Balbharati solutions for Book-keeping and Accountancy 12th Standard HSC Maharashtra State Board Chapter 8 - Company Accounts - Issue of Shares [Latest edition]
Select the appropriate answer from the alternative given below and rewrite the sentence.
The balance of Share Forfeiture A/c is transferred to ______________ account after re-issue of these shares.
Reserve Capital
Capital Reserve
Profit & Loss
Share capital
Premium received on issue of shares is shown to______________.
Liability side of Balance Sheet
Asset side of Balance Sheet
Profit & Loss Account debit side
Profit & Loss A/c credit side
Shareholders get_______________ on shares.
Interest
Commission
Rent
Dividends
The document inviting to subscribe to the shares of a company is______________
Prospectus
Memorandum of Association
Articles of Association
Share certificate
As per SEBI guidelines minimum amount payable on share application should be_______________ of Nominal Value of shares.
10%
15%
2%
5%
The liability of shareholder in Joint Stock Company is___________
Joint and Sever
Limited
Unlimited
huge
The Share Capital which a company is authorised to issue by its Memorandum of Association is__________.
Nominal capital/Authorised capital
Issued capital
Paid-up capital
Reserve capital
The unpaid amount on allotment and calls may be transferred to_____________account.
calls in advance
calls
calls in arrears
allotment
There must be provision in _____________ for forfeiture of shares.
Article of Association
Memorandum of Association
Prospectus
Balance Sheet
Give one word/term/phrase for the following statement.
Amount called-up on shares by the company but not received.
Calls-in-Arrears.
Issue of share at its face value
Issue at par.
The person who purchase the shares of a company.
Shareholder
The form of business organisation where huge amount of capital can be raised.
Joint-stock company.
The capital which is subscribed by the public.
Subscribed capital.
The shares having preferential right at the time of winding up of the company
Preference shares.
The shares on which dividend is not fixed.
Equity shares.
The part of subscribed capital which is not called-up by the company.
Uncalled capital.
State true or false with reason.
Directors can forfeit the shares for any reason.
Options
True
False
This statement is False.
After paying money on a share application, When a share applicant fails to pay the call money or premium on shares in spite of repeated reminders and warnings directors/company can forfeit the shares.
Once the application money is received, directors can immediately proceed for allotment of shares.
Options
True
False
This statement is False.
Directors can proceed for allotment of shares only after receiving the minimum subscription amount of the issued amount by cheque or other instrument complying all legal requirements.
Joint-stock company form of the business organisation came into existence after the industrial revolution.
Options
True
False
This statement is True.
As the volume and scale of trade and industry expanded, specially after the industrial revolution, a very large unit of commercial organisation requiring large capital and greater managerial skill, called Joint stock company came into existence.
Equity shareholders get a guaranteed rate of dividend every year.
Options
True
False
This statement is False.
One of the features for equity shares is the rate of dividend payable on equity shares keeps on changing from one year to another. So, there is no question of guaranteed dividend every year for equity shareholders.
Face value of shares and market value of shares is always the same.
Options
True
False
This statement is False.
Face value of shares means issue price of shares while market value of shares means trading price of shares at stock exchange. Face value of shares remains the same and fixed. However, market price changes as per the performance of the company. Hence face value and market value of shares are not the same.
Sweat shares are issued to the public.
Options
True
False
This statement is False.
Sweat shares are issued by a company to its directors or employees at a discount or for consideration other than cash. Sweat shares are not issued to public.
State whether you agree or disagree with following statement:
In case of Pro-rata allotment the excess application money received must be refunded.
Agree
Disagree
Calls in Advance account are shown on the Asset side of the Balance sheet.
Agree
Disagree
The Authorised capital is also known as Nominal Capital.
Agree
Disagree
Paid-up capital can be more than Called up Capital.
Agree
Disagree
When shares are forfeited Shares Capital Account is credited.
Agree
Disagree
Directors can reissue forfeited shares.
Agree
Disagree
When the issued price of share is ₹ 12 and face value is ₹ 10, the share is said to be issued at premium.
Agree
Disagree
Public limited company can issue its share without issuing its prospectus.
Agree
Disagree
Shares can be issued for consideration other than cash.
Agree
Disagree
Answer in one sentence only
What is Preference shares?
Preference Shares is a type of a share which enjoys priority or preference over equity share for the repayment of dividend at a predetermined fixed rate and for the repayment of capital.
What is Registered Capital?
Registered Capital or Authorised Capital means maximum limit up to which a company is authorised to raise share capital.
What is Reserve Capital?
Reserve Capital is that part of the subscribed capital which is reserved to be called-up only at the time of winding up or liquidation of the company.
What is Over subscription of shares?
When a company received more applications of shares than those actually offered or issued to the public, known as Over Subscription of Shares.
Which account is debited when share first call money is received?
Bank accounts will be debited when share first call money is received.
When are shares allotted on a pro-rata basis?
Shares are said to be allotted on a pro-rata basis when the applications are received for more shares than the number of shares issued and shares are allotted in proportion to the number of shares applied for.
What is Forfeiture of Shares?
When a shareholder fails to pay the call money or premium on the shares in spite of repeated reminders and warnings, the company forfeits the shares of such defaulters known as forfeiture of shares.
What is Calls-in-Arrears?
Non-payment of allotment or call money by the applicants in spite of repeated reminders are called Calls-in-Arrears.
What do you mean by Shares Issued at Premium?
When shareholders are supposed to pay a price higher than the face value of the shares, then shares are said to be issued at premium.
What is Paid-up Capital?
Part of the called-up capital which is actually paid by the shareholders is called Paid-up Share Capital.
Complete the following sentence.
When the face value of the share is ₹ 100 and the issued price is ₹ 120, then it is said that the shares are issued at premium.
Authorised Capital is the Capital which a company is authorised to issue by its Memorandum of Association.
The difference between Called-up Capital and Paid-up Capital is known as Calls-in-Arrears.
Preference shareholders get fixed rate of dividend.
Equity shareholders are the real owners of the company.
Joint-stock company form of business organisation in which Capital is raised through the issue of shares.
Subscribed Capital is the part of issued capital which is subscribed by the public.
The part of Authorised Capital which is not issued to the public is known as Unissued Capital.
Calculate the following.
One shareholder holding 500 equity shares paid share application money @ ₹ 3 Allotment money @ ₹ 4 per share and failed to pay final call of ₹ 3 per share, his shares were forfeited. Calculate the amount of share forfeiture.
Solution:
Amount of forfeiture = Amount received by company (In case of non-payment of ‘calls’)
Here, shareholder paid ₹ 3 per share on application and ₹ 4 per share on allotment on 500 shares. So, total amount received by company.
= 500 × ₹ 3 + 500 × ₹ 4
= 1,500 + 2,000
= ₹ 3,500.
∴ Amount of share forfeiture = ₹ 3,500.
10000 equity shares of ₹ 10 each issued at 10% premium. Calculate the total amount of share premium.
Solution:
Equity shares = 10,000
Face value = ₹ 10 per share
Premium @ 10 % = 10,000 × 10 × (10/100) = ₹ 10,000.
So, premium 10,000 shares of ₹ 10 each at 10 % = ₹ 10,000.
Company received an excess application for 5000 shares @ ₹4 per share. Applications of 1000 shares were rejected and a pro-rata allotment was made. Calculated the amount of application money adjusted with allotment.
Solution:
80000 Equity shares of ₹ 10 each issued and fully subscribed and called up at 20% premium. Calculate the amount of Equity share Capital.
Solution:
Equity Share capital = No. of equity shares × face value of each share
= 80,000 × ₹ 10
= ₹ 8,00,000
Note: Equity Share capital has no concern with premium or discount amount.
Directors issued 20000 equity shares of ₹ 100 each at par. These were fully subscribed and called up. All money received except one shareholder holding 100 equity shares failed to pay final call of ₹ 20 per share. Calculate the amount of paid-up capital of the company.
Solution:
Fully subscribed and called-up amount = 20,000 equity shares × ₹ 100 each share
= ₹ 20,00,000
But one shareholder failed to pay final call of ₹ 20 per share of 100 equity shares means Non-payment of shares = 100 equity shares × ₹ 20 per share
= ₹ 2,000
∴ Total Paid-up capital amount = ₹ 20,00,000 – ₹ 2,000
= ₹ 19,98,000
Company sends Regret letter for 100 shares and Allotment letter to 25000 shareholders. Application money was ₹ 20 per share. Calculate the amount of application money which company is refunding.
Solution:
Company send Regret letter for 100 shares for ₹ 20 per share application money received
i.e. only that much amount company will refund.
Amount of refund = No. of shares × Value of per share
= 100 × ₹ 20
= ₹ 2,000
PRACTICAL PROBLEM
[PAGES 341 - 342]
Balbharati solutions for Book-keeping and Accountancy 12th Standard Hsc Maharashtra State Board Chapter 8 Company Accounts - Issue of Shares Practical problem [Pages 341 - 342]
Practical problem | Q 1 | Page 341
Vijay Ltd. was registered with an authorised capital of ₹ 15,00,000 divided into 1,50,000 equity shares of ₹ 10 each. Company issued 1,00,000 equity shares of ₹ 10 each at a premium of ₹ 2 per share.
Company received applications for 80,000 equity shares and were allotted the shares.
Company received application money ₹ 3 per share, allotment money ₹ 4 per share (Including premium), and first call money ₹ 3 per share.
The Directors have not made final call of ₹ 2 per share. All money were received except one shareholder holding 500 shares did not pay first call.
Show Authorised Capital, Issued Capital, Subscribed Capital, Called-up Capital, Paid-up Capital, Calls in Arrears, and Share Premium amount in company balance sheet.
Solution:
In the books of Vijay Ltd. Balance Sheet as on ----------------------
Liabilities | Amount (₹) | Assets | Amount (₹) | |
Authorised Capital : | Cash at Bank | 7,98,500 | ||
1,50,000 equity shares of ₹10 each | 15,00,000 | |||
Issued Capital : | ||||
1,00,000 equity shares of ₹10 each | 10,00,000 | |||
Subscribed Capital : | ||||
80,000 equity shares of ₹10 each | 8,00,000 | |||
Called-up Capital : | ||||
80,000 equity shares of ₹ 8 each | 6,40,000 | |||
Paid-up Share Capital : | ||||
(80,000 equity shares at 8 per shares) | 6,40,000 | |||
Less: Calls-in-Arrears (500 shares at ₹3 per share) | 1,500 | 6,38,500 | ||
Share Premium / Securities A/c (80,000 shares at ₹2 per share) | 1,60,000 | |||
7,98,500 | 7,98,500 | |||
Working Notes :
(1) Bank balance at the end = Amount received on application + Amount received on allotment + Amount received on 1st call + Premium amount received
= 80,000 × 3 + 80,000 × 2 × 79,500 × 3 + 80,000 × 2
= 2,40,000 + 1,60,000 + 2,38,500 + 1,60,000
= ₹ 7,98,500
(2) Directors have not made final call of ₹ 2 per share means total called-up amount = ₹ 10 – ₹ 2 = ₹ 8
(3) Calls-in-Arrears → on 500 shares at ₹ 3 = ₹ 1,500 of first call
(4) Share premium on 80,000 shares @ ₹ 2 received at allotment stage i.e. share premium amount = 80,000 × ₹ 2 = ₹ 1,60,000
Practical problem | Q 2 | Page 341
Anand Company Limited issued 1,00,000 Preference shares of ? 10 each payable as -
On On Application ₹ 4
On Allotment ₹ 3
On First call ₹ 2
On Second & Final call ₹1
Company received application for all these share and received all money.
Pass Journal Entries in the books of Anand Company Ltd.
Solution:
Journal Entries in the books of Anand Company Limited
Date | Particulars | L.F | Debit Amount (₹) | Credit Amount (₹) |
1 | Bank A/c Dr. | 4,00,000 | ||
To Preference Share Application A/c | 4,00,000 | |||
( Being application money on 1,00,000 preference shares @ ₹ 4 per share received) | ||||
2 | Preference Share Application A/c Dr. | 4,00,000 | ||
To Preference Share Capital A/c | 4,00,000 | |||
( Being application money received on 1,00,000 preference share @ ₹ 4 per share transferred to Preference Share Capital Account) | ||||
3 | Preference Share Allotment A/c Dr | 3,00,000 | ||
To Preference Share Capital A/c | 3,00,000 | |||
( Being allotment money on 1,00,000 preference shares @ ₹ 3 per share due) | ||||
4 | Bank A/c Dr. | 3,00,000 | ||
To Preference Share Allotment A/c | 3,00,000 | |||
( Being allotment money on 1,00,000 preference share @ ₹ 3 per share received) | ||||
5 | Preference Share First Call A/c Dr. | 2,00,000 | ||
To Preference Share Capital A/c | 2,00,000 | |||
( Being first call money on 1,00,000 preference shares @ ₹ 2 per share due) | ||||
6 | Bank A/c Dr | 2,00,000 | ||
To Preference Share First Call A/c | 2,00,000 | |||
( Being first call money on 1,00,000 preference share @ ₹ 2 per share received) | ||||
7 | Preference Share Second & Final Call A/c Dr | 1,00,000 | ||
To Preference Share Capital A/c | 1,00,000 | |||
( Being second & final call money on 1,00,000 Preference Shares @ ₹ 1 per share due) | ||||
8 | Bank A/c Dr. | 1,00,000 | ||
To Preference Share Second & Final Call A/c | 1,00,000 | |||
( Being Second and final call money on 1,00,000 Preference Shares @ ₹ 1 per share received) | ||||
2000000 | 2000000 |
Practical problem | Q 3 | Page 341
Rohini Company Limited issued 25000 equity shares of ₹ 100 each payable as follows -
On Application ₹ 20
On Allotment ₹ 30
On First call ₹ 20
On Second & Final call ₹ 30
Applications were received for 22,000 equity shares and allotment of shares were made to them. All money was received by the company.
Pass Journal Entries in the books of Rohini Co. Ltd.
Solution:
Journal Entries in the books of Rohini Company Limited
Date | Particulars | L.F | Debit Amount (₹) | Credit Amount (₹) |
1 | Bank A/c Dr. | 4,40,000 | ||
To Equity Share Application A/c | 4,40,000 | |||
( Being equity share application money on 22,000 shares @ ₹ 20 per share received) | ||||
2 | Equity Share Application A/c Dr | 4,40,000 | ||
To Equity Share Capital A/c | 4,40,000 | |||
( Being equity share application money on 22,000 equity shares @ ₹ 20 per share transferred to Equity Share Capital Account) | ||||
3 | Equity Share Allotment A/c Dr. | 6,60,000 | ||
To Equity Share Capital A/c | 6,60,000 | |||
( Being allotment money on 22,000 equity shares @ ₹ 30 per share due) | ||||
4 | Bank A/c Dr | 6,60,000 | ||
To Equity Share Allotment A/c | 6,60,000 | |||
( Being equity share allotment money on 22,000 shares @ ₹ 30 per share received) | ||||
5 | Equity Share First Call A/c Dr. | 4,40,000 | ||
To Equity Share Capital A/c | 4,40,000 | |||
( Being equity share first call money on 22,000 shares @ ₹ 20 due) | ||||
6 | Bank A/c Dr. | 4,40,000 | ||
To Equity Share First Call A/c | 4,40,000 | |||
( Being equity share first call money on 22,000 shares @ ₹ 20 per share received) | ||||
7 | Equity Share Second & Final Call A/c Dr. | 6,60,000 | ||
To Equity Share Capital A/c | 6,60,000 | |||
( Being equity share second & final call money on 22,000 shares @ ₹ 30 due) | ||||
8 | Bank A/c Dr | 6,60,000 | ||
To Equity Share Second & Final Call A/c | 6,60,000 | |||
( Being equity share second & final call money on 22,000 shares @ ₹ 30 per share received) | ||||
4400000 | 4400000 |
Practical problem | Q 4 | Page 341
Deepak Manufacturing co. Ltd. issued a prospectus inviting applications for 1,00,000 equity shares of ₹ 10 each payable as follows
₹ 2 on Application
₹ 4 on Allotment
₹ 2 on first call
₹ 2 on final call
Applications were received for 1,20,000 equity shares. The Directors decided to reject excess applications and refunded application money on that. Company received all the money.
Pass Journal Entries in the books of a company.
Solution:
Journal Entries in the books of Deepak Manufacturing Co. Ltd.
Date | Particulars | L.F | Debit Amount (₹) | Credit Amount (₹) |
1 | Bank A/c Dr. | 2,40,000 | ||
To Equity Share Application A/c | 2,40,000 | |||
( Being equity share application money on 1,20,000 shares @ ₹ 2 per share received) | ||||
2 | Equity Share Application A/c Dr. | 2,00,000 | ||
To Equity Share Capital A/c | 2,00,000 | |||
( Being application money on 1,00,000 shares transferred to equity share capital account) | ||||
3 | Equity share Application A/c Dr. | 40,000 | ||
To Bank A/c | 40,000 | |||
( Being application money on excess 20,000 shares @ ₹2 per share refunded) | ||||
4 | Equity Share Allotment A/c Dr | 4,00,000 | ||
To Equity Share Capital A/c | 4,00,000 | |||
( Being equity share allotment money on 1,00,000 shares @ ₹4 per share due) | ||||
5 | Bank A/c Dr. | 4,00,000 | ||
To Equity Share Allotment A/c | 4,00,000 | |||
( Being allotment money on 1,00,000 shares @ ₹4 per share received) | ||||
6 | Equity Share First Call A/c Dr. | 2,00,000 | ||
To Equity Share Capital A/c | 2,00,000 | |||
( Being equity share first call money on 1,00,000 shares @ ₹2 per share due) | ||||
7 | Bank A/c Dr. | 2,00,000 | ||
To Equity Share First Call A/c | 2,00,000 | |||
( Being equity first call money on 1,00,000 shares @ ₹2 per share received) | ||||
8 | Equity Share Final Call A/c Dr. | 2,00,000 | ||
To Equity Share Capital A/c | 2,00,000 | |||
( Being equity share final call money on 1,00,000 shares @ ₹2 per share due) | ||||
9 | Bank A/c Dr. | 2,00,000 | ||
To Equity Share Final Call A/c | 2,00,000 | |||
( Being equity share final call money on 1,00,000 shares @ ₹ 2 per share received) | ||||
2080000 | 2080000 |
Practical problem | Q 5 | Page 342
Sucheta Company Limited issued ₹ 20,00,000 new capital divided into ₹ 100 equity shares at a Premium of ₹ 20 per share payable as ₹ 10 on Application ₹ 40 on Allotment and ₹ 10 premium ₹ 50 on Final call and ₹ 10 premium.
The issue was oversubscribed to the extent of 26000 equity shares. The applicants on 2000 shares were sent letter of regret and their application money was refunded. Remaining applicants were allotted shares on a pro-rata basis. All the money due on Allotment and Final call was duly received.
Make necessary Journal entries in the books of Sucheta Company Ltd.
Solution:
Journal Entries in the books of Sucheta Company Limited
Date | Particulars | L.F | Debit Amount (₹) | Credit Amount (₹) |
1 | Bank A/c Dr. | 2,60,000 | ||
To Equity Share Application A/c | 2,60,000 | |||
( Being application money on 26,000 equity shares @ ₹ 10 per share received) | ||||
2 | Equity Share Application A/c Dr. | 20,000 | ||
To Bank A/c | 20,000 | |||
( Being application money on 2,000 equity shares @ ₹ 10 per share refunded) | ||||
3 | Equity Share Application A/c Dr. | 2,40,000 | ||
To Equity Share Capital A/c | 2,00,000 | |||
To Equity Share Allotment A/c | 40,000 | |||
( Being application money on 20,000 equity shares transferred to equity share capital and application money on 2,000 equity shares adjusted against Share Allotment A/c) | ||||
4 | Equity Share Allotment A/c Dr. | 10,00,000 | ||
To Equity Share Capital A/c | 8,00,000 | |||
To Share Premium A/c | 2,00,000 | |||
( Being allotment money (including premium) on 20,000 equity shares @ ₹ 50 per share due) | ||||
5 | Bank A/c Dr. | 9,60,000 | ||
To Equity Share Allotment A/c | 9,60,000 | |||
( Being allotment money on 20,000 equity shares, after adjusting excess application money received) | ||||
6 | Equity Share Final Call A/c Dr. | 12,00,000 | ||
To Equity Share Capital A/c | 10,00,000 | |||
To Share Premium A/c | 2,00,000 | |||
( Being share final call money (including premium) on 20,000 equity shares @ ₹ 60 per share due) | ||||
7 | Bank A/c Dr | 12,00,000 | ||
To Equity Share Final Call A/c | 12,00,000 | |||
( Being share final call money on 20,000 equity shares @ ₹ 60 per share received) | ||||
4880000 | 4880000 |
Working Note :
Calculation of Application money transferred to Share Allotment :
Application money received (26,000 × 10) : | 2,60,000 |
Less: Application money refunded (2,000 × 10) : | 20,000 |
2,40,000 | |
Less: Application money transferred to Share Capital : (20,000 × 10) | 2,00,000 |
Excess money received on application transferred to Share Allotment: | 40,000 |
Bifurcation of calls amount :
Per-share value ₹ 100 Premium amount ₹ 20 | On Application: ₹ 10 per share |
On Allotment: ₹ 40 per share for Capital + ₹ 10 per share for Premium | |
On final call: ₹ 50 per share for Capital + ₹ 10 per share for Premium |
Practical problem | Q 6 | Page 342
Suhas Limited issued 10000 equity shares of ₹ 10 each at a premium of ₹ 2 per share payable ₹ 3 on application, ₹ 5 (including premium) on allotment and the balance in two calls of equal amount. Applications were received for ll,000 equity shares and pro-rata allotment was made for all the applicants. The excess application money was adjusted towards allotment. Mrs. Shobha who were allotted 200 equity shares failed to pay F/F/C and her shares were forfeited after the final call
Show Journal entries in the books of Suhas Ltd. and also show its presentation in Balance sheet.
Solution:
Journal Entries in the books of Suhas Limited
Date | Particulars | L.F | Debit Amount (₹) | Credit Amount (₹) |
1 | Bank A/c Dr | 33,000 | ||
To Equity Share Application A/c | 33,000 | |||
( Being application money on 11,000 equity shares @ ₹ 3 per share received) | ||||
2 | Equity Share Application A/c Dr. | 33,000 | ||
To Equity Share Capital A/c | 30,000 | |||
To Equity Share Allotment A/c | 3,000 | |||
( Being application money on 10,000 shares transferred to Share Capital A/c and remaining amount adjusted against allotment) | ||||
3 | Equity Share Allotment A/c Dr | 50,000 | ||
To Equity Share Capital A/c | 30,000 | |||
To Share Premium A/c | 20,000 | |||
( Being allotment money on 10,000 equity shares @ ₹ 5 per share, including premium of ₹ 2 per share, due) | ||||
4 | Bank A/c Dr | 47,000 | ||
To Equity Share Allotment A/c | 47,000 | |||
( Being share allotment money received after adjusting excess application money received) | ||||
5 | Equity Share First Call A/c Dr | 20,000 | ||
To Equity Share Capital A/c | 20,000 | |||
( Being equity share first call money on 10,000 shares @ ₹ 2 per share due) | ||||
6 | Bank A/c Dr. | 19,600 | ||
To Equity Share First Call A/c | 19,600 | |||
( Being share first call money received @ ₹ 2 per share except 200 shares of Mrs Shobha) | ||||
7 | Equity Share Final Call A/c Dr. | 20,000 | ||
To Equity Share Capital A/c | 20,000 | |||
( Being equity share final call money on 10,000 shares @ ₹ 2 per share due) | ||||
8 | Bank A/c Dr. | 19,600 | ||
To Equity Share Final Call A/c | 19,600 | |||
( Being share final call money received @ ₹ 2 per share except 200 shares of Mrs. Shobha) | ||||
9 | Equity Share Capital A/c Dr | 2,000 | ||
To Equity Share First Call A/c | 400 | |||
To Equity Share Final Call A/c | 400 | |||
To Equity Share Forfeiture A/c | 1,200 | |||
( Being 200 shares of Mrs. Shobha forfeited due to non-payment of first and final call @ ₹ 2 each i.e. paid amount ₹ 6 per share forfeited by company) | ||||
244200 | 244200 |
Balance Sheet of Suhas Limited
Liabilities | Amount (₹) | Assets | Amount (₹) |
Share Capital | 98,000 | Bank | 1,19,200 |
Share Premium | 20,000 | ||
Share forfeiture | 1,200 | ||
1,19,200 | 1,19,200 |
Working Notes :
(1) Excess amount received at the time of application ₹ 3,000 adjusted at allotment stage, so allotment amount received in bank is ₹ 47,000.
(2) Amount called-up per share: ₹ 3 on application, ₹ 5 (including premium) on allotment i.e. ₹ 2 premium + ₹ 3 capital and balance amount ₹ 4 in two calls of equal amount i.e. ₹ 2 on first call and ₹ 2 on final call.
(3) Mrs Shobha was not able to pay F / F / C i.e. first and final call means 200 × ₹ 2 first call money = ₹ 400 and 200 × ₹ 2 final call money = ₹ 400. Mrs Shobha paid ₹ 6 per share towards capital which company received and company has right to forfeit only paid amount means company forfeited ₹ 1,200 of Mrs Shobha.
Practical problem | Q 7 | Page 342
Subhash Company Limited issues 2000 Equity shares of ₹100 each payable as ₹ 30 on application, ₹ 30 on allotment, ₹ 40 on first and final call. All the shares were subscribed and duly allotted. Company made all the calls. All cash was duly received except the first & final call on 100 equity shares. These shares were forfeited by the company and were re-issued as fully paid for ₹75 per share.
Show the Journal entries in the books of Subhash Company Ltd.
Solution:
Journal Entries in the books of Anand Company Limited
Date | Particulars | L.F | Debit Amount (₹) | Credit Amount (₹) |
1 | Bank A/c Dr. | 60,000 | ||
To Equity Share Application A/c | 60,000 | |||
(Being application money on 2,000 equity shares @ ₹ 30 per share received) | ||||
2 | Equity Share Application A/c Dr | 60,000 | ||
To Equity Share Capital A/c | 60,000 | |||
(Being application money received on 2,000 equity shares transferred to equity share capital) | ||||
3 | Equity Share Allotment A/c Dr. | 60,000 | ||
To Equity Share Capital A/c | 60,000 | |||
(Being equity share allotment money on 2,000 shares @ ₹ 30 per share due) | ||||
4 | Bank A/c Dr | 60,000 | ||
To Equity Share Allotment A/c | 60,000 | |||
(Being equity share allotment money on 2,000 shares @ ₹ 30 per share received) | ||||
5 | Equity Share First and Final Calls A/c Dr. | 80,000 | ||
To Equity Share Capital A/c | 80,000 | |||
(Being equity share first and final call money on 2,000 shares @ ₹ 40 per share due) | ||||
6 | Bank A/c Dr. | 76,000 | ||
To Equity Share First and Final Call A/c | 76,000 | |||
(Being equity share first and final call money on 1900 shares @ ₹ 40 per share received) | ||||
7 | Equity Share Capital A/c Dr. | 10,000 | ||
To Equity Share First and Final Call A/c | 4,000 | |||
To Equity Share Forfeiture A/c | 6,000 | |||
( Being forfeiture of 100 shares due to non-payment of first and final call) | ||||
8 | Bank A/c Dr | 7,500 | ||
Equity Share Forfeiture A/c Dr | 2,500 | |||
To Equity Share Capital A/c | 10,000 | |||
(Being re-issue of 100 forfeited shares @ ₹ 75 per share) | ||||
9 | Equity Share Forfeiture A/c Dr | 3,500 | ||
To Capital Reserve A/c | 3,500 | |||
(Being balance of Share Forfeiture A/c transferred to Capital Reserve A/c) | ||||
419500 | 419500 |
Working Notes :
(1) Amount forfeited by the company on 100 shares forfeited = 100 × (30 + 30) = 100 × 60 = ₹ 6,000
(2) Calls-in-Arrears = 100 × 40 = ₹ 4,000.
(3) Amount received on re-issue of 100 forfeited shares = 100 × 75 = ₹ 7,500. Balance of ₹ 2,500 (i.e. loss 25 × 100) is transferred to Share Forfeiture A/c.
(4) Amount transfer from Share Forfeiture A/c to Capital Reserve is ascertained by preparing Share Forfeiture A/c.
Share Forfeiture A/c
Date | Particulars | J.F | Amount (₹ ) | Date | Particulars | J.F | Amount (₹ ) |
8 | To Equity Share Capital A/c | 2,500 | 7 | By Equity Share Capital A/c | 6,000 | ||
9 | To Capital Reserve A/c (Balancing figure) | 3,500 | |||||
6,000 | 6,000 |
Practical problem | Q 8 | Page 342
Pass Journal entries for the forfeiture and re-issue of shares in the following cases.
A) Asha Ltd. forfeited 100 equity shares of ₹ 20 each fully called up for non-payment of first call of ₹ 3 per share and final call of ₹ 5 per share. 80 shares of these were reissued at ₹ 15 per share fully paid
B) Bhakti Ltd. forfeited 100 equity shares of ₹ 10 each, ₹ 6 called-up on which the shareholder paid application and allotment of ₹ 5 per share. Of these 80 shares were re-issued as fully paid-up for 16 per share.
C) Konark Ltd. forfeited 50 shares of ₹ 10 each, ₹ 8 called-up. The shareholder failed to pay first call of ₹ 3 per share. Later on 30 shares of these were re-issued at ₹ 7 per share.
Solution:
Journal Entries [For Asha Ltd.]
Date | Particulars | L.F | Debit Amount (₹) | Credit Amount (₹) |
(A)(i) | Equity Share Capital A/c Dr. | 2,000 | ||
To Equity Share First Call A/c | 300 | |||
To Equity Share Final Call A/c | 500 | |||
To Equity Share Forfeiture A/c | 1,200 | |||
( Being forfeiture of 100 equity shares due to non-payment of first call @ ₹3 and final call @ ₹5 per share) | ||||
(ii) | Bank A/c Dr. | 1,200 | ||
Equity Share Forfeiture A/c Dr | 400 | |||
To Equity Share Capital A/c | 1,600 | |||
( Being re-issue of 80 forfeited shares @ ₹15 per share as fully paid-up) | ||||
(iii) | Equity Share Forfeiture A/c Dr. | 560 | ||
To Capital Reserve A/c | 560 | |||
( Being proportion balance of Share Forfeiture A/c transferred to Capital Reserve A/c) | ||||
4160 | 4160 |
Working Notes: For A :
(1) Out of 100 forfeited shares, 80 shares were re-issued accordingly Equity Share Capital A/c is debited and credited.
(2) To find the proportionate amount for Forfeiture A/c:
For 100 shares – share forfeiture amount = ₹ 1,200
∴ 80 shares – share forfeiture amount =? = ₹ 960
Now, out of this ₹ 960 we used ₹ 400 from Share Forfeiture A/c at the time of re-issue of shares. So, balance of Share Forfeiture A/c = ₹ 960 – ₹ 400 = ₹ 560
Journal Entries [For Bhakti Ltd.]
Date | Particulars | L.F | Debit Amount (₹ ) | Credit Amount (₹ ) |
(B)(i) | Equity Share Capital A/c (100 × ₹ 6) Dr | 600 | ||
To Calls-in-Arrears A/c | 100 | |||
To Equity Share Forteifure A/c (100 × ₹ 5) | 500 | |||
(ii) | Bank A/c (80 × ₹ 6) Dr. | 480 | ||
To Equity Share Capital A/c | 480 | |||
( Being re-issue of 80 forfeited shares @ ₹ 6 per share as fully paidup) | ||||
(iii) | Equity Share Forfeiture A/c Dr. | 400 | ||
To Capital Reserve A/c | 400 | |||
( Being proportionate balance of Share Forfeiture A/c transferred to Capital Reserve A/c) | ||||
1480 | 1480 |
Working Notes: For B :
(1) Out of 100 forfeited shares, 80 shares were re-issued accordingly Equity Share Capital A/c is debited for ₹ 600 and credited for ₹ 480.
(2) The proportionate amount debited to Forfeiture A/c :
For 100 shares – share forfeiture amount debited = ₹ 500 |
∴ 80 shares – share forfeiture amount =? = ₹ 400 |
∴ (80 x 500) / 100 = ₹ 400
Now, shares were re-issued at ₹ 16 per share which is the called-up amount.
∴ Proportionate amount for Forfeiture A/c ₹ 400 will be transferred to Capital Reserve A/c.
Journal Entries [For Konark Ltd.]
Date | Particulars | L.F | Debit Amount (₹ ) | Credit Amount (₹ ) |
(c)(i) | Equity Share Capital A/c (50 × ₹ 8) Dr | 400 | ||
To Equity Share First Call A/c (50 × ₹ 3) | 150 | |||
To Equity Share Forteifure A/c | 250 | |||
( Being forfeiture of 50 equity shares due to non-payment of first call @ ₹ 3 per share) | ||||
(ii) | Bank A/c (30 × ₹ 7) Dr. | 210 | ||
Equity Share Forfeiture A/c Dr | 30 | |||
To Equity Share Capital A/c (30 × ₹ 8) | 240 | |||
( Being re-issue of 30 forfeited shares @ ₹ 7 per share) | ||||
(iii) | Equity Share Forfeiture A/c Dr. | 120 | ||
To Capital Reserve A/c | 120 | |||
( Being proportionate balance of Share Forfeiture A/c transferred to Capital Reserve A/c) | ||||
760 | 760 |
Working Note: For C :
The proportionate amount debited to Forfeiture A/c :
For 50 shares – share forfeiture amount debited is ₹ 250 |
∴30 shares – share forfeiture amount =? = ₹ 150 |
∴ (30 x 250) / 50 = ₹ 150
Out of this ₹ 30 used for re-issue of forfeited shares.
∴ Balance of Share Forfeiture A/c = ₹ 150 – ₹ 30 = ₹ 120.
Book-keeping and Accountancy 12th Standard
HSC Maharashtra State Board. Latest Syllabus.
Chapter 1: Introduction to Partnership and Partnership Final Accounts
Chapter 2: Accounts of ‘Not for Profit’ Concerns
Chapter 3: Reconstitution of Partnership (Admission of Partner)
Chapter 4: Reconstitution of Partnership (Retirement of Partner)
Chapter 5: Reconstitution of Partnership (Death of Partner)
Chapter 6: Dissolution of Partnership Firm
Chapter 8: Company Accounts - Issue of Shares
Chapter 9: Analysis of Financial Statements
Chapter 10: Computer In Accounting
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