilities

1. Shareholder’s Funds

a. Share Capital

b. Reserves and Surplus

2. Non Current Liabilities

3. Current Liabilities

 1

2

 3,99,700

1,50,000
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 (Rs)
1 Share Capital
2

3

 Authorised Share Capital 1,00,000 shares of Rs 10 each

Issued Share Capital 50,000 shares of Rs 10 each

Subscribed, Called up and Paid up Share Capital

50,000 shares of Rs 10 each, Rs.8 call up 4,00,000

Less : Calls-in-arrears

(300)

Reserves and Surplus

Securities Premium

Cash and Cash Equivalent

Cash at Bank

 10,00,000
5,00,000
3,99,700
1,50,000

5,49,700

Question 26

Sumit Machine Ltd issued 50,000 shares of Rs 100 each at a discount of 5%. The shares were payable Rs 25 on application, Rs 40 on allotment and Rs 30 on first and final call. The issue was fully subscribed and money was duly received except the final call on 400 shares. The discount was adjusted on allotment. Give journal entries and prepare a balance sheet.

Answer:

Books of Sumit Machine Ltd.

Date Particulars L.F Debit Amount Rs Credit Amount Rs
Bank A/c Dr.

To Share application A/c (Share application money received on application for 50,000 shares @ Rs 25 per share)

 12,50,000

12,50,000

20,00,000

2,50,000

20,00,000

15,00,000

 12,50,000

12,50,000

22,50,000

20,00,000

15,00,000
Share Application A/c Dr. To Share Capital A/c (Share application money of 50,000 shares transferred to share Capital Account)
Share Allotment A/c Dr. Discount on issue of Share Dr.

To Share Capital A/c (Share Allotment money due on 50,000 shares @ Rs 40 each at discount of Rs 5)
Bank A/c Dr.
To Share allotment A/c (Allotment money received for 50,000 shares @ Rs 40 per share) 14,88,000

12,000

 15,00,000
Share First and Final Call A/c Dr.

To Share Capital A/c (Share First and Final due on50,000 shares @ Rs 30 per share)
Bank A/c Dr.

Calls in Arrears Dr.

To Share First and Final Call A/c

(Share First and Final Call received except 400 Shares)

Sumit Machine Limited

Balance Sheet

Particulars Note No. Amount (Rs)
1.Equity and Liabilities

1.Shareholder’s Funds
a. Share Capital

2. Non Current Liabilities

3. Current Liabilities

 1 49,88,000
Total 49,88,000
2. Assets

1. Non-Current Assets

a. Other Non-Current Assets

2. Current Assets

a. Cash and Cash Equivalents

 2

3

 2,50,000

47,38,000
Total 49,88,000

NOTES TO ACCOUNTS

Note No. Particulars Amount (Rs)
1

2

3

 Share Capital

Authorised Share Capital……… shares of Rs 100 each

Issued Share Capital 50,000 shares of Rs 100 each

Subscribed, Called up, and Paid up

Share Capital

50,000 shares of Rs 100

50,00,000

Less: Calls-in-arrears (12,000)

Other Non-Current Assets

Discount on the issue of shares
50,00,000
49,88,000
2,50,000
Other Non-Current Assets

Discount on the issue of shares

Cash and Cash Equivalent

Cash at Bank

 47,38,000

Question 27

Kumar Ltd purchases assets of Rs 6,30,000 from Bhanu Oil Ltd. Kumar Ltd. issued equity shares of Rs 100 each fully paid in consideration. What journal entries will be made, if the shares are issued, (a) at par, (b) at a discount of 10 % and (c) at a premium of 20%.

Answer:

Books of Kumar Ltd. Case (a)

Date Particulars L.F Debit Amount Rs Credit Amount Rs
Sundry Assets A/c Dr. 6,30,000
To Bhanu Oil Ltd 6,30,000
(Assets purchased from
Bhanu Oil Limited)
6,30,000
(a) 6,30,000
Bhanu Oil Ltd
Dr.
To Share Capital
(b) (6,300 shares issued at par to Bhanu Ltd.) 6,30,000

70,000
Bhanu Oil Ltd 7,00,000
Dr.
Discount on issue of
(c) Share A/c Dr 6,30,000
To Share Capital A/c 5,25,000
(7,000 shares issued at 1,05,000
10% discount)
Bhanu Oil Ltd.
Dr.
To Share Capital A/c
To Securities Premium
A/c
(5,250 shares are issued
at 20% premium)

No. of Shares issued at par = Amount Payable/Face Value = 630000/100 = 6300 shares

Case (b)

Date Particulars L. F Debit Amount (Rs) Credit Amount (Rs)
Sundry Assets A/c 6,30,000
Dr. 6,30,000
To Bhanu Oil Ltd
(Assets purchased from
Bhanu Oil Ltd.) 6,30,000
70,000 7,00,000
Bhanu Oil Ltd. Dr.

Discount on issue of Share A/c Dr.

To Share Capital A/c (7,000 shares issued at 10% discount to Bhanu Ltd. In consideration to assets purchased)

No. of Shares issued at discount = Amount Payable/(Face Value – Discount per Share) = 6,30,000/(100-10) = 7,00,000 shares

Date Particulars L.F Debit Amount (Rs) Credit Amount (Rs)
Sundry Assets A/c 6,30,000
Dr. 6,30,000
To Bhanu Oil Ltd A/c
(Assets purchased
from Bhanu Oil Ltd.) 6,30,000
5,25,000
1,05,000
Bhanu Oil Ltd.
Dr.
To Share Capital A/c
To Securities Premium A/c

(5,250 shares issued at 20% premium to Bhanu Ltd. In consideration to assets purchased)

No. of Shares issued at Premium = Amount Payable/(Face Value + Premium Per Share) = 6,30,000/(100+20) = 52,50 Shares

Question 28

Bansal Heavy machine Ltd purchased a machine worth Rs 3,20,000 from Handa Trader. Payment was made as Rs 50,000 cash and remaining amount by issue of equity share of the face value of Rs 100 each fully paid at an issue price of Rs 90 each.

Give journal entries to record the above transaction.

Answer:

Books of Bansal Heavy Machine Ltd

Date Particulars L.F Debit Amount (Rs) Credit Amount (Rs)
Machinery A/c Dr. 3,20,000 50,000
To Cash A/c

To Handa Traders (Machine Purchased from Handa Traders paid Rs 50,000 in cash immediately)

 2,79,000

30,000

 2,70,000

3,00,000
Handa Trader Dr.

Discount on issue of shares A/c Dr.

To Share Capital A/c (3,00,000 shares issued at Rs 90 face value of Rs 100 each to Handa Traders in consideration of the amount due to him for machinery purchased)

Working Notes:

1. Number of Share issued = Amount Payable / Issue Price = 2,70,000/90 = 3,000 shares

Question 29

Naman Ltd issued 20,000 shares of Rs 100 each, payable Rs 25 on application, Rs 30 on allotment, Rs 25 on first call and The balance on final call. All money duly received except Anubha, who holding 200 shares did not pay allotment and calls money and Kumkum, who holding 100 shares did not pay both the calls. The directors forfeited shares of Anubha and kumkum.

Give journal entries.

Answer:

Books of Naman Ltd.

Date Particulars L.F Debit Amount Rs Credit Amount Rs
Bank A/c Dr.

To Share Application A/c (Share application money received on application for 20,000 shares @ Rs 25 per share)

 5,00,000

50,00,000

6,00,000

 5,00,000

5,00,000

6,00,000
Share Application A/c Dr. To Share Capital A/c (Share Application money for 20,000 shares @ Rs 25 share transferred to Share Capital account)
Share Allotment A/c Dr. To Share Capital A/c
(Share Allotment money due on 20,000 shares @ Rs 30 per share) 5,94,000

5,00,000

4,92,500

4,00,000

3,94,000

 5,94,000

5,00,000

4,92,500

4,00,000

3,94,000
Bank A/c Dr. To Share Allotment A/c (Allotment money received for 19,800 shares @ Rs 30 per)
Share First Call A/c Dr.

To Share Capital A/c (Share First Call money due on 20,000 shares @ Rs 25 per share)
Bank A/c Dr.

To Share Final Call A/c (Share First Call money for 19,700 shares @ Rs 25 each)
Share Final Call A/c Dr.

To Share Capital A/c
(Share Final call money due on 20,000 shares @ Rs 20 per share) 30,000 10,500

6,000

7,500

6,000
Bank A/c Dr.

To Share Final Call A/c (Share Final Call money received for 19,700 shares @ Rs 20 per share and 300 shares failed to pay call)
Share Capital A/c Dr.

To Share Forfeiture A/c (200´25+100´55)

To Share Allotment (200´300)

To share First Call A/c (300´25)

To Share Final Call A/c (300´20)

(300 share forfeited)

Working Note:-

1. Forfeited Amount

Amount on application

(300 shares @ Rs 25 each) =

Amount on allotment

(100 shares @ Rs 30 each) =

 7,500

3,000
10,500

Question 30

Kishna Ltd issued 15,000 shares of Rs 100 each at a premium of Rs 10 per share, payable as follows:

On application Rs 30
On allotment Rs 50 (including premium)
On first and final call Rs 30

All the shares subscribed and the company received all the money due, With the exception of the allotment and call money on 150 shares. These shares were forfeited and reissued to Neha as fully paid shares of Rs 12 each.

Give journal entries in the books of the company.

Answer:

Books Of Krishna Ltd

Date Particulars L.F Debit Amount Rs Credit Amount Rs
Bank A/c Dr.

To Share Application A/c

 4,50,000 4,50,000
(Share Application 4,50,000

6,00,000

1,50,000

7,42,500

4,50,000

4,45,500
money received for
15,000 shares @ 30 per 4,50,000
share)
Share Application A/c
Dr.
To Share Capital A/c

(Share Application

 7,50,000
money of 15,000 shares
transferred to Share
Capital Account)
Share Allotment A/c
Dr.

To Share Capital A/c

 7,42,500
To Securities Premium
A/c
(Share Allotment money
on 15,000 shares @ Rs

50 per share including

 4,50,000
Rs 10 securities premium
due)
Bank A/c
Dr.

To Share Allotment A/c

 4,45,500
(Share Allotment
received on 14,850
shares and 150 shares 7,500

4,500

4,500

15,000

3,000

4,500
failed to pay the money
due)
15,000
1,500
Share First and Final Call
A/c Dr.
To Share Capital A/c
(Share First and Final
Call for 15,000 shares @
Rs 30 per share due)
Bank A/c Dr. 18,000
To Share First and Final
Call A/c
(Share First and Final
Call received for 14,850
shares @ Rs 30 per share

and 150 shares failed to

 4,500
pay the amount due)
Share Capital A/c
(150´100) Dr.
Share premium
A/c(150´10) Dr.
To Share Allotment
A/c(150´50)
To Share First and Final
Call A/c(150´30)
To Share Forfeiture A/c(150´30)

(150 share forfeited for non-payment of Share Allotment and Share First and Final Call)
Bank A/c Dr.

To Share Capital A/c To Securities Premium A/c

(150 shares of Rs 100 each reissued @ Rs 120 to Neha)
Share Forfeiture A/c Dr.

To Capital Reserves A/c (Balance of Share Forfeiture Account transferred to Capital reserve account)

Note: In the solution, the reissued price of Rs.12 has been assumed as Rs.120 per share.

Question 31

Arushi Computers Ltd issued 10,000 equity shares of Rs 100 each at a 10% discount. The net amount payable is as follows:

On application Rs 20
On allotment Rs 30 (Rs 40 – discount Rs 10)
On the first call Rs 30
On final call Rs 10

A shareholder holding 200 shares did not pay a final call. His shares were forfeited. Out of these 150 shares were reissued to Ms. Sonia at Rs 75 per share.

Give Journal entries in the books of the company.

Answer:

Books of Arushi Computers Ltd.

Date Particular L.F. Debit Amount Rs. Credit Amount Rs.
Bank A/c Dr 200000
To Share Application A/c 200000
(Share application money

received for 10000
shares @ Rs.20 per share)
Share Application A/c Dr 200000
(Share application money for 10000 shares 200000
transferred to share capital account)
Share Allotment A/c Dr 300000
Discount on Issue of Shares

A/c Dr

 100000 400000
To Share Capital A/c
(Share allotment money due

@ Rs.30 per share
excluding discount Rs.10, on 10000 shares)
Bank A/c Dr 300000
To Share Allotment A/c 300000
(Share allotment money

received for 10000
shares @ Rs.30 per share)
Share First Call A/c Dr 300000
To Share Capital A/c 300000
(Share first call money due

on 10000 shares @
Rs.30 per share)
Bank A/c Dr 300000
To Share First Call A/c 300000
Rs.30 per share)
Share Final Call A/c Dr 100000 100000
To Share Capital A/c
(Final Call money due on

10000 shares @
Rs.10 per share)
Bank A/c Dr 98000
To Share Final Call A/c 98000 98000
(Final call money received

for 9800 shares @
Rs.10 per share and 200 shares failed to pay)
Share Capital A/c Dr (200 x 100) 20000
To Share Final Call A/c

(200 x 10)

 2000
To Discount the Issue of

Share A/c (200 x 10)

 2000
To Share Forfeiture A/c

(200 x 80)

 16000
(200 shares forfeited for

non-payment of final call
Rs.10 per share)
Bank A/c Dr (150 x 75) 11250
Discount on Issue of Shares

A/c Dr (150 x 10)

 1500
Share Forfeiture A/c Dr (150 x 15) 2250
To Share Capital A/c (150 x

100)

 15000
(150 forfeited shares

reissued @ Rs.100 per
share for Rs.75)
Share Forfeiture A/c Dr 9750
To Capital Reserve A/c 9750
(Balance of 150 reissued

shares are transferred
to capital reserve account)

Working Note:

Amount transferred to Capital Reserve A/c

Share Forfeiture Account credited Rs.80 per share
Less: Share Forfeiture Account debited Rs.15 per share
Amount transferred to Capital Reserve Account, after adjustment Rs.65 per share

Amount transferred to Capital Reserve Account = Balance per share after adjustment x Number of Shares reissued = 65 x 150 = Rs.9750

Question32

Raunak Cotton Ltd. issued a prospectus inviting applications for 6,000 equity shares of Rs 100 each at a premium of Rs 20 per shares, payable as follows:

On application Rs 20
On allotment Rs 50 (including premium)
On the first call Rs 30
On final call Rs 20

Applications were received for 10,000 shares and allotment was made Pro-rata to the applicants of 8,000 shares, the remaining applications Being refused. Money received in excess on the application was adjusted toward the amount due on allotment.

Rohit, to whom 300 shares were allotted failed to pay allotment and calls money, his shares were forfeited. Itika, who applied for 600 shares, failed to pay the two calls and her shares were also forfeited. All these shares were sold to Kartika as fully paid for Rs 80 per share.

Give journal entries in the books of the company.

Answer:

Books of Raunak Cotton Ltd.
Date Particular L.F Debit Amount Rs. Credit Amount Rs.
Bank A/c Dr 200000 200000

120000

40000

40000

180000

120000

247000

180000

157500
To Share Application A/c
(Share application money

received for 10000
shares @ Rs.20 per share)
Share Application A/c Dr 200000
To Share Capital A/c
To Share Allotment A/c
To Bank A/c
(Share application money

for 10000 shares
are adjusted)
Share Allotment A/c Dr 300000
To Share Capital A/c
To Share Premium A/c
(Share allotment money due)
Bank A/c Dr 247000
To Share Allotment A/c
(Allotment money received except 300 shares)
Share First Call A/c Dr 180000
To Share Capital A/c
Bank A/c Dr 157500
To Share First Call A/c 120000

105000
(First call money received

except 750 shares)
(300 + 450)
Share Final Call A/c Dr 120000
To Share Capital A/c
(Final Call money due)
Bank A/c Dr 105000
To Share Final Call A/c
(Final call money received except 750 shares)
Share Capital A/c Dr (750 x 100) 75000
Share Premium A/c Dr

(300 x 20)

 6000 13000

22500

15000

30500
To Share Allotment A/c
To Share First Call A/c

(750 x 30)
To Share Final Call A/c

(750 x 20)
To Share Forfeiture A/c

(200 x 80)
(750 shares forfeited)
Bank A/c Dr 60000
Share Forfeiture A/c Dr 15000
To Share Capital A/c 15500 75000
(Forfeited shares reissued

@ Rs.80 per share)
Share Forfeiture A/c Dr
To Capital Reserve A/c 15500
(Balance of reissued shares

are transferred to
capital reserve account)

Working Note:

1. Number of share applied by Rohit = (Total number of applied shares/Total number of allotted shares) x Number of allotted shares = (8000/6000) x 300 = 400 shares

2. Call in arrears by Rohit on allotment

Money received on application (400 x 20) 8000
Less: Transfer to share

capital

 (300 x 20) 6000
Excess adjusted on allotment 2000
Allotment due (300 x 50) 15000
Less: Excess adjustment on

allotment

 2000
Call in arrear 13000

3. Number of share allotted to Itika = (Total number of allotted shares/Total number of applied shares) x Number of applied shares = (6000/8000) x 600 = 450

4. Share forfeiture amount

Amount on application 300 x 20 6000
450 x 20 9000
Excess amount received from Rohit for allotment on pro-rata basis 2000
Amount received on allotment by Kartika 13500
30500

Question 33

Himalaya Company Limited issued for public subscription of 1,20,000 equity shares of Rs 10 each at a premium of Rs 2 per share payable as under:

With Application Rs 3 per share
On allotment (including premium) Rs 5 per share
On First call Rs 2 per share
On Second and Final call Rs 2 per share

Applications were received for 1,60,000 shares. Allotment was made on a pro-rata basis. Excess money on application was adjusted against the amount due on allotment.

Rohan, whom 4,800 shares were allotted, failed to pay for the two calls. These shares were subsequently forfeited after the second call was made. All the shares forfeited were reissued to Teena as fully paid at Rs 7 per share.

Record journal entries in the books of the company to record these transactions relating to share capital. Also show the company’s balance sheet.

Answer:

Books of Himalaya Company Ltd.

Date Particular L.F Debit

Amount Rs.

 Credit

Amount Rs.
Bank A/c Dr 480000
To Share Application A/c 480000
(Share application money

received for 160000
Shares @ Rs.3 per share)
Share Application A/c Dr 480000
To Equity Share Capital

A/c

 360000
To Share Allotment A/c 120000
(Share application money

for 120000 shares @
Rs.3 per share transferred

to share capital

 360000

240000

480000

240000

230400

240000
Share Allotment A/c Dr 600000
To Equity Share Capital

A/c
To Securities Premium

A/c
(Share allotment money due including premium)
Bank A/c Dr 480000
To Share Allotment A/c
(Allotment money received)
Share First Call A/c Dr 240000
To Equity Share Capital

A/c
(Share first call money due)
Bank A/c Dr 230400
To Share First Call A/c
(First call money received

on 115200 shares and
4800 shares failed to pay)
Share Final Call A/c Dr 240000
To Equity Share Capital

A/c
Bank A/c Dr 230400
To Share Final Call A/c 230400
(Final call money received

except 4800 shares)
Equity Share Capital A/c Dr (4800 x 10) 48000
To Share First Call A/c

(4800 x 2)

 9600
To Share Final Call A/c

(4800 x 2)

 9600
To Share Forfeiture A/c

(4800 x 6)

 28800
(4800 shares forfeited)
Bank A/c Dr 33600
Share Forfeiture A/c Dr 14400
To Equity Share Capital

A/c

 48000
(Forfeited shares reissued

@ Rs.7 per share)
Share Forfeiture A/c Dr 14400
To Capital Reserve A/c 14400
(Balance of reissued

shares are transferred to
capital reserve account)

Himalaya Company Limited Balance Sheet

Particular Note No. Amount (Rs.)
I. Equity and Liabilities
1. Shareholders’ Fund
a. Share Capital 1 1200000
b. Reserve and Surplus 2 254400
2. Non-Current

Liabilities
3. Current Liabilities
Total 1454400
II. Assets 3 1454400
1. Non-Current Assets
2. Current Assets
a. Cash and Cash

Equivalents
Total 1454400

NOTES TO ACCOUNTS

Note No. Particulars Amount (Rs)
1 Share Capital
Authorised Share Capital ………….

shares of Rs.10 each
Issued Share Capital 120000 shares of Rs.10 each 1200000
Subscribed, Called-up and Paid-up Share Capital
120000 shares of Rs.10 each 1200000
2 Reserve and Surplus
Securities Premium
Capital Reserve 254400
 

3

 Cash and Cash Equivalents
Cash at Bank 1454400

Question 34

Prince Limited issued a prospectus inviting applications for 2,00,000 equity shares of Rs 10 each at a premium of Rs 3 per share payable as follows:

 

1 With Application Rs 2
On Allotment (including premium) Rs 5
On First Call Rs 3
On Second Call Rs 3

Applications were received for 30,000 shares and allotment was made on a pro-rata basis. Money overpaid on applications was adjusted to the amount due on allotment.

Mr. ‘Mohit’ whom 400 shares were allotted, failed to pay the allotment money and the first call, and her shares

were forfeited after the first call. Mr. ‘Joly’, whom 600 shares were allotted, failed to pay for the two calls and hence, his shares were forfeited.

Of the shares forfeited, 800 shares were reissued to Supriya as fully paid for Rs 9 per share, the whole of Mr. Mohit’s shares being included.

Record journal entries in the books of the Company and prepare the Balance Sheet.

Answer:

Books of Prince Ltd.

Date Particular L.F. Debit Amount

Rs.

 Credit Amount

Rs.
Bank A/c Dr 600000
To Share Application A/c 600000
(Share application money

received for 300000
shares @ Rs.2 per share)
Share Application A/c Dr 600000
To Equity Share Capital A/c 400000
To Share Allotment A/c 200000
transferred to share capital account and balance 400000

600000

798400

600000

597000

1200

1600

1200
adjusted to allotment
Share Allotment A/c Dr 1000000
To Share Capital A/c
To Securities Premium A/c
(Share allotment money due including premium)
Bank A/c Dr (600000 – 200000 – 1600) 798400
To Share Allotment A/c
(Allotment money received)
Share First Call A/c Dr 600000
To Equity Share Capital A/c
(Share first call money due)
Bank A/c Dr (600000 – 1200 – 1800) 597000
To Share First Call A/c
(First call money received)
Share Capital A/c Dr 2800
Share Premium A/c Dr 1200
To Share Forfeiture A/c
To Share Allotment A/c
(400 shares forfeited after first call)
Share Final Call A/c Dr 598800 598800
To Share Capital A/c
(Final Call money due on 199600 shares)
Bank A/c Dr (598800 – 1800) 597000
To Share Final Call A/c 587000
(Final call money received except 600 shares) 1800

1800

2400
Share Capital A/c Dr 6000
To Share First Call A/c
To Share Final Call A/c
To Share Forfeiture A/c
(600 shares forfeited)
Bank A/c Dr 7200
Share Forfeiture A/c Dr 800
To Share Capital A/c 800
(Forfeited shares reissued @ Rs.9 per share) 2000
Share Forfeiture A/c Dr 2000
To Capital Reserve A/c
(Balance of reissued shares

are transferred to
capital reserve account)
Prince Limited
Balance Sheet
Particular Note No. Amount (Rs.)
I. Equity and Liabilities
1. Shareholders’ Fund
a. Share Capital 1 1998000
b. Reserve and Surplus 2 601600
2. Non-Current

Liabilities
3. Current Liabilities
Total 2599600
II. Assets 3 2599600
1. Non-Current Assets
2. Current Assets
a. Cash and Cash

Equivalents
Total 2599600

NOTES TO ACCOUNTS

Note No. Particulars Amount (Rs.)
1 Share Capital –
Authorised Share Capital ………….

shares of Rs.10 each
Issued Share Capital 200000 shares of Rs.10 each 2000000
Subscribed, Called-up and Paid-up Share Capital 19198000

601600
199800 shares of Rs.10 each
2 Reserve and Surplus
Securities Premium 5980800

2800
Capital Reserve
 

3

 Cash and Cash Equivalents
Cash at Bank 2599600

Working Note:

1. Number of shares applied by Mohit = (Total number of applied shares/Total number of allotted shares) x Number of shares allotted = (300000/200000) x 400 = 600 shares

Money received on application (600 x 2) 1200
Less: Utilised on application (400 x 2) -800
Excess amount received 400
Amount due on allotment (400 x 5) 2000
Less: Excess amount received -400
Amount due on allotment 1600

2. Amount to be transferred to capital reserve

Amount forfeited on Mohit’s 400 shares 1200
Amount forfeited on

Joly’s 600 shares

 2400
Amount forfeited on Joly’s 400

shares {(2400/600) x 400}

 1600
Less: Discount allowed on 800 shares reissued 2800
-800
Amount to be transferred to capital reserve 2000

Question 35

Life machine tools Limited, issued 50,000 equity shares of Rs 10 each at Rs 12 per share, payable at to Rs 5 on application (including premium), Rs 4 on allotment and the balance on the first and final call.

Applications for 70,000 shares had been received. Of the cash received, Rs 40,000 was returned and Rs 60,000 was applied to the amount due on allotment, the balance of which was paid. All shareholders paid the call due, with the exception of one shareholder of 500 shares. These shares were forfeited and reissued as fully paid at Rs 8 per share. Journalise the transactions.

Answer:

Books of Life Machine Tools Ltd.

Date Particular L.F. Debit Amount

Rs.

 Credit Amount

Rs.
Bank A/c Dr 350000
To Share Application A/c 350000
(Share application money

received for 70000
Shares @ 5 per share including premium Rs.2)
Share Application A/c Dr 350000
To Share Capital A/c 150000
To Securities Premium A/c 100000
To Share Allotment A/c 60000
To Bank A/c 40000
(Share application money

for 50000 shares
transferred to share capital

account and securities
premium Rs.60000

adjusted to allotment and
Rs.40000 returned)
Share Allotment A/c Dr 200000
To Share Capital A/c 200000
(Share allotment money

due @ Rs.4 per share
on 50000 shares)
To Share Allotment A/c 140000
(Share allotment money received for all the share) 150000

148500

1500

3500
Share First and Final Call A/c Dr 150000
To Share Capital A/c
(Share first and final call

money due on 50000
shares @ Rs.3 per share)
Bank A/c Dr
To Share First and Final

Call A/c

 148500
(Share first and final call

money received for
49500 shares @ Rs.3 per

share and 500 shares
failed to pay)
Share Capital A/c Dr (500 x 10) 5000
To First and Final Call A/c

(500 x 3)
To Share Forfeiture A/c

(500 x 7)
(500 shares of Rs.10 per

share fully paid-up
forfeited for non-payment

of first and final call
Rs.3 per share)
Bank A/c Dr 4000
Share Forfeiture A/c Dr 1000
To Share Capital A/c 5000
(500 shares @ Rs.10 each

for Rs.8 per share
fully paid-up, reissued)
Share Forfeiture A/c Dr 2500
To Capital Reserve A/c 2500
(Balance of 500 reissued

shares are transfer to
capital reserve account)

Question 36

The Orient Company Limited offered for public subscription 20,000 equity shares of Rs 10 each at a premium of 10% payable at Rs 2 on application; Rs 4 on allotment including premium; Rs 3 on First Call and Rs 2 on Second and Final call. Applications for 26,000 shares were received. Applications for 4,000 shares were rejected. Pro-rata allotment was made to the remaining applicants. Both the calls were made and all the money were received except the final call on 500 shares which were forfeited. 300 of the forfeited shares were later on issued as fully paid at Rs 9 per share. Give journal entries and prepare the balance sheet.

Answer:

Books of Orient Company Ltd.

Date Particular L.F. Debit

Amount Rs.

 Credit

Amount Rs.
Bank A/c Dr 52000
To Share Application A/c 52000
(Share application money

received for 26000
shares @ 2 per share)
Share Application A/c Dr 52000
To Share Capital A/c 40000
To Share Allotment A/c 4000
To Bank A/c 8000
(Share application @ Rs.2 per

share for 20000
shares transferred to share

capital and remaining
for 4000 shares returned)
Share Allotment A/c Dr 80000
To Share Capital A/c 60000
To Securities Premium A/c 20000
(Share allotment money due @

Rs.4 per share
including Re.1 securities

premium, on 20000
Bank A/c Dr 76000 76000

60000

60000

40000

39000
To Share Allotment A/c
(Share allotment money

received for all the share
after adjustment of money

transferred from
share application)
Share First Call A/c Dr 60000
To Share Capital A/c
(Share first call money due on

20000 shares @
Rs.3 per share)
Bank A/c Dr 60000
To Share First Call A/c
(Share first call money

received for 20000
shares @ Rs.3 per share)
Share Second and Final Call A/c Dr 40000
To Share Capital A/c
(Share second and final call

money due on 20000
shares @ Rs.2 per share)
Bank A/c Dr 39000
To Share Second and Final

Call A/c
(Share second and final call money received for
19500 shares @ Rs.2 per share

except 500 shares)
Share Capital A/c Dr 5000
To Second and Final Call A/c 1000
To Share Forfeiture A/c 4000
(500 shares of Rs.10 per share

fully called-up
forfeited for non-payment of

second and final call
Rs.2 per share)
Bank A/c Dr 2700
Share Forfeiture A/c Dr 300
To Share Capital A/c 3000
(300 shares @ Rs.10 each for

Rs.9 per share
reissued)
Share Forfeiture A/c Dr 2100
To Capital Reserve A/c 2100
(Balance of 300 reissued

shares are transfer to
capital reserve account)

Oriented Company Limited Balance Sheet

Particular Note No. Amount (Rs.)
I. Equity and Liabilities
1. Shareholders’ Fund
a. Share Capital 1 199600
b. Reserve and Surplus 2 22100
2. Non-Current Liabilities
3. Current Liabilities
Total 221700
II. Assets 3 221700
1. Non-Current Assets
2. Current Assets
a. Cash and Cash

Equivalents
Total 221700

NOTES TO ACCOUNTS

Note No. Particulars Amount (Rs.)
1 Share Capital –
Authorised Share Capital ………….

shares of Rs.10 each
Issued Share Capital 20000 shares of Rs.10 each 200000
Subscribed, Called-up and Paid-up Share Capital
19800 shares of Rs.10

each

 198000
Add: Shares Forfeiture 1600 199600
2 Reserve and Surplus
Securities Premium 20000
Capital Reserve 2100 22100
3 Cash and Cash Equivalents
Cash at Bank 221700

Working Note:

Share Forfeiture Account credited Rs.8 per share
Less: Share Forfeiture Account debited Rs.1 per share
Amount transferred to Capital Reserve Account, after adjustment Rs.7 per share

Amount transferred to Capital Reserve Account, after adjustment for 300 shares = 300 shares @ Rs.7 per share = Rs.2100

Question 37

Alfa Limited invited applications for 4,00,000 of its equity shares of Rs 10 each on the following terms:

Payable on application Rs 5 per share
Payable on allotment Rs 3 per share
Payable on first and final call Rs 2 per share

Applications for 5,00,000 shares were received. It was decided:

(a) to refuse allotment to the applicants for 20,000 shares.

(b) to allot in full to applicants for 80,000 shares.

(c) to allot the balance of the available shares’ pro-rata among the other applicants, and

(d) to utilise excess application money in part as payment of allotment money.

One applicant, whose shares had been allotted on pro- rata basis, did not pay the amount due on allotment and on the call, and his 400 shares were forfeited. The shares were reissued @ Rs 9 per share. Show the journal and prepare a Cash book to record the above.

Answer:

In the books of Alfa Limited

Date Particular L.F. Debit

Amount Rs.

 Credit

Amount Rs.
Share Application A/c Dr 2400000
To Share Capital A/c 2000000
To Share Allotment A/c 400000
(Share application money adjusted)
Share Allotment A/c Dr 1200000
To Share Capital A/c 1200000
(Share allotment money due) 800000 800000
Share First and Final Call A/c Dr
To Share Capital A/c
(Share first and final call

due)

Working Note:

1.Number of Share Applied by Applicant = (Total number of Applied Shares/Total number of Allotted Shares) x Number of Shares Allotted = (400000/320000) x 400 = 500 shares

2.Call in arrears by applicant on allotment

Money received on Application (500 x 5) 2500
Less: Amount adjusted on Application (400 x 5) 2000
Amount adjusted on Allotment 500

3.​

Money due on Allotment (400 x 3) 1200
Less: Money adjusted 500
Balance due on Allotment 700
Date Particular L.F. Debit Amount

Rs.

 Credit Amount

Rs.
Share Capital A/c Dr 4000
To Share Allotment A/c 700
To Share First and Final

Call A/c

 800
To Share Forfeiture A/c 2500
(400 shares forfeited)
Share Forfeiture A/c Dr 400
To Share Capital A/c 400
(Share reissued and loss

on issue charged from
share forfeiture account)
Share Forfeiture A/c Dr 2100
To Capital Reserve A/c 2100
(Share forfeiture account

transferred to capital
reserve account)

Cash Book (Bank Column)

Date Particular J. F Amount Date Particular J. F Amount
2500000 Share

Application

 10000

0
Share
Application
Share 79930

0

 Balance

c/d

 40021

00
Allotment
Share First and Final

Call

 79920

0
Share Capital 3600
41021

00

 41021

00

Question 38

Ashoka Limited Company which had issued equity shares of Rs 20 each at a discount of Rs 4 per share, forfeited 1,000 shares for non-payment of final call of Rs 4 per share. 400 of the forfeited shares are reissued at Rs 14 per share out of the remaining shares of 200 shares reissued at Rs 20 per share. Give journal entries for the forfeiture and reissue of shares and show the amount transferred to capital reserve and the balance in Share Forfeiture Account.

Answer:

Books of Ashoka Ltd.

Date Particular L.F Debit

Amount Rs.

 Credit

Amount Rs.
Share Capital A/c Dr 20000
To Final Call A/c 4000
To Share Discount A/c 4000
To Share Forfeiture A/c 12000
(1000 shares of 20 per

share final call money @
Rs.4 per share)
Bank A/c Dr (400 x 14) 5600
Discount on Issue of

Shares A/c Dr (400 x 4)

 1600
Share Forfeiture A/c Dr

(400 x 2)

 800
To Share Capital A/c 8000
(400 shares @ Rs.20 per

share reissued for
Rs.14 per share fully paid-

up)
Bank A/c Dr 4000
To Share Capital A/c 4000
(200 shares @ 20 per share

reissued for Rs.20
per share fully paid-up)
Share Forfeiture A/c Dr 6400
To Capital Reserve A/c 6400
(Balance of 600 shares in

share forfeiture
account transferred to

capital reserve account,
after reissue)

Balance in Share Forfeiture Account (12000 – 800 – 6400)

= Rs.4800

Working Note:

For 400 Shares

Share Forfeiture Account credited Rs.12 per share
Less: Share Forfeiture

Account debited

Amount transferred to Capital Reserve Account, after adjustment

 Rs.2 per share
Rs.10 per share

Amount of 400 shares transferred to Capital Reserve Account, after reissue = 400 shares @ Rs.10 per share = Rs.4000

For 200 Shares

Share Forfeiture Account credited Rs.12 per share
Less: Share Forfeiture Account debited Nil
Amount transferred to Capital Reserve Account, after Rs.12 per share
adjustment

Amount of 200 shares transferred to Capital Reserve Account, after reissue = 200 shares @ Rs.12 per share = Rs.2400

Total amount transferred to Capital Reserve Account for 600 shares = Capital Reserve for 200 shares + Capital Reserve for 200 shares = 4000 + 2400 = Rs.6400

Question 39

Amit holds 100 shares of Rs 10 each on which he has paid Re.1 per share as application money. Bimal holds 200 shares of Rs 10 each on which he has paid Re.1 and Rs 2 per share as application and allotment money, respectively. Chetan holds 300 shares of Rs 10 each and has paid Re.1 on application, Rs 2 on allotment and Rs 3 for the first call. They all fail to pay their arrears and the second call of Rs 2 per share and the directors, therefore, forfeited their shares. The shares are reissued subsequently for Rs 11 per share as fully paid. Journalise the transactions.

Answer:

Date Particular L.F. Debit Amount Rs. Credit Amount Rs.
Share Capital A/c Dr (600 x 8) 4800
To Share Allotment A/c

(100 x 2)

 200
To Share First Call A/c

(300 x 3)

 900
To Share Second Call A/c

(600 x 2)

 1200
To Share Forfeiture A/c 2500
(600 shares @ Rs.10 per

share Rs.8 called-up
forfeited after making second call)
Bank A/c Dr 6600
To Share Capital A/c 6000
To Securities Premium A/c 600
(600 shares @ Rs.10 each

for Rs.11 per share
fully paid-up reissued)
Share Forfeiture A/c Dr 2500
To Capital Reserve A/c 2500
(Balance of share forfeiture

account transferred
to capital reserve account

after reissue)

Working Note:

Share Forfeiture Account credited
Amit (100 x 1) = 100
Bimal (200 x 3) = 600
Chetan (300 x 6) = 1800
2500

Question 40

Ajanta Company Limited having a normal capital of Rs 3,00,000, divided into shares of Rs 10 each offered for public subscription of 20,000 shares payable at Rs 2 on application. Rs 3 on allotment and the balance in two calls of Rs 2.50 each. Applications were received by the company for 24,000 shares. Applications for 20,000 shares were accepted in full and the shares allotted.

Applications for the remaining shares were rejected and the application money was refunded.

All monies due were received with the exception of the final call on 600 shares which were forfeited after legal formalities were fulfilled. 400 shares of the forfeited shares were reissued at Rs 9 per share.

Record necessary journal entries and prepare the balance Sheet showing the amount transferred to capital reserve and the balance in Share forfeiture account.

Answer:

Books of Ajanta Company Ltd

Date Particular L.F. Debit

Amount Rs.

 Credit

Amount Rs.
Bank A/c Dr 48000
To Share Application A/c 48000
(Share application money

received for 24000
shares @ 2 per share)
Share Application A/c Dr 48000
To Share Capital A/c 40000
(Share application @ Rs.2 per share for 20000 8000
shares transferred to share

capital and remaining

 60000

60000

50000

50000

50000

50000

1500

4500

40000
for 4000 shares rejected)
Share Allotment A/c Dr 60000
To Share Capital A/c
(Share allotment money due

@ Rs.3 per share
on 20000 shares)
Bank A/c Dr 60000
To Share Allotment A/c
(Share allotment money

received for 20000
shares @ Rs.3 per share)
Share First Call A/c Dr 50000
To Share Capital A/c
(Share first call money due

on 20000 shares @
Rs.2.5 per share)
Bank A/c Dr 50000
To Share First Call A/c
(Share first call money

received for 20000
Share Final Call A/c Dr 50000
To Share Capital A/c
(Share final call money due

on 20000 @ Rs.2.5
per share)
Bank A/c Dr 48500
Call in Arrears A/c Dr 1500
To Share Final Call A/c
(Share final call money

received for 19400
shares @ Rs.2.5 per share except 600 shares)
Share Capital A/c Dr 6000
To Calls in Arrears A/c
To Share Forfeiture A/c
(600 shares forfeited @

Rs.10 each for the non
payment of share final call @ Rs.2.5 per share)
Bank A/c Dr 3600
Share Forfeiture A/c Dr 400
To Share Capital A/c
(400 shares @ Rs.10 each

for Rs.9 per share
reissued)
Share Forfeiture A/c Dr 2600
To Capital Reserve A/c 2600
(Balance of 400 reissued

shares are transfer to
capital reserve account)
Ajanta Company Limited
Balance Sheet
Particular Note No. Amount (Rs.)
I. Equity and Liabilities
1. Shareholders Fund
a. Share Capital 1 199500
b. Reserve and Surplus 2 2600
2. Non-Current Liabilities
3. Current Liabilities
Total 202100
II. Assets 3 202100
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents
Total 202100

NOTES TO ACCOUNTS

Note No. Particulars Amount (Rs.)
1 Share Capital 300000
Authorised Share Capital 30000 shares of Rs.10 each
Issued Share Capital 20000 shares of Rs.10 each 200000
Subscribed, Called-up and Paid-up Share Capital 199500
19800 shares of Rs.10 each 198000
Add: Shares Forfeiture 1500
2 Reserve and Surplus
Capital Reserve 2600
3 Cash and Cash Equivalents
Cash at Bank 202100

Working Note:

Share Forfeiture Account credited Rs.7.5 per share
Less: Share Forfeiture Account debited Rs.1 per share
Amount transferred to Capital Reserve Account, after adjustment Rs.6.5 per share

Question 41

Journalise the following transaction in the books Bhushan Oil Ltd:

(a) 200 shares of Rs 100 each issued at a discount of Rs 10 were forfeited for the non payment of allotment money of Rs 50 per share. The first and final call of Rs 20 per share on these shares were not made. The forfeited shares were reissued at Rs 70 per share as fully paid-up.

(b) 150 shares of Rs 10 each issued at a premium of Rs 4 per share payable with allotment were forfeited for non- payment of allotment money of Rs 8 per share including premium. The first and final call of Rs 4 per share were not made. The forfeited shares were reissued at Rs 15 per share fully paid-up.

(c) 400 shares of Rs 50 each issued at par were forfeited for non-payment of final call of Rs 10 per share. These shares were reissued at Rs 45 per share fully paid-up.

Answer:

Case (a)

Books of Bhushan Oil Ltd.

Date Particular L.F. Debit

Amount Rs.

 Credit

Amount Rs.
Share Capital A/c Dr 16000
To Share Allotment A/c 10000
To Share Forfeiture A/c 4000
To Discount on Issue of

Shares A/c

 2000
(200 shares forfeited @

Rs.100 each issued at
a discount of Rs.10 for the

non-payment of
allotment money Rs.50 per

share)
Bank A/c Dr 14000
Discount on Issue of

Shares A/c Dr

 2000
Share Forfeited A/c Dr 4000
To Share Capital A/c 20000
(200 shares reissued @

Rs.70 per share fully
paid-up)

Case (b)

Date Particular L.F. Debit Amount Rs. Credit Amount Rs.
Share Capital A/c Dr 900
Securities Premium A/c Dr 600
To Share Allotment A/c 1200
To Share Forfeiture A/c 300
(150 shares @ Rs.10 each forfeited for non
payment of allotment

money Rs.8 per share
including premium Rs.4)
Bank A/c Dr 2250
To Share Capital A/c 1500
To Securities Premium A/c 750
(150 shares @ Rs.10 each

reissued for Rs.15
per share fully paid-up)
Share Forfeiture A/c Dr 300
To Capital Reserve A/c 300
(Balance of share forfeiture

account transferred
to capital reserve account)

Case (c)

Date Particular L.F. Debit Amount

Rs.

 Credit Amount

Rs.
Share Capital A/c Dr 20000
To Share Final Call A/c 4000
To Share Forfeiture A/c 16000
(400 shares @ Rs.50 per

share forfeited for
Non-payment of final call Rs.10 per share)
Bank A/c Dr 18000
Share Forfeiture A/c 2000
To Share Capital A/c 20000
(400 shares @ Rs.50 each

reissued for Rs.45
fully paid-up)
Share Forfeiture A/c Dr 14000
To Capital Reserve A/c 14000
(Balance in share forfeiture

account transferred
to capital reserve account)

Question 42

Amisha Ltd invited applications for 40,000 shares of Rs 100 each at a premium of Rs 20 per share payable; on application Rs 40 ; on allotment Rs 40 (Including premium): on first call Rs 25 and Second and final call Rs 15.

Applications were received for 50,000 shares and allotment was made on a pro-rata basis. Excess money on application was adjusted on sums due on allotment.

Rohit to whom 600 shares were allotted failed to pay the allotment money and his shares were forfeited after allotment. Ashmita, who applied for 1,000 shares failed to pay the two calls and his shares were forfeited after the second call. Of the shares forfeited, 1,200 shares were sold to Kapil for Rs 85 per share as fully paid, the whole of Rohit’s shares being included.

Record necessary journal entries.

Answer:

Books of Amisha Ltd.

Date Particular L.F. Debit Amount Rs. Credit Amount Rs.
Bank A/c Dr 2000000
To Share Application A/c 2000000
(Share application money

received on 50,000
shares @ 40 per share)
Share Application A/c Dr 2000000
To Share Capital A/c 1600000
To Share Allotment A/c 400000
(Share application money adjusted)
Share Allotment A/c Dr 1600000
To Share Capital A/c 800000
To Share Premium A/c 800000
(Share allotment money due including premium)
Bank A/c Dr 1182000
(Share allotment money received except 600 1182000

18000

30000

985000

965000

591000
shares)
Share Capital A/c Dr 36000
Share Premium A/c Dr 12000
To Share Allotment A/c
To Share Forfeiture A/c
(600 shares forfeited after allotment)
Share First Call A/c Dr 985000
To Share Capital A/c
(First call money in due on 39400 shares)
Bank A/c Dr 965000
To Share First Call A/c
(First call money received except 800 shares)
Share Second and Final Call A/c Dr 591000
To Share Capital A/c
(Second and final call

money due on 39400
shares)
Bank A/c Dr 579000
To Share Second and Final Call A/c 579000
(Second and final call

money received except
800 shares)
Share Capital A/c Dr 80000
To Share First Call A/c 20000
To Share Second and Final

Call A/c

 12000
To Share Forfeiture A/c 48000
(800 shares forfeited)
Bank A/c Dr 102000
Share Forfeiture A/c Dr 18000
To Share Capital A/c 120000
(Forfeited shares reissued

1200 @ 85 per share)
Share Forfeiture A/c Dr 48000
To Capital Reserve A/c 48000
(Profit on 1200 reissued

shares are transfer to
capital reserve account)
Date Particular J.F Amount Date Particular J.F Amount
Share Application 2000000 Balance c/d 4828000
Share Allotment 1182000
Share

First Call

 965000
Share

Final Call

 579000
Share

Capital

 102000
4828000 4828000

Working Note:

1. Number of Share Applied by Rohit = (Total number of Applied Shares/Total number of Allotted Shares) x Number of Allotted Shares = (50000/40000) x 600 = 750 shares

2. Call in arrears by Rohit on allotment

Money received on application (750 x 40) = 30000
Less: Amount adjusted on application (600 x 40) = 24000
Amount adjusted on Allotment = 6000

3.

Money due on allotment (600 x 40) = 24000
Money adjusted = 6000
Balance due on allotment = 18000

4. Number of shares allotted to Ashmita = (Total number of Allotted Shares/Total number of Applied Shares) x Number of Applied Shares = (40000/50000) x 1000 = 800 shares

5. Profit on the forfeiture of 600 shares of Rohit = Rs.30000 Profit on the forfeiture of 600 shares of Ashmita = 48000 x (600/800) = Rs.36000

Profit on forfeiture of 1200 shares (30000 + 36000) = 66000
Less: Loss on reissue of shares = 18000
Transfer to Capital Reserve = 48000

6. Balance in Share Forfeiture Account = 48000 – 36000 = Rs.12000

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