shareCapital25-26 - commercemine

Question 109:

Nitro Paints Ltd. invited applications for issuing 1,60,000 equity shares of ₹10 each at a premium of ₹3 per share. The amount was payable as follows:

On application	—	₹6 per share(including premium ₹1);
On allotment	—	₹3 per share(including premium ₹1); and
The balance	—	On First and Final call.

Applications for 1,80,000 shares were received .Applications for 10,000 shares were rejected and pro rata allotment was made to the remaining applicants.Over payment received on application was adjusted towards sums due on allotment . All calls were made and were duly received except allotment and final call from Aditya who was allotted 3,200 shares. His shares were forfeited . Half of the forfeited shares were reissued for ₹43,000 as fully paid-up .
Pass necessary journal entries for the above transactions in the books of Nitro Paints Ltd. (CBSE 2017)

Answer:

Journal
Date	Particulars		L.F.	Debit (₹)	Credit (₹)
	Bank A/c (1,80,000 × 6)	Dr.		10,80,000
	To Equity Share Application A/c				10,80,000
	(Application money received)

	Equity Share Application A/c	Dr.		10,80,000
	To Equity Share Capital A/c (1,60,000 × 5)				8,00,000
	To Securities Premium Reserve A/c (1,60,000 × 1)				1,60,000
	To Share Allotment A/c(10,000×6)				60,000
	To Bank A/c (10,000×6)				60,000
	(Application money transferred)

	Equity Share Allotment A/c (1,60,000 × 3)	Dr.		4,80,000
	To Equity Share Capital A/c (1,60,000 × 2)				3,20,000
	To Securities Premium Reserve A/c (1,60,000 × 1)				1,60,000
	(Allotment money due)

	Bank A/c (4,80,000 â”€ 60,000 â”€ 8,400)	Dr.		4,11,600
	To Equity Share Allotment A/c				4,11,600
	(Allotment money received)

	Equity Share First Call A/c (1,60,000 × 4)	Dr.		6,40,000
	To Equity Share Capital A/c				4,80,000
	To Securities Premium Reserve A/c				1,60,000
	(Call money due)

	Bank A/c	Dr.		6,27,200
	To Equity Share First Call A/c				6,27,200
	(Call money received)

	Equity Share Capital A/c (3,200 × 10)	Dr.		32,000
	Securities Premium Reserve A/c (3,200 × 2)	Dr.		6,400
	To Equity Share Allotment A/c				8,400
	To Equity Share First & Final Call A/c				12,800
	To Equity Share Forfeiture A/c				17,200
	(3,200 shares forfeited)

	Bank A/c	Dr.		43,000
	To Equity Share Capital A/c				16,000
	To Securities Premium A/c				27,000
	(1,600 shares re–issued)

	Equity Share Forfeiture A/c	Dr.		8,600
	To Capital Reserve A/c				8,600
	(Prof it on re-issue transferred)

Working Notes:
Shares Applied by Aditya=1,70,000/1,60,000×3,200=3,400

*Amount unpaid by Aditya on Allotment*
Application money received	20,400
Less: Transferred to Share Capital	(19,200)
Excess received on Application	1,200
Allotment money due	9,600
Less: Excess adjustment	(1,200)
*Amount unpaid by Aditya*	8,400

Question 110:

XYZ Ltd. invited applications for issuing 50,000 Equity Shares of ₹10 each . The amount was payable as:

On application	—	₹3 per share,
On allotment	—	₹4 per share,
On first and final call	—	₹3 per share.

Applications were received for 75,000 shares and pro rata allotment was made as:
Applicants for 40,000 shares were allotted 30,000 shares on pro rata basis.
Applicants for 35,000 shares were allotted 30,000 shares on pro rata basis.
Ramu, to whom 1,200 shares were allotted out of the group applying for 40,000 shares, failed to pay the allotment money. His shares were forfeited immediately after allotment .
Shamu, who had applied for 700 shares out of the group applying for 35,000 shares , failed to pay the first and final call . His shares were also forfeited. Out of the forfeited shares, 1,000 shares were reissued @ Applicants for 40,000 shares were allotted 30,000 shares on pro rata basis. 8 per share as fully paid-up. The reissued shares included all the forfeited shares of Shamu.
Pass necessary Journal entries to record the above transactions.

Answer:

Issued 1,000 equity shares of ₹10 each

Applied 1,800 shares

Allotment made as:		Amount payable per shares as:
Applied	Allotted		Application	₹3
40,000	30,000		Allotment	₹4
35,000	20,000		First Call	₹3
1,800	1,000			₹10

Books of XYZ Limited Journal Entries
Date	Particulars		L.F.	Debit ₹	Credit ₹

	Bank A/c	Dr.		2,25,000
	To Equity Share Application A/c				2,25,000
	(Share application money received for 75,000 shares at ₹3 each)

	Equity Share Application A/c	Dr.		2,25,000
	To Equity Share Capital A/c				1,50,000
	To Equity Share Allotment A/c				75,000
	(Application money of 50,000 shares transferred to share capital and the remaining amount adjusted on allotment)

	Equity Share Allotment A/c	Dr.		2,00,000
	To Equity Share Capital A/c				2,00,000
	(Share allotment due on 50,000 shares at ₹4 each)

	Bank A/c	Dr.		1,21,400
	To Equity Share Allotment A/c				1,21,400
	(Share allotment received on 48,800 shares after adjusting the excess money on application)

	Equity Share Capital A/c (1,200 × ₹7)	Dr.		8,400
	To Share Forfeiture A/c				4,800
	To Equity Share Allotment A/c				3,600
	(1,200 shares of ₹10 each ₹7 called-up forfeited for the non-payment of allotment)

	Equity Share First and Final Call A/c	Dr.		1,46,400
	To Equity Share Capital A/c				1,46,400
	(First and final call due on 48,800 shares at ₹3 each)

	Bank A/c	Dr.		1,45,200
	To Equity Share First and Final Call A/c				1,45,200
	(Share first and call received 48,800 shares at ₹3 each)

	Equity Share Capital A/c	Dr.		4,000
	To Share Forfeiture A/c (400 × ₹7)				2,800
	To Equity Shares First and Final Call A/c				1,200
	(400 shares forfeited for the non-payment of first and final call)

	Bank A/c	Dr.		8,000
	Share Forfeiture A/c	Dr.		2,000
	To Equity Share Capital A/c				10,000
	(1,000 shares of ₹10 each re-issued at ₹8 per share fully paid-up)

	Share Forfeiture A/c	Dr.		3,200
	To Capital Reserve A/c				3,200
	(Balance of 1,000 re-issued shares in Share Forfeiture Account transferred to Capital Reserve Account)

Working Notes-

Rumu’s Share

Number of shares applied = 40,000/30,000×1,200 = 1,600 shares

Money received on Application 1,600 shares × ₹3	=	₹4,800
Money adjusted on Application 1,200 Shares × ₹3	=	₹3,600
Excess on Application		₹1,200

Allotment due on 1,200 shares × ₹4	=	4,800
Less: Excess money on Application	=	1,200
Calls-in-Arrears on Allotment		3,600

Share Allotment

Share Allotment due 50,000 shares × ₹4	=	2,00,000
Less: Excess money on application	=	75,000
		1,25,000
Less: Calls-in-Arrears on Allotment	=	3,600
Money received on Allotment	=	1,21,400

Shamu’s Shares

Number of shares allotted to Shamu =20,000/35,000×700 = 400 shares

First and Final Call

First and Final Call due; 48,800 shares × ₹3	=	1,46,400
Less: Calls-in-Arrears by Shamu; 400 shares × ₹3	=	1,200
Money received on of First and Final Call		1,45,200

Capital Reserve

Shares re-issued out the shares forfeited from Ramu = 1,000 shares − Shamu’s shares

= 1,000 − 400

= 600 shares

on re-isssue Ramu’s shares:

Capital Reverse on re-issue of 600 shares forfeited from Ramu
Share Forfeiture Cr. 4,800/1,200	=	₹	4
Share Forfeiture Dr.	=	₹	2
Share Forfeiture after re-issued		₹	2	per share

Capital Reserve after re-issue of 600 shares = Share Forfeiture after re-issue (per share) × 600 shares

= ₹2 × 600

= ₹1,200

on re-isssue Shamu’s shares:

Share Forfeiture	Cr.	₹7
Share Forfeiture	Dr.	₹2
Share Forfeiture after re-issue		₹5	per share

Capital Reserve after re-issue of 400 shares = Share Forfeiture after re-issue (per share) × 600 shares

= ₹5 × 400

= ₹2,000

Total amount of Capital Reserve = Capital Reserve of 600 shares + Capital Reserve of 400 shares

Total amount of Capital Reserve	= Capital Reserve of 600 shares + Capital Reserve of 400 shares
	= ₹1,200 + ₹2,000
	= ₹3,200

Question 111:

Konark Ltd. invited applications for issuing 3,00,000 shares of ₹10 each. The amount per share was payable as follows: ₹3 on application, ₹3 on allotment, and ₹4 on first and final call.

The company received applications for 4,00,000 shares. Allotment was done as follows:

(i) Applicants of 2,40,000 shares were allotted 2,00,000 shares.

(ii) Applicants of 1,20,000 shares were allotted 80,000 shares.

(iii) Remaining applicants were allotted 20,000 shares.

Money overpaid on applications was adjusted towards sums due on allotment. Divij, a shareholder belonging to group (ii), who had applied for 6,000 shares, failed to pay allotment and call money, Faisal. Another shareholder, who was allotted 10,000 shares, paid the call money along with allotment. Faisal belonged to group (i),

Divi's shares were forfeited after the first and final call. Half of the forfeited shares were reissued @ 10 per share fully paid.

Pass the necessary Journal entries to record the above transactions in the books of the company.

(CBSE 2020)

Answer:

Journal
Date	Particulars		L.F.	Debit (₹)	Credit (₹)
	Bank A/c (4,00,000 ×3)	Dr.		12,00,000
	To Share Application A/c				12,00,000
	(Being share application money received)
	Share Application A/c	Dr.		12,00,000
	To Share Capital A/c (3,00,000×3) (WN.1)				9,00,000
	To Share allotment A/c (2,50,000×6) (WN.1)				3,00,000
	(Being share application money transferred to share capital and excess transferred to allotment)
	Share allotment A/c (3,00,000×3)	Dr.		9,00,000
	To Share Capital A/c (3,00,000×3)				9,00,000
	(Being share allotment money transferred to share capital)
	Bank A/c	Dr.		6,34,000
	To Share Allotment A/c				5,94,000
	To First and Final Call A/c (10,000×4)				40,000
	(Being share allotment money received and except 4,000 shares from Divij and Faisal. Another shareholderpaid the call money along with allotment for 10,000 shares)
	First and Final Call A/c (3,00,000×4)	Dr.		12,00,000
	To Share Capital A/c				12,00,000
	(Being First and Final Call was due)
	Bank A/c (1,500×8)	Dr.		11,44,000
	To First and Final Call A/c				11,44,000
	(Being First and Final Call money received and except 4,000 shares from Divij)
	Share Capital A/c (4,000×10)	Dr.		40,000
	To Forfeited Shares A/c (4,000×3+6,000)				12,000
	To Share Allotment A/c (4,000×3)				6,000
	To Share First and Final A/c(4,000×4)				16,000
	(Being 4,000 shares forfeited for not payment of allotment and call)
	Bank A/c (2,000×10)	Dr.		20,000
	To Share Capital A/c (2,000×10)				20,000
	(Being 2,000 shares forfeited reissued at ₹10 as fully paid-up)
	Forfeited Shares A/c	Dr.
	To Capital Reserve A/c
	(Being full amount Forfeited on 2,000 Shares reissued, transferred to Capital Reserve)
	(Being Prof it of 1500 shares transferred to capital reserve account)

Working Notes:

WN.1:

Table of Disposal of application money

Category	Shares applied	Shares allotted	Disposal of application money
Category	Shares applied	Shares allotted	Shares application money received	Share capital	Shares allotment
1	2,40,000	2,00,000	7,20,000	6,00,000	1,20,000
2	1,20,000	80,000	3,60,000	2,40,000	1,20,000
3	40,000	20,000	1,20,000	60,000	60,000
	4,00,000	3,00,000	12,00,000	9,00,000	3,00,000
			4,00,000×3	3,00,000×3

WN. 2:

Divij belong to group (ii) applied 6,000 and allotted 4,000

Money received on application = 6,000×3=18,000

Money received on application Transferred to share capital =4,000×3=12,000

And advance for allotment transferred =18,000-12,000=6,000

Amount Due on allotment was = 4,000×3=12,000

Amount not paid on allotment = 12,000-6,000=6,000 (call in arrears)

Faisal belong to group (i) applied 12,000 and allotted 10,000

Paid call with allotment

Question 112:

Max Ltd. invited applications for 2,00,000 Equity Shares of ₹ 10 each to be issued at 20% premium. The money payable per shares was: on application ₹ 5, on allotment ₹ 4 (including premium of ₹ 2), first call ₹ 2 and final call ₹ 1.

Applications were received for 2,40,000 shares and allotment was made as:
(i) to applicants for 1,00,000 shares— in full,
(ii) to applicants for 80,000 shares—60,000 shares,
(iii) to applicants for 60,000 shares—40,000 shares.

Applicants of 1,000 shares falling in Category
(i) and applicants of 1,200 shares falling in Category
(ii) failed to pay allotment money. These shares were forfeited on failure to pay first call. Holders of 1,200 shares falling in Category
(iii) failed to pay the first and final call and these shares were forfeited after final call.

1,300 shares[1,000 of Category(i) and 300 of Category (ii)] were reissued at ₹ 8 per share as fully paid-up.
Journalise the above transactions. Prepare Cash book and Balance Sheet.

Answer:

Applied shares 2,40,000

Allotment made as:		Payable as:
Applied	Allotted	Application	₹5
1,00,000	1,00,000	Allotment	₹4	(2 + 2)
80,000	60,000	First Call	₹2
60,000	40,000	Final Call	Re 1
2,40,000	2,00,000		₹12	(10 + 2) per share

Cash Book
Dr.					Cr.
Date	Particulars	₹	Date	Particulars	₹

	Equity Share Application (2,40,000 × ₹5)	12,00,000		Balance c/d
	Equity Share Allotment (See note-2)	5,93,900
	Equity Share First Call (See note-3)	3,93,800
	Equity Share First Call	1,96,900
	(1,96,900 shares × Re 1)
	Equity Share Capital (1,000shares of category i)	8,000
	Equity Share Capital (300 shares of category ii)	2,400			23,95,000
		23,95,000			23,95,000

Journal
Date	Particulars		L.F.	Debit ₹	Credit ₹

	Equity Share Application A/c	Dr.		12,00,000
	To Equity Share Capital A/c				10,00,000
	To Equity Share allotment A/c				2,00,000
	(Equity Share application money of 2,00,000 shares at ₹5 each transferred to Share Capital and ₹2,00,000 adjusted on allotment)

	Equity Share Allotment A/c	Dr.		8,00,000
	To Equity Share Capital A/c				4,00,000
	To Securities Premium A/c				4,00,000
	(Share allotment due on 2,00,000 shares at ₹4 each including ₹2 premium)

	Equity Share First Call A/c	Dr.		4,00,000
	To Equity Share Capital A/c				4,00,000
	(First call due on 2,00,000 shares at ₹2 each)

	Equity Share Capital A/c	Dr.		9,000
	Securities Premium A/c	Dr.		2,000
	To Share Forfeiture A/c (900 shares × ₹5)				5,000
	To Equity Share Allotment A/c (900 shares × ₹4)				4,000
	To Equity Share First Call A/c (900 shares × ₹2)				2,000
	(1,000 shares of category (i) ₹10 each, on which ₹8 had called-up, forfeited for the non-payment of amount due)

	Equity Share Capital A/c	Dr.		8,100
	Securities Premium A/c	Dr.		1,800
	To Share Forfeiture A/c				6,000
	To Equity Shares Allotment A/c				2,100
	To Equity Shares First-Call A/c				1,800
	(900 shares of category (ii) forfeited for the non-payment of amount due)

	Equity Share Final Call A/c	Dr.		1,98,100
	To Equity Shared Capital A/c				1,98,100
	(Final call due on 1,98,100 shares at Re 1 each)

	Equity Share Capital A/c	Dr.		12,000
	To Share Forfeiture A/c				8,400
	To Share First Call A/c				2,400
	To Share Final Call A/c				1,200
	(1,200 shares of category (iii) forfeited for the non-payment amount due)

	Share Forfeiture A/c	Dr.		2,000
	To Equity Share Capital A/c				2,000
	(Loss on re-issue of 1,000 shares of category (i) charged from Share Forfeiture Account)

	Share Forfeiture A/c	Dr.		600
	To Equity Share Capital A/c				600
	(Loss on re-issue of 300 of category (ii) charged from Share Forfeiture Account)

	Share Forfeiture A/c	Dr.		4,400
	To Capital Reserve A/c				4,400
	(Balance in Share Forfeiture Account of 1,300 re-issued shares transferred to Capital Reserve)

As per the Schedule III of Companies Act, 2013, the Company's Balance Sheet is presented as follows.

Max Ltd.
Balance Sheet
Particulars	Note No.	(₹)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital	1	19,94,400
b. Reserves and Surplus	2	4,00,600
2. Non-Current Liabilities
3. Current Liabilities
Total		23,95,000

II. Assets
1. Non-Current Assets
2. Current Assets
a. Cash and Cash Equivalents	3	23,95,000
Total		23,95,000

NOTES TO ACCOUNTS


Note No.	Particulars		(₹)
1	Share Capital
	Authorised Share Capital
	……. Equity Shares of ₹10 each		-
	Issued Share Capital
	2,00,000 Equity Shares of ₹10 each		20,00,000
	Subscribed, Called-up and Paid-up Share Capital
	1,98,200 Equity Shares of ₹10 each	19,82,000
	Add: Shares Forfeited (600 shares × ₹6.66)	4,000
	Add: Shares Forfeited (1,200 shares × ₹7)	8,400	19,94,400

2	Reserves and Surplus
	Securities Premium	3,96,200
	Capital Reserve	4,400	4,00,600

3	Cash and Cash Equivalents
	Cash at Bank		23,95,000

Working Notes:

1.1,200 shares of Category (ii)

Number of share allotted = 60,000/80,000 ×1,200=900shares

Money received on application (1,200 shares × ₹5)	=	6,000
Less: Application money transferred to Share Capital (900 shares × ₹5)	=	4,500
Excess money received from 1,200 shares on Application	=	1,500

Money due on Allotment (900 shares × ₹4)	=	3,600
Less: Excess money on Application	=	1,500
Calls-in-Arrears on Allotment of category (ii)		2,100

2. Share Allotment

Money due on Allotment (2,00,000 shares × ₹4)	=	8,00,000
Less: Excess money on Application	=	2,00,000
Less: Calls-in-Arrears 1,000 shares of category (i) (1,000 shares × ₹4)	=	4,000
Less: Calls-in-Arrears 1,200 shares of category (ii)	=	2,100
Money received on Allotment	=	5,93,900

3. Share First Call

First Call due on 2,00,000 shares × ₹2

4,00,000

Less: Calls-in-Arrears on 3,100 shares × ₹2

(1,000 + 900 + 1,200 shares of category (i), (ii) and (iii) respectively)

(6,200)

Money received on First Call

3,93,800

4. Share Final Call

Money due on Share Final Call

(2,00,000 – 1900) × ₹1

1,98,100

Less: Calls-in-Arrears of 1,200 shares of Category (iii)

1,200

Money received on Final Call

1,96,900

Capital Reserve

Calculation of Share Forfeiture of 1,000 shares of category (i)

Share Forfeiture	₹5,000	Cr.
Less: Share Forfeiture	₹2,000	Dr.
Capital Reserve of 1,000 shares (balance after re-issue)	₹3,000	Cr.

Calculation of Share Forfeiture of 300 shares of category (ii)

Share Forfeiture = 6,000/900 Credit	=	₹	6.67	per share
Less: Share Forfeiture Debit	=	₹	2	per share
Capital Reserve (balance after re-issue)	=	₹	4.67	per share

Capital Reserve of 300 shares = Capital Reserve (per share) × No. of shares re-issued = ₹4.67 × 300 shares = ₹1,400

Total Capital Reserve of 1,300 shares = Capital Reserve of 1,000 shares of category (i) + Capital Reserve of 300 shares of category (ii) = 3,000 + 1,400 = ₹4,400

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Class 12 / Volume – 2

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Chapter 9- Company Accounts- Accounting for Share Capital