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Accounting For Share Capital

Question
CBSEENAC12000095
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Shyam Ltd. invited applications for issuing 80,000 Equity Shares of Rs 10 each at a premium of Rs 40 per share. The amount was payable as follows: 
On Application Rs 35 per share (including Rs 30 Premium)
On Allotment Rs 8 per share (including Rs 4 Premium)
On First and Final Call - Balance
Applications for 77,000 shares were received. Shares were allotted to all the applicants. Sundaram to whom 7,000 shares were allotted failed to pay the allotment money. His shares were forfeited immediately after allotment. Afterwards, the first and final call was made. Satyam the holder of 500 shares failed to pay the first and final call. His shares were also forfeited. Out of the forfeited shares 1,000 shares were re-issued at Rs 50 per share fully paid up. The re-issued shares included all the shares of Satyam.

Pass necessary Journal Entries for the above transactions in the books of Shyam Ltd.

 

Solution

Book of Shaym Ltd.

Journal

 

Date

Particulars

 

L.F.

Debit

Amount

Rs

Credit

Amount

Rs

 

Bank A/c

To Share Application

(Share Application received for 77,000 shares at Rs 35 per share)

 

Share Application A/c

To Equity Share Capital A/c

To Securities Premium A/c

(Share Application of 77,000 shares transferred to equity share capital and securities premium)

 

Share Allotment A/c

To Equity Share Capital A/c

To Securities Premium A/c

(Share Allotment due on 77,000 shares)

 

Bank A/c

Calls-in-Arrears A/c

To Share Allotment A/c

(Share allotment received from all allotted shares except 7,000 shares)

 

Equity Share Capital A/c

Securities Premium A/c

To Share Forfeiture A/c

To Calls-in-Arrears A/c

(7,000 shares Rs 9 called-up forfeited for the non-payment of allotment)

 

Share First and Final Call A/c

To Equity Share Capital A/c

To Securities Premium A/c

(Share first and final call due on 70,000 shares)

 

Bank A/c

Calls in Arrears A/c

To Share First and Final Call A/c

(Share First and Final Call received on all shares except 500 shares)

 

Equity Share Capital A/c

Securities Premium A/c

To Share Forfeiture A/c

To Calls in Arrears A/c

(500 Shares forfeited for the no non-payment of First and Final Call)

 

Bank A/c

To Equity Share Capital A/c

To Securities Premium A/c

(1,000 shares of Rs 10 each re-issued at premium of Rs 40 per share)

 

Share Forfeiture A/c

To Capital Reserve A/c

(Share forfeiture of 1,000 shares transferred to Capital Reserve)

 

Dr.

 

 

 


 Dr.

 

 

 

 

 

 Dr.

 

 

 

 

Dr.

Dr.

 

 

 

 

Dr.

Dr.

 

 

 

 

 Dr.

 

 

 

 

Dr.

Dr.

 

 

 

 

Dr.

Dr.

 

 

 

 

 

Dr.

 

 

 

  

Dr.

 

26,95,000

 

 

 

 

26,95,000

 

 

 

 

 

 

6,16,000

 

 

 

 

5,60,000

56,000

 

 

 

 

63,000

28,000

 

 

 

 

 

4,90,000

 

 

 

 

 

486,500

3,500

 

 

 

 

5,000

3,000

 

 

 

 

 

50,000

 

 

 

 

 

7,000

 

26,95,000

 

 

 

 

3,85,000

23,10,000

 

 

 

 

 

3,08,000

3,08,000

 

 

 

 

6,16,000

 

 

 

 

 

35,000

56,000

 

 

 

 

70,000

4,20,000

 

 

 

 

 

4,90,000

 

 

 

 

 

4,500

3,500

 

 

 

 

10,000

40,000

 

 

 

 

7,000

 

 Working Note: 

Satyam shares:
Share forfeiture = Rs 9 per share
Share forfeiture on reissue = 0
Transfer to capital reserve: 500*9=4500 Rs.

 

Sundaram:
Share forfeiture = Rs 5 per share
Share forfeiture on reissue = 0
Transfer to Capital Reserve: 500*5= 2500
Total amount transferred to capital reserve = 4500+2500= Rs 7000

 

Some More Questions From Accounting For Share Capital Chapter

What is the maximum amount of discount at which forfeited shares can be re-issued?

Give any one purpose for which the amount received as 'Securities Premium' may be utilised.

On 1st April, 2012, Vivek Ltd. Was formed with an authorized capital of Rs 1,00,00,000 divided into 2,00,000 equity shares of Rs 50 each. The company issued prospectus inviting applications for 1,80,000 shares. The issue price was payable as under:
On Application: Rs 15
On Allotment : Rs 20
On Call : Balance amount
The issue was fully subscribed and the company allotted shares to all the applicants. The company did not make the call during the year.
 Show the following:
(a) Share capital in the Balance Sheet of the company as per revised Schedule-VI, Part-I of the Companies Act, 1956.
(b) Also prepare 'Notes to Accounts' for the same.

Pass necessary journal entries for the following transactions in the books of Rajan Ltd.
Rajan Ltd. purchased machinery of Rs 7,20,000 from Kundan Ltd. The payment was made to Kundan Ltd. by issue of equity shares of Rs 100 each at 10% discount.

Pass necessary journal entries for the following transactions in the books of Rajan Ltd.
Rajan Ltd. purchased a running business from Vikas Ltd. for a sum of Rs 2,50,000 payable as Rs 2,20,000 in fully paid equity shares of Rs 10 each and balance by a bank draft. The assets and liabilities consisted of the following:
Plant & Machinery Rs 90,000; Building Rs 90,000; Sundry Debtors Rs 30,000; Stock Rs 50,000; Cash Rs 20,000; Sundry Creditors Rs 20,000.

XYZ Ltd. invited applications for 40,000 equity shares of Rs 100 each at a discount of 6%. The amount was payable as follows:
On Application and Allotment Rs 90 per share. On First and Final call the balance amount. Application for 60,000 shares were received. Applications for 10,000 shares were rejected and shares were allotted on pro-rata basis to remaining applicants. Excess application money received on application and allotment was adjusted towards sums due on first and final call. The calls were made. A shareholder, who applied for 50 share, failed to pay the first and final call money. His shares were forfeited. All the forfeited shares were re-issued at Rs 97 per share fully paid up.
Pass necessary journal entries for the above transactions in the books of XYZ Ltd.

 

AB Ltd. invited applications for issuing 75,000 equity shares of Rs 100 each at a premium of Rs 30 per share. The amount way payable as follows:
On Application and Allotment  Rs 85 per share (including premium)On First and Final call  the balance Amount Applications for 1,27,500 shares were received. Applications for 27,500 shares were rejected and share were allotted on pro-rata basis to the remaining applicants. Excess money received on application and allotment was adjusted towards sums due to first and final call. The calls were made. A shareholder, who applied for 1,000 shares, failed to pay the first and final call money. His shares were forfeited. All the forfeited shares were reissued at Rs 150 per share fully paid up.
Pass necessary journal entries for the above transactions in the books of AB Ltd.

What is meant by Securities Premium?

What rate of interest the company pays on calls - in advance if, it has not prepared its own Articles of Association?

Madhav Ltd. issued fully paid equity shares of Rs. 80 each at a discount of Rs. 5 per share for the purchase of a running business from Gupta Bros. for a sum of Rs. 15,00,000.
The assets and liabilities consisted of the following:
Plant Rs. 5,00,000; Trucks Rs. 7,00,000; Stock Rs. 3,00,000; Machinery Rs. 6,00,000 and Sundry Creditors Rs. 5,00,000.
You are required to pass necessary journal entries for the above transactions in the books of Madhav Ltd.

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