# DK Goel Solutions Chapter 7 Company Accounts Issue of Share

Read below DK Goel Solutions for Class 12 Chapter 7 Company Accounts Issue of Share. These solutions have been designed based on the latest Class 12 DK Goel Accountancy book used by commerce stream students issued for the current year and the questions given in each chapter.

DK Goel Class 12 Accountancy Company Accounts Issue of Shares, a company has to issue shares for expansion of business, there are accounting requirements which the company has to follow to ensure the correct display of the financial situation of the company. In this chapter, the students will learn about the basics of the issue of shares and how the related accounting entries have to be passed in the books.

The chapter contains a lot of questions which can be very helpful for Class 12 commerce students of Accountancy and will also help build strong concepts which will be really helpful in your career. These are free and will help you to prepare for Class 12 Accountancy. Just scroll down and read through the answers provided below

## Company Accounts Issue of Share DK Goel Class 12 Accountancy Solutions

Q1. Show the Share Capital in Company’s balance sheet with imaginary figures.
Sol.1

Extract of Balance Sheet of _ Ltd. as at ___

Notes in Accounts:

Question 2. At least how much portion of the nominal (Rs.) of a share must be called as application money?
Sol.2
At least 5 percent of share application money of the nominal value of shares. The money for the application must be deposited in a ‘Scheduled Fund’ by the corporation. Application money is a portion of the company’s equity capital and, as such, the application money is added to the share capital account as the directors assign the stock. Application funds raised by the organization when it shares are problems for the public.

Question 3. What is the maximum Amount of a Call according to Table ‘F’ of Schedule I?
Sol.3
The rules of table ‘F’ of Schedule I of the Companies Act, 2013 shall extend in the absence of the Articles of Association. The (Rs.) to be called up shall not exceed 25% of the complete quantity of the problem, either on application or on allotment or on any one call.

Question 4. What is the minimum time interval between two consecutive calls according to Table ‘F’ of Schedule I?
Sol.4
The rules of table ‘F’ of Schedule I of the Companies Act, 2013 shall extend in the absence of the Articles of Association. There must be an interval between making two calls for at least one month.

Question 5. What journal entry shall you pass when shares are issued by a Public Limited Co. on premium?
Sol.5
The sum of the securities premium can be paid on request or on allocation or also on calls by the Firm.
Entries will be passed, if the Amount of premium is collected along with application money:

If Amount of securities premium is collected along with allotment money.

Question 6. Can securities premium be utilised for the purchase of fixed assets? Give reason.
Sol.6
No, the premium on shares cannot be used for the acquisition of fixed assets. Under Section 52(2) of the Companies Act, 2014, the (Rs.) of the Shares Prime can be used for the following purposes only:
1.) To pay down the company’s preliminary costs.
2.) To write off the costs, commission or discount permitted on the issuance of the company’s shares or debentures.
3.) In order to account for the premium owed upon redemption of the company’s redeemable preferred shares or debentures.
4.) For issuing incentive shares that are entirely charged.
5.) For the repurchase, as per section 68, of its own stock and other assets.

Question 7. State any three purposes other than ‘issue of bonus shares’ for which securities premium can be utilized.
Sol.7
Securities Premium should be used for:—
1.) To pay down the company’s preliminary costs.
2.) To write off the costs, commission or discount permitted on the issuance of the company’s shares or debentures.
3.) In order to account for the premium owed upon redemption of the company’s redeemable preferred shares or debentures.

Numerical Questions:-
Question 1. Vikas Ltd. has an authorised capital of Rs. 40,00,000 divided into 4,00,000 Equity shares of Rs. 10 each. Out of these, the company invited applications for 3,00,000 equity shares.
The public applied for 2,80,000 shares and all the money was duly collected show how share capital will appear in the balance sheet of the company. Also prepare notes to accounts.
Sol.1

Balance Sheet as at __

Notes In Accounts:

Point for Students:-
Subscribed but not fully paid up: Shares are said to be ‘Subscribed but not fully paid-up’ under the following two situations:
(i) When the company has called-up the full nominal value of the share but the shareholder has not paid some part of the nominal value of the share.
(ii) When the company has not called-up the full nominal value of the share.

Q2. ‘Tractors India Ltd.’ is registered with an authorized capital of Rs. 10,00,000 divided into equity shares of Rs. 10 each. The company issued 50,000 equity shares at a premium of Rs. 5 per share. Rs. 2 per share were payable with application, Rs. 8 per share including premium on allotment and the balance (Rs.) on first and final call. The issue was fully subscribed and all the (Rs.) pending was collected except the first and final call money on 500 shares allotted to Balram.
Present the ‘Share Capital’ in the Balance Sheet of ‘Tractors India Ltd.’ as per Schedule III Part I of the Companies Act, 2013. Also prepare Notes to Accounts for the same.

Sol.2

Extract of Balance Sheet of Tractors India Ltd. as at __

Notes In Accounts:

Point for Students:-
Authorised share capital refers to the amount which is stated in the Memorandum of Association. This is the maximum capital for which a Company is authorised to issue shares during its lifeline.

Q3. Nupur Ltd. was registered with an Authorised Capital of Rs. 20,00,000 divided into 2,00,000 equity shares of Rs. 10 each. The Company offered 1,50,000 equity shares for subscription to public and applications were collected for 1,40,000 equity shares. The directors called Rs. 7 per share upto 31st March and the money called was duly collected.
Show the Share Capital in the Balance Sheet of the Company together with notes to accounts.

Sol.3

Balance Sheet as at __

Point for Students:-
Capital that has been issued According to Section 2(50) of the Companies Act of 2013, released capital refers to the capital that the corporation issues for subscription from time to time.

Q4. On 1st April, 2017, Shakti Ltd. was formed with an authorized capital of Rs. 60,00,000 divided into 3,00,000 equity shares of Rs. 20 each. Out of these, 50,000 shares were issued to the vendors as fully paid up for purchase of office premises. The directors offered 1,20,000 shares to the public and called up Rs. 10 per share and collected the entire called up (Rs.) on these shares.
Show the share capital in the Balance Sheet of the company as per Schedule-III and also prepare ‘notes to accounts’
Sol.4

Point for Students:-
The term “Paid-up” refers to that portion of called up capital which has been actually received from the shareholders. Usually the called-up Capital and the paid-up Capital are the same except that some shareholders may not have paid the amount of calls. Any update amount is called ‘Calls in arrear’. If a shareholder has paid Rs. 5 against the called-up amount of Rs. 8, then Rs. 5 is paid-up amount. Paid up capital will be called-up Capital less the amount of called in arrears.

Q5. Rama Co. issued 50,000 share of Rs. 10 each payable as follows:

All the shares were subscribed and allotted. Give Journal entries and show the Share Capital in the Balance Sheet assuming that all sums have been duly collected. Expenses on issue of share (Rs.)ed to Rs. 10,000.
Sol.5

Point for Students:-
As per section 65 of the Companies Act, 2013 only an unlimited company having a share capital while converting into a limited company, may have reserve capital. In such a case, the company by a resolution may
(i) Increase the nominal amount of its share capital by increasing the nominal amount of each of its shares, and determine that no part of the increased capital shall be called up except in the event of winding up of the company.
(ii) Provide that a specified portion of its uncalled share capital shall not be called except in the event of winding up of the company.

Q6. Z Ltd. was registered with an authorised capital of Rs. 60,00,000 divided in 60,000 equity shares of 100 each. Company issued 25,000 equity shares at a premium of Rs. 20 per share, payable as follows: Rs. 30 on Application; Rs. 45 on Allotment (including premium); Rs. 20 on first call and Rs. 25 on Second and Final Call.
All shares were subscribed and all the money was duly collected. Share issue expenses (Rs.)ed to Rs. 40,OOO which were fully written off against Securities Premium.
Prepare necessary Journal Entries and Bank Account in the books of the Company.
Sol.6

Point for Students:-
Issue expenses are always written off by securities premium. Below are the necessary entries will be passed for this expense:-
To Share issued Expenses A/c

Q7. Pushkar Ltd. invited applications for issuing 5,00,000 equity shares of Rs. 10 each at a premium of Rs. 3 per share. The whole (Rs.) was payable on application. The issue was fully subscribed.
Pass necessary journal entries.
Sol.7

Point for Students:-
Share may be issued in any of the following ways:
(i) For Cash: By Private Placement of shares.
(ii) For Cash: By Public Subscription of shares.
(iii) For Consideration other than Cash.

Q8. Kiran Textiles Ltd. issued 50,000 Equity share of Rs. 10 each at a premium of Rs. 4 per share and 2,000, 6% Preference Shares of Rs. 100 each at par payable as follows:

All these shares were fully subscribed, called up and paid. Record these transactions in journal and Cash book
Sol.8

Point for Students:-
Sweat equity Shares are issued as per Section 54 of Companies Act, 2013. Sweat equity shares means equity shares issued by the Company to its employees or directors at a discount or for consideration other than cash for providing know-how or making available intellectual property rights. Such shares cannot be resold by their holders within a period of 3 years, called lock-in period.

Q9. Kanpur Gas Ltd. issued 40,000 equity shares of Rs. 10 each at a premium of Rs. 1 per share. (Rs.) were payable as follows:
Rs. 2.50 on Application; Rs. 4.50 on Allotments (including premium); Rs. 2 on First Call and RS. 2 on Final call.
Applications were collected for 37,000 shares.
Give Journal Entries assuming that all sums have been collected on pending dates.
Sol.9

Point for Students:-
Following steps are to be taken by a Public Company for the issue of shares to public:
(i) To Issue Prospectus
(iii) To Make Allotments
(iv) To Make Calls

Q10. Vimal Ltd. purchased machinery of Rs. 9,90,000 from Kamal Ltd. The payment to kamal ltd. was made by issuing equity shares of Rs. 100 each. Pass the necessary Journal entries in the books of Vimal Ltd. for purchase of machinery and the issue of shares when
(i) Shares were issued at par.
(ii) Share were issued at 25% premium.
Sol.10

Working Note:-

Point for Students:-
We can use shares for the purchases consideration. Below entries will be passed for the machinery purchased:-
Machinery A/c Dr.
To Seller’s A/c
Seller’s A/c Dr.
To Equity Share Capital A/c

Q11. Pass Journal entries for the following:
(i) X Ltd. Purchased Land and Building from R. Sundram for Rs. 5,00,000 payable in fully paid shares of Rs. 100 each at a premium of 25%.
(ii) Y Ltd. decided to issue 2,000 shares of Rs. 100 each to the Unit Trust of India as underwriting commission.
Sol.11
(i)

Point for Students:-
A company purchases some assets and instead of making the payment to the venders in the form of cash, it issues fully paid shares to the vendors. Following journal entries are made for this purpose:
(i) When assets are purchased from the vendors:
Sundry Assets A/c Dr.
To Vendor’s A/c
(ii) When shares are issued to vendors:
Vendor’s A/c Dr.
To Share Capital A/c

Q12. Taore Ltd. purchased a running business from Tulsi Bros. for a sum of Rs. 48,00,000 payable by the issue of fully paid equity shares of RS. 20 each at a premium of 20%. The assets and liabilities consisted of the following:

Pass the necessary journal entries in the books of Tagore Ltd.
Sol.12

Working Note:-

Point for Students:-
As per Section 53 of Companies Act 2013, Companies would no longer be permitted to issue shares at a discount. The only shares that could be issued at a discount are sweat equity wherein shares are issued to employees or directors in lieu of their services under Section 54 of 2013 Act.

Q13. X Ltd. took over the following assets and liabilities of Y Ltd.:
Land and Building Rs. 20,00,000; Stock Rs. 5,00,000; Sundry Debtors Rs. 2,50,000 and Sundry Creditors Rs. 2,00,000.
X ltd. paid purchase consideration by issuing Bank Draft of Rs. 16,00,000 and 50,000 Equity Shares of Rs. 20 each at 10% premium. Calculate purchase consideration and pass journal entries in the books of X ltd.
Sol.13

Point for Students:-
A Company may issue fully paid shares for consideration other than cash, in the following circumstances:
Issue of Shares to Promoters:
Promoters of a Company may be issued shares in the Company for the services rendered by them. The entry will be:
Incorporation Costs or Formation Exp. A/c Dr.
To Share Capital A/c
(Share issued to Promoters)

Q14. Madhur Ltd. took over the assets of Rs. 3,90,000 and Liabilities of Rs. 40,000 of Rasova Ltd. for a consideration of Rs. 4,00,000. 20% was paid by a cheque and the balance by issue of gully paid equity shares of Rs. 100 each at a premium of 60%. Show necessary journal entries for these transactions in the books of Madhur Ltd.
Sol.14

Point for Students:-
We can use shares for the purchases consideration. Below entries will be passed for the machinery purchased:-
Machinery A/c Dr.
To Seller’s A/c
Seller’s A/c Dr.
To Equity Share Capital A/c

Q15. X Ltd. issued 20,000, 7% Preference shares of Rs. 100 each at a premium of 6%. Payments were to be made as – Rs. 25 on Application; Rs. 46 on Allotment, Rs. 10 on first Call and Rs. 25 on Final Call.
The applications for 18,000 shares were collected and all were accepted. All the money was duly collected except the first and final call on 100 shares.
Give the necessary Journal Entries and prepare Cash Book of the Company. Also show the share Capital in the Balance Sheet of the Company.
Sol.15

Point for Students:-
It is not necessary to issue the shares only for cash. A Company may issue fully paid shares for consideration other than cash, in the following circumstances:
(i) Issue of shares to promoters:
Promoters of a Company may be issued shares in the Company for the services rendered by them. The entry will be:
Incorporation Costs or Formation Exp. A/c Dr.
To Share Capital A/c
(Shares issued to Promoters)

Q16. Shipra Limited invited application for 80,000 shares of Rs. 10 each payable as follows:

All the shares were applied and allotted. Shankar holding 600 shares paid the whole of the (Rs.) along with allotment.
Pass Cash Book and Journal entries assuming that books are closed on 31st March every year.
Sol.16

Point for Students:-
Issue of Shares for Purchases of Assets:
Sometimes, a Company purchases some assets and instead of making the payment to the vendors in the form of Cash, it issued fully paid shares to the vendors. Following journal entries are made for this purpose:
1. When assets are purchased from the vendors:
Assets A/c Dr.
To Vendor’s A/c
2. When shares are issued to vendors:
Vendor’s A/c Dr.
To Share Capital A/c

Q17. On 1st February 2016, Raj Ltd. collected in advance the first call of Rs. 25 per share on 400 equity shares. The first call was pending on 31st March 2016.
Sol.17

Point for Students:-
As per section 65 of the Companies Act, 2013 only an unlimited company having a share capital while converting into a limited company, may have reserve capital. In such a case, the company by a resolution may
(i) Increase the nominal amount of its share capital by increasing the nominal amount of each of its shares, and determine that no part of the increased capital shall be called up except in the event of winding up of the company.
(ii) Provide that a specified portion of its uncalled share capital shall not be called except in the event of winding up of the company.

Q18. A limited Company was registered with a capital of Rs. 5,00,000 in shares of Rs. 10 each and issued 20,000 such shared at a premium of Rs. 2 per share, payable as Rs. 3 per share on application, Rs. 4 per share on allotment (including premium) and Rs. 2 per share on first call made three months later. All the money payable on application and allotment were duly collected but when the first call was made, one shareholder paid the entre balance on his holding of 300 shares, and another shareholder holding 1,000 shares failed to pay the first call money.
Give Journal entries to record the above transactions and show how they will appear in the company’s Balance Sheet.
Sol.18

Point for Students:-
It often happens that some shareholders fall to pay the amount of allotment or call when it becomes due. This is known as calls in arrears. There are two methods to deal with calls in arrears:
(i) Without Opening Calls in Arrear Account: Under this method, there is no need to open calls-in-arrear account. In such a case the actual amount received from the shareholders is credited to the call account and the cell account will show a debit balance equal to the unpaid amount of the cell. On a subsequent date, when the unpaid amount is received, Bank Account is debited and the relevant call a/c is credited.
(ii) By Opening Calls in Arrear Account: Under the method, ‘Calls in Arrear A/c’ is opened and this account is debited when some amount of allotment or calls is not received. On a later date, when the arrear amount is received, Bank Account is debited and the Calls in Arrear A/c is credited.

Q19. On 28-2-2016 the first call of Rs. 2 per share become pending on 50,000 equity shares allotted by Kumar Ltd. Komal, a holder of 1,000 shares did not pay the first call money. Kovil, a holder of 750 shares, paid the second and final call of Rs. 4 per share along with the first call. Pass necessary Journal entry for the (Rs.) collected by opening call-in-arrear and calls-in-advance accounts in the books of the company.
Sol.19

Point for Students:-
Some shareholders fail to pay the amount of allotment or call when it becomes due. This is known as calls in arrears. There are two methods to deal with calls in arrears:
Without Opening Calls in Arrear Account:
Under this method, there is no need to open calls-in-arrear account. In such a case the actual amount received from the shareholders is credited to the call account and the call account will show a debit balance equal to the unpaid amount of the call. On a subsequent date, when the unpaid amount is received, Bank Account is debited and the relevant call A/c is credited.

Q20. Jyoti Power Ltd. decided to issue 8,50,000 equity shares of Rs. 10 each at a premium of Rs. 3 per share. The whole (Rs.) was payable on application. Application for 20,00,000 shares were collected. Application for 3,00,000 shares were rejected and shares were allotted to the remaining applicant on pro-rata basis.
Pass necessary Journal entries for the above transactions in the books of the company.
Sol.20

Point for Students:-
Sweat equity Shares are issued as per Section 54 of Companies Act, 2013. Sweat equity shares means equity shares issued by the Company to its employees or directors at a discount or for consideration other than cash for providing know-how or making available intellectual property rights. Such shares cannot be resold by their holders within a period of 3 years, called lock-in period.

Q21. Govind Ltd. issued a prospectus inviting applications for 20,000 shares of Rs. 10 each at a premium of Rs. 3 per share, payable as to Rs. 4 on application; Rs. 5 on allotment (including premium); Rs. 2 on First call; and Final Call.
Applications were collected for 27,000 shares. Directors allotted the shares as follows:
To applicants of 16,000 shares………………………………….. full allotment
To applicants of 6,000 shares………………………………….. 4,000 shares
To applicants of 5,000 shares………………………………….. Nil
Give entries in the cash book and journal, assuming that all sums pending on allotment and calls have collected.
Sol.21

Point for Students:-
Following steps are to be taken by a Public Company for the issue of shares to public:
i) To Issue Prospectus
iii) To Make Allotments
iv) To Make Calls

Q22. X ltd. issued share for Rs. 20,00,000 divided into shares of Rs. 10 each at a premium of Rs. 5 per share, payable as under:
On Application Rs. 4 Per share
On Allotment Rs. 6 (including premium of Rs. 3)
On First and Final Call Balance
Extra application money was to be adjusted against allotment and first and Final call and the money on rejected applications war to be returned.
The issue was oversubscribed to the extent of 80,000 shares and the allotment was made as follows:
(i) Applicants of 1,00,000 shares were allotted 30% shares, applicants for 10,000 shares were rejected and the remaining applicants were given full allotment.
All the money was duly collected. Given journal entries.
Sol.22

Working Note:-
Calculation of Access Money:-

Point for Students:-
A shareholder may sometimes pay a part, or whole of the amount not yet called upon his shares is order to save him-self the trouble of paying different called at different times. Thus the amount of future calls is received in advance by the Company. According to Section 50 of the Companies Act 2013, such amount of calls in advance can be accepted by the Company only when it is so authorised by its Articles of Association.

Q23. A Company invited applications for 5,000 shares of Rs. 100 each. The (Rs.) is payable as follows:
On Application Rs. 20 Per share
On Allotment Rs. 30 Per share
On First and Final Call Rs. 20 Per share
On Second and Final Call Rs. 30 Per share
Applications were collected for 8,000 shares. Applications for 1,000 shares were rejected and pro-rata allotment was made to the remaining applicants.
All Calls were made and duly paid except:
(i) Ganesh, the holder of 200 shares paid the two calls with allotment.
(ii) Shiva, the holder of 300 shares failed to pay the first and second call money.
Sol.23

Point for Students:-
Following entries are passed for recording interest on call in advance:-
1.) On making due to the interest on call in advance:
Interest on call in advance A/c Dr.
To Sundry members A/c

Q24. On October 1, 2018 X Ltd. offered 1,00,000 shares of Rs. 10 each payable as follows:
On Application Rs. 20 Per share
On Allotment Rs. 30 Per share
On First and Final Call Rs. 20 Per share
On Second and Final Call Rs. 30 Per share
Applications were collected for 1,25,000 shares on October 15, 2018. Applications for 1,20,000 shares were allotted 1,00,000 shares and the remaining applications were rejected.
Give journal entries assuming that all (Rs.) have been collected and the company maintains a combined account for application and allotment.
Sol.24

Point for Students:-
Sometimes, number of shares applied for by the public is less than the number of shares offered by the Company. Such an issue is said to be under-subscribed. In such a case the accounting entries are made on the basis of the number of shares applied for.

Q25. X ltd. was registered with an authorised capital of 2,00,000 shares of Rs. 10 each. It purchased assets of Y ltd. for 3,00,000 and issued fully paid shares for purchase consideration. It also invited application for 1,20,000 shares payable as under:
Rs. 2.50 on application
Rs. 2.50 on allotment
Rs. 2 on first call and Rs. 3 on final call
Sarkar, who had been allotted 400 shares failed to pat the final call. His shares were forfeited and re-issued at Rs. 8.50 per share as fully paid up. Pass entries in the Cash Book and Journal. Show the share capital in the Balance Sheet of the Company.
Sol.25

Point for Students:-
Forfeiture of shares means cancelling the shares for non-payment of calls due. But, shares can be forfeited only if the Articles of Association of the company allows forfeiture. If any shareholder does not pay the amount of call, the company may exercise the power of forfeit the shares held by him on which amount of call is not paid.

Q26. Alfa ltd. issued 5,000 shares of Rs. 100 each at par. The (Rs.) payable was as under:
Rs. 25 on application
Rs. 25 on allotment
Rs. 25 on first call
Rs. 25 on final call
The company did not make final call. X, a holder of 100 shares, failed to pay allotment and first call money. Directors forfeited his shares and immediately re-issued the forfeited share at Rs. 6.50.
Pass Journal entries in the books of the company and show the share capital in the Balance Sheet.
Sol.26

Point for Students:-
The company before forfeiture must first give clear 14 days’ notice to the defaulting shareholder that unless due is paid the amount along with interest, if any, by the specified date, the shares shall be forfeited. If the shareholder still does not pay, the company may forfeit the shares by passing an appropriate resolution.

Q27. Dinesh Ltd. issued 5,000 shares of Rs. 100 each at par, payable as follows

Anil, holding 100 shares failed to pay the (Rs.) of allotment and first call and his shares were forfeited after the first call.
Sunil, holding 200 shares failed to pay the (Rs.) pending on final call and his shares were also forfeited. Show entries in the Cash Book and Journal of the Company.
Sol.27

Point for Students:-
Till the time forfeited shares are reissued, balance of the Forfeited Shares Account is added to paid-up capital under Subscribed Capital in the Note to Accounts on ‘Share Capital’, being part of Shareholders’ Fund shown under Equity and Liabilities part of the Balance Sheet.

Q28. Fast Food Ltd. issued a prospectus offering 10,000 equity shares of Rs. 50 each at par payable as follows:
On Application Rs. 15
On Allotment Rs. 10
On First Call Rs. 15
On Final Call Rs. 10
Ram, the holder of 500 equity shares did not pay the (Rs.) pending on both the calls. These 500 shares were forfeited by the Board of Directors and 300 of these shares were subsequently re-issued at Rs. 55 per share.
Show the entries in the Cash Book and Journal of the Company.
Sol.28

Point for Students:-
If Forfeiture shares issued at par:-
In this case,
(i) Share Capital Account is debited with the amount called-up upto the date of forfeiture on shares forfeited;
(ii) Shares Allotment Account and/or Shares Call Account is credited with amount called-up on forfeited shares but not paid by the shareholders. If Calls-in-Arrears Account is maintained, Calls-in-Arrears Account is credited

Q29. Z ltd. was registered with an authorized capital of Rs. 10,00,000 divided into 10,000 shares of Rs. 100 each. The Company offered 5,000 of these shares to the public, which were payable Rs. 25 per share on application, Rs. 50 per share on allotment and the balance three months later. Applications for 7,100 shares were collected on which the directors allotted as follows:
Application for 4,000 Shares Full
Application for 3,000 Shares 1,000
Applications for 100 Shares Nil
Rs. 1,85,000 was realized on account of allotment money (excluding the (Rs.) carried from application money) and Rs. 1,15,000 on account of call. The Directors decided to forfeit those shares on which allotment money was over pending.
Show the entries in the company’s books.
Sol.29

Working Note:-
Calculation of number of shares:-

Point for Students:-
Forfeited Shares Account is credited by the amount received on the shares forfeited. The entry for forfeiture of shares is:
Share Capital A/c Dr.
To Forfeiture Shares A/c
To Shares Allotment A/c
To Share Call A/c

Q30. W Ltd. issued 10,000 shares of Rs. 100 each. During the year only Rs. 80 were called payable as follows:
On Application Rs. 25
On Allotment Rs. 20
On First Call Rs. 20
On Final Call Rs. 15
(Rs.) were collected as follows:
On 8,000 shares the full (Rs.) called
On 1,200 share Rs. 65 per share
On 500 share Rs. 45 per share
On 300 share Rs. 25 per share
The directors forfeited those shares on which less than Rs. 65 per share were collected. Show entries in the Cash Book and show the Share Capital in the Balance Sheet.
Sol.30

Point for Students:-
Sometimes, number of shares applied for by the public is less than the number of shares offered by the Company. Such an issue is said to be under-subscribed. In such a case the accounting entries are made on the basis of the number of shares applied for.
Forfeiture of shares means cancelling the shares for non-payment of calls due. But, shares can be forfeited only if the Articles of Association of the company allows forfeiture. If any shareholder does not pay the amount of call, the company may exercise the power of forfeit the shares held by him on which amount of call is not paid.

Q31. ‘Suvidha Ltd.’ is registered with an authorized capital of Rs. 10,00,00,000 divided into 10,00,000 equity shares of Rs. 100 each. The company issued 1,00,000 shares for public subscription. A shareholder holding 100 shares, failed to pay the final call of Rs. 20 per share. His shares were forfeited. The forfeited shares were re-issued at Rs. 90 per share as fully paid up.
Present the ‘Share Capital’ in the Balance Sheet of the company as per Schedule III Part I of the Companies Act, 2013. Also prepare ‘Notes to Account’.
Sol.31

Point for Students:-
The company before forfeiture must first give clear 14 days’ notice to the defaulting shareholder that unless due is paid the amount along with interest, if any, by the specified date, the shares shall be forfeited. If the shareholder still does not pay, the company may forfeit the shares by passing an appropriate resolution.

Q32. Xansa Ltd. offered 22,000 equity shares of Rs. 100 each to the public at a premium of Rs. 20 per share. The (Rs.) per share was payable as Rs. 30 on application; Rs. 50 (including premium) on allotment; and the balance on first and final call. 20,000 shares were subscribed by the public. All calls were made. A shareholder holding 1,000 shares failed to pay the first and final call money. His share were forfeited Show ‘Share Capital’ in the Balance Sheet of Xansa Ltd. Also prepare ‘Note to Accounts’.
Sol.32

Point for Students:-
Subscribed but not fully paid up: Shares are said to be ‘Subscribed but not fully paid-up’ under the following two situations:
(i) When the company has called-up the full nominal value of the share but the shareholder has not paid some part of the nominal value of the share.
(ii) When the company has not called-up the full nominal value of the share.

Q33. David Ltd. issued Rs. 40,00,000 equity shares of Rs. 10 each out of its registered capital of Rs. 10,00,00,000. The (Rs.) payable on these shares was as follows:

All calls were made and were duly collected, except the second and final call on 1,000 shares held by Vipul. These shares were forfeited.
Present the ‘Share Capital’ in the Balance Sheet of the company as per Schedule III Part I of the Companies Act, 2013. Also prepare ‘Note of Accounts’.
Sol.33

Point for Students:-
Issue of Shares for Purchases of Assets:
Sometimes, a Company purchases some assets and instead of making the payment to the vendors in the form of Cash, it issued fully paid shares to the vendors. Following journal entries are made for this purpose:
1. When assets are purchased from the vendors:
Assets A/c Dr.
To Vendor’s A/c
2. When shares are issued to vendors:
Vendor’s A/c Dr.
To Share Capital A/c
Number of Shares to be Issued = (Purchase Consideration)/(Issue Price of a Share)

Q34. On 1st April, 2014, Blue Haven Ltd. was formed with an authorized capital of Rs. 20,00,000 divided into 2,00,000 equity shares of Rs. 10 each. The company issued prospectus inviting applications for 1,50,000 equity shares. The company collected applications for 1,40,000 equity shares. During the first year, Rs. 7 per share were called. Arun holding 4,000 shares and Varun holding 3,000 shares did not pay the first call of Rs. 2 per share. Varun’s shares were forfeited after the first call and later on 1,800 of the forfeited shares were re-issued at Rs. 5 per share, Rs. 7 called up.
Show the following:
(a) Share Capital in the Balance Sheet of the company as per Schedule III Part I of the Companies Act, 2013.
(b) Also prepare ‘Note to Accounts’ for the same.
Sol.34

Point for Students:-
The term “Paid-up” refers to that portion of called up capital which has been actually received from the shareholders. Usually the called-up Capital and the paid-up Capital are the same except that some shareholders may not have paid the amount of calls. Any update amount is called ‘Calls in arrear’. If a shareholder has paid Rs. 5 against the called-up amount of Rs. 8, then Rs. 5 is paid-up amount. Paid up capital will be called-up Capital less the amount of called in arrears.

Q35. Surya Tube Limited issued 20,000 shares of Rs. 100 each. The pending (Rs.) was collected except for 500 shares on which Rs. 75 per share was collected. These 500 shares were forfeited and 300 shares were reissued for Rs. 60 each fully paid-up.
Show the forfeited Shares Account and the Balance Sheet as at closing date.
Sol.35

Working Note:-
Calculation of Capital Reserve:

Point for Students:-
Shares issued for consideration other than cash are disclosed, i.e., shown in the Balance Sheet under Subscribed Capital (as subscribed and fully paid-up or subscribed but not fully paid-up as the case is) in the Note to Accounts on Share Capital.

Q36. A, who holds 200 shares of Rs. 100 each, has paid only Rs. 25 per share as application money.
B, who holds 300 shares of Rs. 100 each, has paid Rs. 25 per share on application and Rs. 30 per share on allotment.
C, who holds 400 shares of Rs. 100 each, has paid Rs. 25 per share on application, Rs. 30 per share on allotment and Rs. 20 per share on first call.
They failed to pay their arrears and the final call. Their shares were forfeited and re-issued at Rs. 95 per share. Prepare necessary journal entries.
Sol.36

Point for Students:-
Sometimes, number of shares applied for by the public is less than the number of shares offered by the Company. Such an issue is said to be under-subscribed. In such a case the accounting entries are made on the basis of the number of shares applied for.

Q37. Pass journal entries for the forfeiture and re-issue in the following cases:
(i) A ltd. forfeited 100 share of Rs. 10 each fully called-up for non-payment of first call of Rs. 3 per share and final call of Rs. 3 per share. All of these shares were re-issued as fully paid for Rs. 10 per share.

(ii) B ltd. forfeited 400 shares of Rs. 10 each fully called-up for non-payment of final call of Rs. 3 per share. 300 of these shares were re-issued as fully paid for Rs. 8 per share.

(iii) C ltd. forfeited 700 shares of Rs. 10 each fully called-up on which the holder has paid application money @ Rs. 3 and allotment money @ Rs. 2 per share. Out of these, 300 shares were re-issued as fully paid Rs. 7 per share.

(iv) D ltd. forfeited 1,000 shares of Rs. 10 each fully called-up on which the holder has paid only the application money @ Rs. 3 per share. Out of these, 600 shares were re-issued at Rs. 10.50 per share, fully paid up.
Sol.37
Case (i)

Point for Students:-
The amount received as Securities Premium is not cancelled i.e., Securities Premium Reserve Account is not debited when the shares are forfeited. Securities Premium Reserve Account is not debited with the amount relating to forfeited shares because Securities Premium credited to Securities Premium Reserve Account and also received can be used only for the purposes prescribed in Section 52(2) of the Companies Act, 2013.

Q38. Pass journal entries for the forfeiture and re-issue in the following cases:
(a) X ltd. forfeited 700 shares of Ashok of Rs. 10 each Rs. 8 called –up, on which he had paid Rs. 5 per share. Out of these, 500 shares were re-issued for Rs. 9 per share as fully paid.

(b) Y ltd. forfeited 400 shares of Rs. 10 each, Rs. 6 called –up, for non-payment of first call of Rs. 2 per share. Out of these, 300 shares were immediately re-issued at Rs. 5 per share.

(c) Z ltd. forfeited 300 share of Rs. 100 each on which first call of Rs. 20 per share was no collected, the second and final call of Rs. 30 per share has not yet been called. Out of these, 200 shares were re-issued as Rs. 70 paid-up for Rs. 55 per share.
Sol.38
Case (a)

Point for Students:-
Re-issue of forfeited shares means selling the shares that were cancelled by the company. These shares may be reissued by the company on the terms as it may decide. Thus, forfeited shares may be reissued by the company at par, at premium or at discount. However, if forfeited shares are reissued at discount, the amount of discount allowed on reissue of forfeited shares should not exceed the amount forfeited on reissue shares

(i) A Ltd. forfeited 1,000 shares of Rs. 10 each, Rs. 8 paid, for non-payment of final call of Rs. 2 per share. Out of these, 400 shares were re-issued as fully paid-up in such a way that Rs. 2,000 should be transferred to Capital reserve.
(ii) B Ltd. forfeited 1,000 shares of RS. 10 each, Rs. 8 called-up, for non-payment of Allotment of Rs. 2.50 per share and first call of Rs. 3 per share. Out of these, 400 shares were re-issued for Rs. 7 per share as Rs. 8 paid-up.
(iii) C Ltd. forfeited 300 shares of Rs. 10 each on which Rs. 7 has been called and Rs. 5 has been paid. Out of these, 100 shares are re-issued for Rs. 6 per share as Rs. 7 paid-up.
Sol.39
Case (i)

Working Note:-
Profit on 1,000 shares = Rs. 8,000

Point for Students:-
Capital reserves are those reserves which are created out of Capital profits. Capital profits are those profits which are not earned in the normal course of the business. These reserves cannot be utilised for the distribution of dividends. Following are the item that gives rise to Capital profits and hence Capital reserves:
(i) Profit on sale of fixed assets.
(ii) Profit on revolution of fixed assets.
(iii) Premium on issue of shares and debentures.
(iv) Profit on redemption of debentures.
(v) Profit earned by a company prior to its incorporation.
(vi) Profit on forfeiture and re-issue of shares.
Capital Reserves are shown on the liabilities side of the Balance Sheet under the head “Reserve and Surplus.”

Q40. Paliwal Exports Ltd. with a share capital of Rs. 10,00,000 divided into 20,000 shares of Rs. 50 each offers the shares to the public as under:
Rs. 15 per share payable on application; Rs. 15 per share payable on allotment; Rs. 10 per share payable on First call; and Rs. 10 per share payable on second call.
Shareholder ‘A’ who holds 200 shares has paid only the application money.
Shareholder ‘B’ who holds 300 shares has paid only the application and allotment money.
Shareholder ‘C’ who holds 400 shares has paid application, allotment and first call money.
The company forfeits the shares of the above shareholders who have not paid the arrears and re-issued 600 of these shares at a discount of 20%.
Journalese the above transactions including entries relating to bank in the books of Paliwal Exports Ltd.
Sol.40

Working Note:-

Point for Students:-
In case, forfeited shares are reissued at par, i.e. at nominal value of share, accounting entry passed is:
Bank A/c Dr.
To Share Capital A/c
In case, the forfeited shares are reissued at discount, accounting entry passed is:
Bank A/c Dr.
Forfeited Shares A/c Dr.
To Share Capital A/c

Q41. Accountancy Publication Ltd. issued 50,000 equity shares of Rs. 10 each at a premium of 10% payable as under:
On Application Rs. 3; On Allotment Rs. 4 (Premium Re.1); On First Call Rs. 2; and On Final Call Rs. 2.
The whole of the issue was called for by the company and all the money were duly collected except the allotment and calls money on 500 shares. These shares were, therefore, forfeited and later on re-issued at Rs. 9 per share as fully paid. Pass the necessary journal entries to record the above transactions.
Sol.41

Point for Students:-
Sometimes, number of shares applied for by the public is less than the number of shares offered by the Company. Such an issue is said to be under-subscribed. In such a case the accounting entries are made on the basis of the number of shares applied for.
Forfeiture of shares means cancelling the shares for non-payment of calls due. But, shares can be forfeited only if the Articles of Association of the company allows forfeiture. If any shareholder does not pay the amount of call, the company may exercise the power of forfeit the shares held by him on which amount of call is not paid

Q42. X ltd. issued a prospectus offering 2,00,000 shares of Rs. 10 each at Rs. 14 per share, payable as follows:
On Application Rs. 4
On Allotment Rs. 6 (including premium Rs. 4)
On First Call Rs. 3
On Final Call Balance
Dinesh, the holder of 1,000 shares, did not pay the (Rs.) pending on allotment and first call. His shares were forfeited and 400 of these shares were immediately re-issued credited Rs. 9 paid for Rs. 8.40 per share.
Final call was made afterwards and it was duly collected.
Show entries in the Cash Book and the Journal of the company.
Sol.42

Point for Students:-
Capital reserves are those reserves which are created out of Capital profits. Capital profits are those profits which are not earned in the normal course of the business. These reserves cannot be utilised for the distribution of dividends

Q43. Vikram Ltd. issued 50,000 shares of Rs. 10 each at a premium of Rs. 1 per share payable as follows:
Rs. 3 on Application
Rs. 4 on Allotment (including premium)
Rs. 2 on First Call
Balance when required
Applications were collected for 46,000 shares and all of these were accepted. Directors did not make final call. A shareholder holding 800 shares did not pay the (Rs.) pending on first call. The shares were forfeited and re-issued at Rs. 7 per share, Rs. 8 per share paid. Pass Cash Book and Journal Entries.
Sol.43

Point for Students:-
Amount debited to forfeited shares account is calculated as under:
No. of share reissue × (Paid-up Value – Reissue price per share)
If the forfeiture shares are reissue at a price higher than their nominal value. The excess of reissue price ever over nominal value is credited to Securities Premium Reserve Account. The entry passed is:
Bank A/c Dr.
To Share Capital A/c

Q44. Give journal entries for forfeiture and re-issue of shares:
(a) X ltd. forfeited 500 shares of Rs. 100 each, Rs. 75 called-up, issued at 10% premium (to be paid at the time of allotment) for non-payment of a first call of Rs. 20 per share. Out of these, 200 shares were re-issued as Rs. 75 paid-up for Rs. 60 per share.
(b) X ltd. forfeited 300 shares of Rs. 100 each, Rs. 75 called-up, issued at 10% premium (to be paid at the of allotment) for non-payment of allotment money of Rs. 30 per share (including premium) and first call of Rs. 20 per share. Out of these, 100 shares were re-issued as fully paid-up in such a way that Rs. 3,100 were transferred to capital reserve.
Sol.44

Working Note:-

Working Note:-

Point for Students:-
Capital reserves are those reserves which are created out of Capital profits. Capital profits are those profits which are not earned in the normal course of the business. These reserves cannot be utilised for the distribution of dividends. Following are the item that gives rise to Capital profits and hence Capital reserves:
(i) Profit on sale of fixed assets.
(ii) Profit on revolution of fixed assets.
(iii) Premium on issue of shares and debentures.
(iv) Profit on redemption of debentures.
(v) Profit earned by a company prior to its incorporation.
(vi) Profit on forfeiture and re-issue of shares.

Q45. Journalese the following:
(a) Y ltd. forfeited 400 shares of Rs. 100 each, issued at a premium of Rs. 5 per share (to be paid at the time of allotment) for non-payment of a first call of Rs. 20 per share. The second and final call of Rs. 20 per share. The second and final call of Rs. 20 has not yet been called. Out of these, 100 shares were re-issued on fully paid-up Rs. 110 per share.
(b) Y ltd. forfeited 700 shares of Rs. 100 each, issued at a premium of Rs. 5 per share for non-payment of allotment money of Rs. 35 per share (including premium) and first call of Rs. 20 per share. The second and final call of Rs. 20 has not yet been called. 500 of these shares were re-issued as Rs. 80 paid-up for Rs. 92 per share.
Sol.45
(a)

Point for Students:-
In case, forfeited shares are reissued at par, i.e. at nominal value of share, accounting entry passed is:
Bank A/c Dr.
To Share Capital A/c
In case, the forfeited shares are reissued at discount, accounting entry passed is:
Bank A/c Dr.
Forfeited Shares A/c Dr.
To Share Capital A/c

Q46.
Luxury Cars Ltd. invited applications for issuing 10,000 equity shares of Rs. 50 each at a premium of Rs. 100 per share. The (Rs.) was payable as follows:
On application – Rs. 75 per share (including Rs. 50 premium)
On allotment – the balance
The issue was fully subscribed. A shareholder holding 400 shares paid his entire share money at the time of application. Another shareholder holding 300 shares did not pay the allotment money. His shares were forfeited. The forfeited shares were later on re-issued for Rs. 90 per share as fully paid up.
Pass necessary journal entries for the above transactions in the books of the company.
Sol.46

Working Note:-
Calculation of (Rs.) collected on Allotment:-

Point for Students:-
The premium on issue of shares is a Capital profit and not a revenue profit and as such, must be credited to a separate account called ‘Securities Premium Reserve Account’. It must be shown separately in the Balance Sheet on the equity and liabilities side under the head ‘Reserve and Surplus’.

Q47. Hindustan Ltd. issued 20,000 shares of Rs. 20 each at 20% premium. (Rs.) was payable as follows:

Applications were collected for 18,000 shares and all were accepted. All money was collected except:
(i) Vasundhra, holding 500 shares failed to pay allotment money and her shares were forfeited after allotment.
(ii) Tapasya, holding 300 shares failed to pay first call money and her shares were forfeited after first call.
(iii) Swarna, holding 400 shares failed to pay first and second call money and her shares were forfeited.
All the forfeited shares were reissued at a discount of 10% as fully paid up.
Pass the necessary journal entries in the books of Hindustan Ltd.
Sol.47

Working Note:-

Point for Students:-
Under section 52 of the Companies Act, 2013, the amount of securities premium reserve may be used only for the following purposes:
(1) In writing off the preliminary expenses of the company.
(2) For writing off the expenses, Commission or discount allowed on issue of shares or debentures of the Company.
(3) For issuing fully paid bonus shares to the shareholders of the company.
(4) For providing for the premium payable on redemption of redeemable preference share or debentures of the Company.
(5) For Buy back of its own shares and other securities as per Section 68.

Q48. A Co. Ltd. offered to the public 20,000 equity shares of Rs. 100 each at a premium of Rs. 10 per share. The payment was to be as follows:

Point for Students:-
Revised Schedule VI does not contain the head ‘Miscellaneous Expenditure’ in the Balance Sheet. As per AS-26, Preliminary Expenses are to be written off in the year in which they are incurred. However, share issue expenses, underwriting commission, discount on shares, discount/premium on borrowing etc., being special nature items are excluded from the scope of AS-26 (Intangible Assets). These Items can be amortized over the period of benefit, i.e. normally 3 to 5 years.
Guidance notes on Revised Schedule VI issued by ‘The institute of Chartered Accounts of India’ suggests that unamortized portion of above mentioned expenses be shown on the assets side of the balance sheet as, ‘Unamortized Expenses’ under the hear ‘Other Current/Non-Current Assets’ depending on whether the amount will be amortized in the next 12 months or thereafter. Amount to be amortized in the next 12 months will be shown under the head ‘Other Current Assets’ and the amount to be amortized after 12 months will be shown under the hear ‘Other Non-Current Assets’.

Q49. On March 1, 2016 the Directors of Sahara Ltd. issued 10,000 Equity Shares of Rs. 100 each at Rs. 125 per share, payable Rs. 50 on application (including premium), Rs. 45 on allotment and the balance on 1st June, 2016.
The lists closed on March 10, 2016 y which date applications for 16,000 shares were collected. Of the cash collected, Rs. 50,000 was returned and Rs. 2,50,000 was applied to the (Rs.) pending on allotment, the balance of which was paid on March 16, 2016.
Call money was collected on 1st June, 2016 with the exception of one allotted of 200 shares. The shares were forfeited on October 15, 2016 and reissued as fully paid at Rs. 110 per share on December 3, 2016.
Record necessary journal entries in the books Sahara Ltd. using a joint account of application and allotment.
Sol.49

Point for Students:-
Discount on issue of shares is a loss of Capital nature. It is written off either against Securities Premium Reserve or from Statement of Profit and Loss. The journal entry for writing off the discount will be as under:
Securities Premium Reserve/ Statement of Profit and loss A/c Dr.
To Share Discount A/c
(Writing off the amount of discount)

Q50. Elite Ltd. invited applications from public for 5,00,000 equity shares of Rs. 10 each issued at Rs. 11 per share. The payment was to be made as follows: Rs. 3 on Application; Rs. 4 on Allotment including premium and Rs. 4 on call.
Application for 6,50,000 shares were collected. Allotment of shares was made as follows: (i) 100% shares to applicants of 4,00,000 shares; (ii) 50% shares to applicants of 2,00,000 shares, (iii) No Allotment to applicants of 50,000 shares.
A shareholder to whom 500 shares were allotted under category (i) paid full (Rs.) pending on shares along with allotment money. Another shareholder holding 1,000 shares failed to pay the (Rs.) pending on call. His shares were forfeited and 800 of these shares were subsequently re-issued as fully paid-up @ Rs. 8 per share.
Pass the journal entries and give balance sheet of the company.
Sol.50

Working Note:-
Calculation of Allotment:-

Extra money collected from application:-
A applicant demand 2,00,000 shares allotted 1,00,000 shares = 1,00,000 × 3 = Rs. 3,00,000
Point for Students:-
Sometimes, number of shares applied for by the public is less than the number of shares offered by the Company. Such an issue is said to be under-subscribed. In such a case the accounting entries are made on the basis of the number of shares applied for.

Q51. AXN Ltd. invited applications for issuing 1,00,000 equity shares of Rs. 10 each at a premium of Rs. 6 per share. The (Rs.) was payable as follows:

Kumar, the holder of 400 shares did not pay the allotment money and Ravi the holder of 1,000 shares paid his entire share money along with allotment money. Kumar’s shares were forfeited immediately after allotment. Afterwards first call was made. Gupta, a holder of 300 shares failed to pay the first call money and Gopal a holder of 600 shares paid the second call money also along with first call. Gupta’s shares were forfeited immediately after the first call. Second and final call was made after wards. The whole (Rs.) pending on second call was collected.
All the forfeited shares were re-issued at Rs. 9 per share fully paid-up.
Pass necessary Journal Entries for the above transactions in the books of the company.
Sol.51

Point for Students:-
After reissue of all the forfeited shares, balance left in forfeited shares account is transferred in capital reserve account by passing the following entry:
Forfeited Share A/c
To Capital Reserve A/c
(Gain on reissue of transferred to capital reserve)

Q52. Journalese the following transactions in the books of Poonam Ltd.:
200 shares of Rs. 10 each issued at a premium of Rs. 5 each payable with allotment were forfeited for the non-payment of allotment money of Rs. 8 per share including premium. The first and final call on these shares at Rs. 3 per share was not made. The forfeited shares were re-issued @ Rs. 12 per share fully paid up.
Sol.52

Point for Students:-
If forfeited shares are reissued at par or premium, the total amount forfeited on the shares is a gain o capital nature and is transferred to capital reserve account

Q53. Prayuj Ltd. forfeited 2,000 shares of Rs. 10 each, fully called up, on which they had collected only Rs. 14,000. Out of these, 50 of the forfeited shares were reissued for Rs. 9 per share fully paid up.
Pass necessary journal entries for forfeiture and re-issue of shares. Also prepare share forfeited account.
Sol.53

Working Note:-
Number of Share Forfeited (2,000 × 7) = Rs. 14,000

Point for Students:-
Share Issue Expenses, underwriting commission, discount on shares etc. being special nature items are excluded from the scope of AS-26. These items can be amortized over the period of benefit, i.e. normally 3 to 5 years. ‘Unamortized portion’ of such expenses will be shown under the head ‘Other Current/Non-Current Assets depending on whether the amount will be amortized in the next 12 months or thereafter.

Q54. Vaibhav Ltd. issued 20,000 equity shares of Rs. 100 each at Rs. 250 payable as follows

All (Rs.)s were collected except first and second and final call on 750 shares held by Mr. Akash. His shares were forfeited and 2/3rd of these shares were reissued to Mr. Dinesh at Rs. 200 per share. Pass entries for forfeiture and reissue.
Sol.54

Working Note:-
Number of Share Forfeited (750 × 60) = Rs. 45,000

Point for Students:-
It often happens that some shareholders fall to pay the amount of allotment or call when it becomes due. This is known as calls in arrears. There are two methods to deal with calls in arrears:
(i) Without Opening Calls in Arrear Account: Under this method, there is no need to open calls-in-arrear account. In such a case the actual amount received from the shareholders is credited to the call account and the cell account will show a debit balance equal to the unpaid amount of the cell. On a subsequent date, when the unpaid amount is received, Bank Account is debited and the relevant call a/c is credited.
(ii) By Opening Calls in Arrear Account: Under the method, ‘Calls in Arrear A/c’ is opened and this account is debited when some amount of allotment or calls is not received. On a later date, when the arrear amount is received, Bank Account is debited and the Calls in Arrear A/c is credited.

Q55. X ltd. offered 25,000 shares of Rs. 100 each payable as Rs. 25 on application, Rs. 20 on allotment, Rs. 30 on first call and the balance on final call.
Applications were collected for 40,000 shares out of which shares were allotted to the applicants for 35,000 shares on a pro-rata basis. All shareholders paid the allotment money excepting Mr. Gopal who was allotted 500 shares. These shares were forfeited immediately. The first call was made thereafter. The forfeited shares were re-issued @ Rs. 78 Prepare Cash Book and pass journal entries.
Sol.55

Working Note:-
(A)
Share applied 35,000 and Share allotted 25,000

Extra shares = 700 – 500 = 200 shares
Extra Application money collected = 200 × 25 = Rs. 5,000

Q56. A limited company invites applications for 50,000 equity shares of Rs. 10 each payable as follows:

Applications were collected for 70,000 shares. Allotments were made on the following basis:
(i) To applicants for 10,000 shares – in full
(ii) To applicants for 60,000 shares – 40,000 shares
Extra money paid on application was utilized towards allotment money.
A shareholder who was allotted 1,000 shares out of the group applying for 60,000 shares failed to pay allotment money and money pending on calls. These shares were forfeited. 600 forfeited shares were re-issued as fully paid on receipt of Rs. 8 per share.
Prepare cash book and journal entries in the books of company.
Sol.56

Working Note:-

Point for Students:-
The amount of forfeited shares not reissued will remain in forfeited share account till the off paid-up share capital under subscribed share capital under subscribed share capital in the note of accounts on shares capital and shown against the main head shares capital under shareholders fund is equity and liabilities part of the balance sheet.

Q57. Jay Ltd. issued a prospectus inviting applications for 1,00,000 shares of Rs. 10 each. These shares were issued at par on the following terms:
On application Rs. 2.50, on allotment Rs. 2.50 on final call Rs. 3 and on final call the balance.
Applications were collected for 1,35,000 shares. Allotments were made on the following basis:
(i) To applicants for 25,000 shares – in full;
(ii) To applicants for 60,000 shares – 45,000 shares
(iii) To applicants for 50,000 shares – 30,000 shares
All Extra (Rs.) paid on application is ot be adjusted against (Rs.) pending on allotment.
The shares were fully called and paid-up except the (Rs.) of allotment, first and final call not paid by those who applied for 4,000 shares of the group applying for 50,000 shares.
All the shares on which calls were not paid were forfeited by the Board of Directors. 1,800 forfeited shares were re-issued as fully paid on receipt of Rs. 9 per share.
Prepare Cash Book and Journal entries to record the above.
Sol.57

Working Note:-
(A)
Share applied 50,000 and Share allotted 30,000

Point for Students:-
After reissue of all the forfeited shares, balance left in forfeited shares account is transferred in capital reserve account by passing the following entry:
Forfeited Share A/c
To Capital Reserve A/c
(Gain on reissue of transferred to capital reserve)

Q58. XY Ltd. invited applications for 5,00,000 Equity shares of Rs. 10 each, payable as Rs. 3 on application, Rs. 4 on allotment and the balance on first and final call. Applications were collected for 12,00,000 shares and the shares were allotted on a pro rata basis. The Extra application money was to be adjusted against allotment only. R, a shareholder, who had applied for 6,000 shares, failed to pay the call money and his shares were accordingly forfeited and reissued at Rs. 9 per share as fully paid. Pass necessary journal entries.
Sol.58

Working Note:-
(A)
Share applied 12,00,000 and Share allotted 5,00,000

Point for Students:-
Capital reserves are those reserves which are created out of Capital profits. Capital profits are those profits which are not earned in the normal course of the business. These reserves cannot be utilised for the distribution of dividends

Q59. A company issued 10,000 shares of Rs. 10 each at a premium of Rs. 1 per share, payment to be made as follows:

Applications were collected for 20,000 shares. Applications for 5,000 shares were rejected and allotment was made proportionately to the remaining applicants. The directors made both the calls and all the money were collected, except the allotment, first call and 400 shares, which were subsequently forfeited. Later, 300 of the forfeited shares were re-issued as fully paid @ Rs. 15 per share. Give journal entries to record the above. Also prepare the Balance Sheet.
Sol.59

Working Note:-
(A)
Share applied 10,000 and Share allotted 15,000

Extra shares = 600 – 400 = 200 shares
Extra Application money collected = 200 × Rs. 3 = Rs. 600

Point for Students:-
The term “Called-up” refers to the part of the face value of a share called by the directors from shareholders. For example, if the directors call at the rate of Rs. 80 per share on 10,000 shares of Rs. 100 each, Rs. 8,00,000 will be the called up Capital. The remaining amount of Rs. 20 share will be uncalled Capital

Q60. A company issued for public subscription 60,000 equity shares of Rs. 10 each at a premium of Rs. 4 per share, payable as under: Rs. 4 on Application; Rs. 5 on Allotment (including premium), Rs. 2.50 on first call and Rs. 2.50 on final call.
Applications were collected for 75,000 equity shares. The shares were allotted pro-rata to the applicants for 70,000 shares, the remaining applications rejected. Money over –paid on applications was utilised towards sums pending to allotment.
A, to whom 1,200 shares were allotted failed to pay allotment and calls money and B, to whom 1,800 shares were allotted failed to pay two calls. These shares were subsequently forfeited after the final call was made. All the forfeited shares were sold to Rajesh as fully paid-up at Rs. 11 per share.
Prepare Cash Book and journal entries required to record the above transactions.
Sol.60

Working Note:-
(A)
Share applied 60,000 and Share allotted 70,000

Extra shares = 1,400 – 1,200 = 200 shares
Extra Application money collected = 200 × Rs. 4 = Rs. 800

Q61. Suzuki Limited issued a prospectus inviting application for 60,000 shares of Rs. 10 each at a premium of 30% payable as follows: On Application Rs. 3.50; On Allotment Rs. 5.50 (including premium): On First Call Rs. 2 and on Second Call Rs. 2.
Applications were collected for 95,000 shares and allotment was made pro-rata to applicants of 80,000 shares. Money over-paid on applications were employed on account of sums pending on allotment.
X, to whom 1,500 shares were allotted, failed to pay the allotment money and on his subsequent failure to pay the first call his shares were forfeited. Y, the holder of 2,400 shares failed to pay the two calls and his shares were forfeited after the Second Call of the shares forfeited, 3,000 shares were sold to Z as fully paid, Z paying Rs. 8.50 per share, the whole of Y’s share included.
Give journal entries; prepare Bank Account and Balance Sheet.
Sol.61

Working Note:-
(A)
Share applied 80,000 and Share allotted 60,000

Extra shares = 2,000 – 1,500 = 500 shares
Extra Application money collected = 500 × Rs. 3.50 = Rs. 1,750

Q62. Hindustan Steel Ltd. invited applications for 50,000 equity shares of Rs. 10 each at a premium of Rs. 4 per share. The (Rs.) was payable as follows:

Applications for 60,000 shares were collected. Allotment was made to all the applicants on pro-rata basis. Extra application money was adjusted towards sums pending on allotment. Ram, to whom 500 shares were allotted, failed to pay allotment and call money. Shyam, to whom 1,000 shares were allotted, failed to pay call money. These shares were forfeited. Out of the forfeited shares 1,200 shares (including all shares of Shyam) were re-issued at 10% discount as fully paid-up.
Pass the necessary journal entries in the books of the company by opening ‘Calls in Arrears A/c’ wherever necessary.

Sol.62

Working Note:-
(A)
Share applied 60,000 and Share allotted 50,000

Point for Students:-
Capital reserves are those reserves which are created out of Capital profits. Capital profits are those profits which are not earned in the normal course of the business. These reserves cannot be utilised for the distribution of dividends. Following are the item that gives rise to Capital profits and hence Capital reserves:
(i) Profit on sale of fixed assets.
(ii) Profit on revolution of fixed assets.
(iii) Premium on issue of shares and debentures.
(iv) Profit on redemption of debentures.
(v) Profit earned by a company prior to its incorporation.
(vi) Profit on forfeiture and re-issue of shares.
Capital Reserves are shown on the liabilities side of the Balance Sheet under the head “Reserve and Surplus.”

Q63. SK Ltd. invited applications for issuing 3,20,000 equity shares of Rs. 10 each at a premium of Rs. 5 per share. The (Rs.) was payable as follows:

Applications for 4,00,000 shares were collected. Applications for 40,000 shares were rejected and application money refunded. Shares were allotted on pro-rata basis to the remaining applicants. Extra money collected with applications was adjusted towards sums pending to allotments. Jeevan holding 800 shares failed to pay the allotment money and his shares were immediately forfeited. Afterwards final call was made. Ganesh who had applied for 2,700 shares failed to pay the final call. His shares were also forfeited. Out of the forfeited shares 1,500 shares were re-issued at Rs. 8 per share fully paid up. The re-issued shares included all the forfeited shares of Jeevan.
Pass necessary journal entries for the above transaction in the books of the company assuming that the company maintains ‘Calls in Arrears Account’.
Sol.63

Working Note:-
(A)
Share applied 3,60,000 and Share allotted 3,20,000

Point for Students:-
When shares belonging to pro rata category are forfeited, amount in arrears on allotment is to be determined. Following process may be followed to determine the amount in arrears:
1. Calculate total number of shares applied by the shareholder whose shares are being forfeited, applying the following formula:

1. 2. Calculate total application money received on shares applied by defaulting shareholder as under:
No. of shares applied by shareholder × Application money per share.
2. 2. Calculate application money due on shares allotted to defaulting shareholder as under:
No. of shares allotted to shareholder × Application money per share.
3. 3. Calculate excess application money received:-
= Application money received – Application money required
4. 4. Calculate amount due on allotment and deduct from it the excess application money. The result is the amount in arrears on allotment.

Q64. Modern Ltd. issued a prospectus inviting applications for 2,00,000 shares of Rs. 10 each at a premium of Rs. 6 per share, payable as follows:

Applications were collected for 2,60,000 shares and pro-rata allotment was made to the applicants for 2,50,000 shares. Excess money paid on applications for these shares was utilised towards allotment.
A, who applied for 1,000 shares, failed to pay the allotment money and his shares were forfeited after allotment.
B, who applied for 1,500 shares, failed to pay the two calls and his shares were also forfeited.
Of the forfeited, 1,800 shares were re-issued as fully paid up for Rs. 15 per share, the whole of B’s share included. Prepare Cash Book, journal and Balance Sheet.
Sol.64

Working Note:-
(A)
Share applied 2,50,000 and Share allotted 2,00,000

Q65. X Ltd. invited application for issuing 75,000 equity shares of Rs. 10 each at a premium of Rs. 5 per share. The (Rs.) was payable as follows:
On application and allotment – Rs. 9 per share (including premium)
On first and final call – the balance (Rs.).
Applications for 3,00,000 shares were collected. Applications for 2,00,000 shares were rejected and money refunded. Shares were allotted on pro-rata basis to the remaining applicants. The first and final call was made. The (Rs.) was duly collected except on 1,500 shares applied by Ravi. His shares were forfeited. The forfeited shares were re-issued at a discount of Rs. 4 per share.
Excess application and allotment money can be utilised for calls.
Pass necessary journal entries for the above transactions in the books of X Ltd.
Sol.65

Working Note:-
(A)
Share applied 1,00,000 and Share allotted 75,000

Point for Students:-
Calculation amount due on allotment but not paid by the defaulting shareholder as follows:
Amount due on Allotment (No. of allotted share × Allotment amount per share)
Less: Excess Application Money Adjusted on Allotment
[{Applied Share – Allotted Share} × Application Money per share]
Amount not paid on Allotment

Q66. A limited company forfeited 400 shares of Mr. X who had applied for 600 shares on account of non-payment of allotment money Rs. 3 + Rs. 2.50 (Premium) and first calls Rs. 2. Only Rs. 4 per share was collected with application. Out of theses, 200 shares were re-issued to Mr. Y at Rs. 8 per share, Rs. 9 paid-up.
Sol.66

Working Note:-
(A)
Extra shares = 600 – 400 = 200 shares
Extra Application money collected = 200 × Rs. 4 = Rs. 800

Point for Students:-
It often happens that some shareholders fall to pay the amount of allotment or call when it becomes due. This is known as calls in arrears. There are two methods to deal with calls in arrears:
(i) Without Opening Calls in Arrear Account: Under this method, there is no need to open calls-in-arrear account. In such a case the actual amount received from the shareholders is credited to the call account and the cell account will show a debit balance equal to the unpaid amount of the cell. On a subsequent date, when the unpaid amount is received, Bank Account is debited and the relevant call a/c is credited.
(ii) By Opening Calls in Arrear Account: Under the method, ‘Calls in Arrear A/c’ is opened and this account is debited when some amount of allotment or calls is not received. On a later date, when the arrear amount is received, Bank Account is debited and the Calls in Arrear A/c is credited.

Q67. X Ltd. forfeited 1,500 shares of Rs. 10 each (originally issued at a premium of Rs. 3 per shares which was payable along with application money) on which allotment money of Rs. 3 and First call money of Rs. 2 were not collected; the final call money of Rs. 3 is not yet called. These shares were originally allotted on pro-rata in the ratio of 3:2. These shares were subsequently reissued at a discount of Rs. 1 per share, credited as Rs. 7 paid up.
Pass necessary Journal entries for forfeiture and re-issue of shares.
Sol.67

Working Note:-
(A)
Extra shares = 2,250 – 1,500 = 750 shares
Extra Application money collected = 750 × Rs. 5 = Rs. 3,750

Q68.
AB Ltd. invited applications for issuing 1,00,000 equity shares of Rs. 10 each. The (Rs.) was payable as follows:

Applications for 1,50,000 shares were collected and pro-rata allotment was made to all application as follows:
Applicants for 80,000 shares were allotted 60,000 shares on pro-rata basis.
Applicants for 70,000 shares were allotted 40,000 shares on pro-rata basis.
Sudha, to whom 600 shares were allotted out of the group applying for 80,000 shares failed to pay the allotment money. Here shares were forfeited immediately after allotment.
Asha, who has applied for 1,400 shares out of the group applying for 70,000 shares failed to pay the first and final call. Her shares were also forfeited.
Out of the forfeited shares 1,000 were re-issued @ Rs. 8 per share fully paid-up. The re-issued shares included all the forfeited shares of Sudha.
Pass necessary journal entries to record the above transactions.
Sol.68

Working Note:-
(A)
Share applied 80,000 and Share allotted 60,000

Point for Students:-
The amount of forfeited shares not reissued will remain in forfeited share account till the off paid-up share capital under subscribed share capital under subscribed share capital in the note of accounts on shares capital and shown against the main head shares capital under shareholders fund is equity and liabilities part of the balance sheet.

Q69. X Ltd. invited application for 4,00,000 shares of Rs. 10 each. The shares were issued at a premium of Rs. 7 per share. The (Rs.) was payable as follows:

Applications were collected for 5,70,000 shares and the allotment was made as under:

Excess application and allotment money could be utilized for calls.
A, who belonged to the first category and was allotted 500 shares, failed to pay the first call money. B, who belonged to the second category and was allotted 300 shares also failed to pay the first call money. Their shares were forfeited and re-issued @ 15 per share fully paid-up.
Pass necessary Cash Book and Journal entries.
Sol.69

Working Note:-
(A) Calculation of Shares applied by A
Share applied 3,50,000 and Share allotted 2,50,000

Point for Students:-
After reissue of all the forfeited shares, balance left in forfeited shares account is transferred in capital reserve account by passing the following entry:
Forfeited Share A/c
To Capital Reserve A/c
(Gain on reissue of transferred to capital reserve)

Q70. Meena Ltd. issued 30,000 shares of Rs.10 each at a premium of Rs. 2 per share payable as Rs. 3 application, Rs. 5 (including premium) on allotment and the balance on first and final call. Applications were collected for 52,000 shares. The directors resolved to allot as follows:

Balu who had applied for 4,000 shares in category A and Ganesh who was allotted 2,000 shares in category B failed to pay the allotment money. Calculate the (Rs.) collected on allotment.
Sol.70
Calculation of Allotment (Rs.):-
(Rs.) pending on allotment with premium = 30,000 × Rs. 5 = Rs. 1,50,000
Pro-rata Table:-

Net (Rs.) collected on Allotment = Rs. 1,50,000 – Rs. 30,000 – Rs. 30,000 – Rs. 4,000 – Rs. 6,000
Net (Rs.) collected on Allotment = Rs. 79,000

Point for Students:-
Capital reserves are those reserves which are created out of Capital profits. Capital profits are those profits which are not earned in the normal course of the business. These reserves cannot be utilised for the distribution of dividends.

Q71. X Ltd. invited applications for 40,000 shares of Rs. 10 each at 5% premium, payable as Rs. 3 on application, Rs. 3.50 on allotment (including premium) and balance on first and final call. Applications were collected for 90,000 shares and allotment was made on pro-rata basis. The excess money collected on application was to be adjusted against allotment only. A shareholder, who applied for 4,500 shares, could not pay the call money and his shares were accordingly forfeited.
Pass necessary journal entries and show the items in company’s Balance Sheet.
Sol.71

Working Note:-
(A)
Share applied 90,000 and Share allotted 40,000

Point for Students:-
The term “Called-up” refers to the part of the face value of a share called by the directors from shareholders. For example, if the directors call at the rate of Rs. 80 per share on 10,000 shares of Rs. 100 each, Rs. 8,00,000 will be the called up Capital. The remaining amount of Rs. 20 share will be uncalled Capital.

Q72. Durga Ltd. invited applications for issuing 1,00,000 equity shares of Rs. 10 each at par. The (Rs.) was payable as follows:

Applications were collected for Rs. 2,80,000 shares. Applications for 30,000 shares were rejected and the money refunded. Allotment was made to the remaining applicants as follows.

Excess money collected with applications was adjusted towards sums pending on allotment and first and final call. All calls were made and were duly collected except the final call by a shareholder belonging to Category I who has applied for 300 shares. His shares were forfeited. The forfeited shares were re-issued at a premium of 30% fully paid up.
Pass necessary Journal entries for the above transactions in the book of Durga Ltd. Open Calls-in-arrears and calls in advance account wherever required.
Sol.72

Point for Students:-
When shares belonging to pro rata category are forfeited, amount in arrears on allotment is to be determined. Following process may be followed to determine the amount in arrears:
1. Calculate total number of shares applied by the shareholder whose shares are being forfeited, applying the following formula:

Q73. Piyush Ltd. invited application for issuing 1,00,000 shares of Rs. 10 each payable as follows:
Rs. 4 – per shares on application
Rs. 2 – per share on allotment
Balance on first and final call.
Applications were collected for 1,60,000 shares. Full allotment was made to the applicants of 10,000 shares. The remaining applicants were allotted 90,000 shares on pro-rata basis. Excess money collected with application was adjusted towards sums pending on allotment and call.
Kanika, holding 6,000 shares, who belonged to the category of applicants to whom full allotment was made, paid the call money at the time of allotment. Ruchi, who belonged to the category of applicants to whom shares. Ruchi’s shares were forfeited after the first and final call. These shares were later reissued at Rs. 9 per share fully paid up.
Pass the necessary journal entries for the above transactions by opening calls in arrears and calls in advance account where necessary.
Sol.73

Working Note:-
(A)
Share applied 1,50,000 and Share allotted 90,000

Q74. Khushboo Ltd. issued for Public subscription 50,000 equity shares of Rs. 10 each at a premium of 30% payable as under:
Rs. 4 on application
Rs. 5 on allotment (including premium)
Rs. 4 on first & final call
Applications were collected for 1,00,000 shares. Allotment was made pro-rata to the applicants for 80,000 shares, the remaining applications refused. Money overpaid on application was utilised towards sums pending on allotment.
Chatterjee, to whom 1,000 shares were allotted, failed to pay the allotment and call money and the shares were subsequently forfeited. Half of the forfeited shares were re-issued as fully paid at a discount of 10%. Show the journal entries to record the above transactions.
Sol.74

Working Note:-
(A)
Share applied 80,000 and Share allotted 50,000

Point for Students:-
Capital reserves are those reserves which are created out of Capital profits. Capital profits are those profits which are not earned in the normal course of the business. These reserves cannot be utilised for the distribution of dividends. Following are the item that gives rise to Capital profits and hence Capital reserves:
(i) Profit on sale of fixed assets.
(ii) Profit on revolution of fixed assets.
(iii) Premium on issue of shares and debentures.
(iv) Profit on redemption of debentures.
(v) Profit earned by a company prior to its incorporation.
(vi) Profit on forfeiture and re-issue of shares.
Capital Reserves are shown on the liabilities side of the Balance Sheet under the head “Reserve and Surplus.”

Q75. Kochi Silk Ltd. issued a prospectus inviting applications for 40,000 shares of Rs. 10 each at a premium of Rs. 8 per share, payable as follows:

Applications were collected for 80,000 shares and pro-rata allotment was made on the applications for 70,000 shares. It was decided to utilise excess application money towards the sums pending on allotment.
X, to whom 1,200 shares were allotted, failed to pay the allotment money and on his subsequent failure to pay the first call his shares were forfeited.
Y, who applied for 3,500 shares failed to pay the two calls and on his such failure, his shares were also forfeited.
Of the shares forfeited, 2,500 shares were reissued as fully paid up for Rs. 9 per share, the whole of Y’s shares included. Prepare Cash Book and Journal entries.
Sol.75

Working Note:-
(A)
Share applied 70,000 and Share allotted 40,000

Point for Students:-
When shares belonging to pro rata category are forfeited, amount in arrears on allotment is to be determined. Following process may be followed to determine the amount in arrears:
1, Calculate total number of shares applied by the shareholder whose shares are being forfeited, applying the following formula:

2. Calculate total application money received on shares applied by defaulting shareholder as under:
No. of shares applied by shareholder × Application money per share.
3. Calculate application money due on shares allotted to defaulting shareholder as under:
No. of shares allotted to shareholder × Application money per share.
4. Calculate excess application money received:-
= Application money received – Application money required
5. Calculate amount due on allotment and deduct from it the excess application money. The result is the amount in arrears on allotment.

Q76. Jupiter Ltd. issued shares of Rs. 100 each at a premium of 40% payable as follows:

Vinita, who applied for 700 shares and to whom 400 shares were allotted on pro-rata basis did not pay allotment and her shares were immediately forfeited. Pass entry for forfeiture of shares.
Sol.76

Working Note:-
Excess application money collected from Vinita:
Extra shares = 700 – 400 = 300 shares
Extra Application money collected = 300 × Rs. 50 = Rs. 15,000

(ii) (Rs.) Pending from Vinita:-

Q77. Sampras Ltd. has an authorized capital of Rs. 20,000 divided into equity shares of Rs. 10 each. The company invited applications for issuing 60,000 shares. Applications for 58,000 shares were collected.
All calls were made and were duly collected except the final call of Rs. 3 per share on 2,000 shares. These shares were forfeited.
(a) Present the share capital in the Balance Sheet of the company as per Schedule III of the Companies Act, 2013.
(b) Also prepare ‘Note to Accounts’ for the same.
Sol.77

Point for Students:-
Calculation amount due on allotment but not paid by the defaulting shareholder as follows:
Amount due on Allotment (No. of allotted share × Allotment amount per share)
Less: Excess Application Money Adjusted on Allotment
[{Applied Share – Allotted Share} × Application Money per share]
Amount not paid on Allotment

Q78. Sun Pharma Ltd. is registered with an authorized capital of Rs. 1,00,00,000 divided into 1,00,000 equity shares of Rs. 100 each. The company issued 50,000 shares at a premium of Rs. 40 per share. A shareholder holding 500 shares did not pay the final call of Rs. 20 per share. His shares were forfeited.
Present the ‘Share Capital’ in the Balance Sheet of the Company as per Schedule III Part I of the Companies Act, 2013. Also prepare notes to accounts.
Sol.78

Q79. Akshra Ltd. was incorporated with a share capital of Rs. 2 crores in shares of Rs. 100 each. The Company purchased Land & Building for Rs. 50,00,000 payable in fully paid shares of the Company. Half of the remaining shares were issued for cash and were taken up by public and fully paid for.
Pass necessary journal entries and also show the Balance Sheet of the Company.
Sol.79

Point for Students:-
Shares Application and Allotment Account is being increasingly used to record entries with respect to shares application and shares allotment when Shares Application Money is received in lump sum. In that case entries are as follows:
Bank a/c
To Share Application and Allotment A/c
Entry for appropriation of Money received and allotment of shares is passed as follows:
Shares Application and Allotment A/c Dr.
To Share Capital A/c
To Bank A/c

Q80. 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:

The issue was fully subscribed and the company allotted shares to all the applicants. All money was collected except allotment on 5,000 shares. The company did not make the call during the year.
Show the following:
(a) Share capita in the Balance Sheet of the company as per Schedules-III Part-I of the Companies Act, 2013.
(b) Also Prepare ‘Note to Accounts’ for the same.
Sol.80

Point for Students:-
Till the time forfeited shares are reissued, balance of the Forfeited Shares Account is added to paid-up capital under Subscribed Capital in the Note to Accounts on ‘Share Capital’, being part of Shareholders’ Fund shown under Equity and Liabilities part of the Balance Sheet.

Q81. Sona Ltd. purchased machinery costing Rs. 17,00,000 from Mona Ltd. Sona Ltd. paid 20% of the (Rs.) by cheque and for balance (Rs.) issued equity shares of Rs. 100 each at a premium of 25%.
Pass necessary Journal Entries for the above transactions in the books of Sona Ltd. Show your working notes clearly.
Sol.81

Point for Students:-
A company purchases some assets and instead of making the payment to the venders in the form of cash, it issues fully paid shares to the vendors. Following journal entries are made for this purpose:
(i) When assets are purchased from the vendors:
Sundry Assets A/c Dr.
To Vendor’s A/c
(ii) When shares are issued to vendors:
Vendor’s A/c Dr.
To Share Capital A/c

Q82. Z Ltd. purchased furniture costing Rs. 2,20,000 from C.D. Ltd. The payment was to be made by issue of 9% Preference Share of Rs. 100 each at a premium of Rs. 10 per share. Pass necessary Journal entries in the books of Z Ltd.
Sol.82

Q83. Nikhi Ltd. purchased a running business from Sonia Ltd. for a sum of Rs. 22,00,000 by issuing 20,000 fully paid equity shares of Rs. 100 each at a premium of 10%. The assets and liabilities consisted of the following:
Machinery Rs. 7,00,000, Debtors Rs. 2,50,000, Stock Rs. 5,00,000, Building Rs. 11,50,000 and Bills Payable Rs. 2,50,000.
Pass necessary Journal entries in the books of Nikhil Ltd. for the above transactions.
Sol.83

Point for Students:-
1. If purchase consideration given is more than net assets, then difference is debited to Goodwill Account. It is a case of Purchased Goodwill hence, will be recorded in the books.
2. If purchase consideration given is less than net assets, then the difference is credited to Capital Reserve. Either Goodwill or Capital Reserve will appear at a time.

Q84. Pass necessary journal entries for the following transactions in the books of Gopal Ltd.:
(i) Purchased furniture for Rs. 2,50,000 from M/c Furniture Mart. The payment to M/s Furniture Mart was made by issuing equity shares of Rs. 10 each at a premium of 25%
.

(ii) Purchased a running business from Aman Ltd. for a sum of Rs. 15,00,000. The payment of Rs. 12,00,000 was made by issue of fully paid equity shares of Rs. 10 each and balance by a bank draft. The assets and liabilities consisted of the following: Plant Rs. 3,50,000: Stock Rs. 4,50,000; Land and Building Rs. 6,00,000; Sundry Creditors Rs. 1,00,000.
Sol.84

Point for Students:-
Entries are to be passed for each transaction:
1. On Purchase of Assets
Sundry Assets A/c Dr.
To Vendor A/c
Sundry Assets A/c Dr.
Goodwill A/c Dr.
To Sundry Liabilities A/c
To Vendor’s A/c
To Capital Reserve A/c
3. When Shares are issued
At par:
Vendor’s A/c Dr.
To Share Capital A/c
Vendor’s A/c Dr.
To Share Capital A/c

Q85. X ltd. with a nominal capital of Rs. 50,00,000 in equity shares of Rs. 10 each, issued 2,00,000 shares payable Rs. 2.50 per share on application, Rs. 2.50 per share on allotment and Rs. 5 per share on first and final call three month later. All moneys payable on allotment were duly collected but one shareholder failed to pay the (Rs.) pending on allotment on his 2,500 shares, while another shareholder who held 2,000 shares paid for the shares first and final call also.
Make the necessary Journal entries in the company’s books to record the above transactions upto allotment of shares and show the company’s Balance Sheet.
Sol.85

Point for Students:-
The term “Paid-up” refers to that portion of called up capital which has been actually received from the shareholders. Usually the called-up Capital and the paid-up Capital are the same except that some shareholders may not have paid the amount of calls. Any update amount is called ‘Calls in arrear’. If a shareholder has paid Rs. 5 against the called-up amount of Rs. 8, then Rs. 5 is paid-up amount. Paid up capital will be called-up Capital less the amount of called in arrears.

Q86. Zee limited was registered with a capital of Rs. 20,00,000 divided into 80,000 shares of Rs. 25 each. The Company offered to the public for subscription 40,000 shares payable Rs. 7.50 per share on Application, Rs. 7.50 per share on allotment and the balance in two calls of equal (Rs.)s. The company collected applications for 46,400 shares. Applications for 4,000 shares were rejected altogether and the application money was returned to the applicants. A person who applied for 4,000 shares was allotted only 1,600 shares and the excess of his application money was carried forward towards the payment of allotment and calls.
Make Journal entries to record the above issue of shares.
Sol.86

Working Note:-
(i)

Point for Students:-
Interest on Calls-in-Advance is paid if the Articles of Association so provides. But if the Articles of Association is silent, Provision of Table F of the Companies Act, 2013 apply and the company is liable to pay interest on call-in-advance @ 12% p.a.

Q87. A Company invited applications for 50,000 equity shares of Rs. 10 each on the following terms: On application Rs. 3; On allotment Rs. 2 and on 1st and final call Rs. 5.
Applications were collected for 1,10,000 shares. It was decided;
(i) To refuse allotment to the applications for 10,000 shares,
(ii) To allot 50% to Mr. X who has applied for 20,000 shares,
(iii) To allot in full to Mr. Y who has applied for 10,000 shares,
(iv) To allot balance of the available shares pro-rata among the other applicants, and
(v) To utilize excess application money in part payment of allotment and final call.
Give journal entries assuming that the entire sum pending is collected in full. Call is made after two months of allotment and 6% p.a. interest is allowed on calls in advance.
Sol.87

Working Note:-
(i) Calculation of Allotted Shares:-

Point for Students:-
The Journal entry passed to record Calls-in-Advance is:
Bank A/c
It is adjusted when the respective call is made due. The entry is:
To Shares First Call A/c

Q88. Narmada Limited was registered with an Authorised Capital of Rs. 5,00,000 in Rs. 10 shares. Company purchased an Asset for Rs. 2,00,000 and issued fully paid shares for it. Balance 30,000 shares were issued to the public, payable as follows:

Govind, holding 100 shares failed to pay the First Call money and his shares were forfeited after the First Call.
Gopal, holding 200 shares failed to pay the Second Call and his shares were also forfeited.
Pass Journal Entries.
Sol.88

Point for Students:-
Entries are to be passed for each transaction:
1. On Purchase of Assets
Sundry Assets A/c Dr.
To Vendor A/c
Sundry Assets A/c Dr.
Goodwill A/c Dr.
To Sundry Liabilities A/c
To Vendor’s A/c
To Capital Reserve A/c

Q89. The directors of a company forfeited 1,000 equity shares of Rs. 10 each (fully called) on which Rs. 4,000 had been paid. 400 of these shares were re-issued upon payment of Rs. 3,000. Journalise the transactions of forfeiture and re-issue of shares.
Sol.89

Point for Students:-
Rate of Interest:-
Calls-in-Arrears:- As per Table F of the Companies Act, 2013 interest is charged @ 10 p.a.
Calls-in-Advance:- As per Table F of the Companies Act, 2013 interest is paid @ 12% p.a.

Q90. (A) Virender Limited forfeited 400 shares of Rs. 100 each (Rs. 60 called-up) issued at par to Mukesh on which he had paid Rs. 25 per share. Out of these, 300 shares were re-issued to Sanjeev as Rs. 60 paid-up for Rs. 45 per share. Pass entries for forfeiture and reissue of shares.

(B) The Directors of Devendra Ltd. resolved on 1st April, 2016 that 1,000 equity shares of Rs. 10 each, Rs. 8 per share called-up be forfeited for non-payment of first call of Rs. 2 per share. On 1st May 2016, 600 of these shares were re-issued at Rs. 7 per share fully paid-up. Pass entries for forfeiture and re-issue of shares.
Sol.90

Point for Students:-
The company before forfeiture must first give clear 14 days’ notice to the defaulting shareholder that unless due is paid the amount along with interest, if any, by the specified date, the shares shall be forfeited. If the shareholder still does not pay, the company may forfeit the shares by passing an appropriate resolution.

Q91. Y Ltd. invited applications for issuing 15,000 equity shares of Rs. 10 each on which Rs. 6 per share were called up, which were payable as follows

The directors forfeited those shares on which less than Rs. 6 per share were collected. The forfeited shares were re-issued at Rs. 9 per share, as Rs. 6 per share paid up.
Pass necessary journal entries for the above transaction in the books of the company.
Sol.91

Point for Students:-
Issue expenses are always written off by securities premium. Below are the necessary entries will be passed for this expense:-
To Share issued Expenses A/c

Q92. XYZ Limited has an Authorised Capital of Rs. 4,00,000 divided into shares of Rs. 20 each, the whole of which is issued and subscribed at a premium of Rs. 2 per share. The (Rs.) was payable as follows: On Application and Allotment: Rs. 10 per share: On 1st Call Rs. 4 per share (including premium) and the balance as and when required.
The company made both the calls. The application and allotment money was duly collected. But a shareholder holding 2,000 shares failed to pay both the cells and his shares were forfeited. These shares were later re-issued at Rs. 14 per share as fully paid.
Give journal entries regarding the above.
Sol.92

Point for Students:-
Shares Application and Allotment Account is being increasingly used to record entries with respect to shares application and shares allotment when Shares Application Money is received in lump sum. In that case entries are as follows:
Bank a/c
To Share Application and Allotment A/c
Entry for appropriation of Money received and allotment of shares is passed as follows:
Shares Application and Allotment A/c Dr.
To Share Capital A/c
To Bank A/c

Q93. The Mohan Ltd., has authorised capital of Rs. 5,00,000 divided into 50,000 shares of Rs. 10 each. The company issued a prospectus inviting applications for 30,000 shares of Rs. 10 each at a premium of Rs. 2 per share, payable as follows: On Application Rs. 3; On Allotment Rs. 5 (including premium); On First Call Rs. 2; On Second and Final Call Rs. 2.
The Company collected applications for 45,000 shares and pro-rata allotment was made in respect of applications of 40,000 shares and the remaining applications were rejected. Money overpaid on applications was employed on account of sums pending on allotment. All the calls were made.
B, to whom 300 shares were allotted, failed to pay the two calls. The company decided to forfeit the shares allotted to B. These shares were subsequently re-issued to C as fully paid for Rs. 9 per share.
Pass the necessary journal entries in the books of the company and prepare the Opening Balance Sheet.
Sol.93

Point for Students:-
In case, forfeited shares are reissued at par, i.e. at nominal value of share, accounting entry passed is:
Bank A/c Dr.
To Share Capital A/c
In case, the forfeited shares are reissued at discount, accounting entry passed is:
Bank A/c Dr.
Forfeited Shares A/c Dr.
To Share Capital A/c

Q94. A Ltd. forfeited 800 shares of Rs. 10 each issued at 20% premium (to be paid at the time of allotment) for non-payment of a final call of Rs. 2 per share. Out of these, 600 shares were re-issued as fully paid-up for Rs. 13 per share. Journalese.
Sol.94

Point for Students:-
The amount of forfeited shares not reissued will remain in forfeited share account till the off paid-up share capital under subscribed share capital under subscribed share capital in the note of accounts on shares capital and shown against the main head shares capital under shareholders fund is equity and liabilities part of the balance sheet.

Q95. B Ltd. forfeited 500 shares of rs. 10 each issued at 20% premium (to be paid at the time of allotment) for non-payment of the first call of Rs. 3 per share and final call of Rs. 2 per share. Out of these, 300 shares were re-issued as fully paid-up for Rs. 10 per share. Journalise.
Sol.95

Point for Students:-
The company before forfeiture must first give clear 14 days’ notice to the defaulting shareholder that unless due is paid the amount along with interest, if any, by the specified date, the shares shall be forfeited. If the shareholder still does not pay, the company may forfeit the shares by passing an appropriate resolution.

Q96. C Ltd. forfeited 300 shares of Rs. 10 each issued at 20% premium (to be paid at the time of allotment) for non-payment of allotment money of Rs. 4 per share (including premium), first call of Rs. 3 pre share and final call of Rs. 2 per share. Out of these, 200 shares were re-issued as fully paid-up at a discount of Rs. 3 per share. Journalese.
Sol.96

Point for Students:-
Till the time forfeited shares are reissued, balance of the Forfeited Shares Account is added to paid-up capital under Subscribed Capital in the Note to Accounts on ‘Share Capital’, being part of Shareholders’ Fund shown under Equity and Liabilities part of the Balance Sheet.

Q97. X ltd. forfeited 800 shares of Rs. 20 each issued at a premium of Rs. 2 per share to Mahesh (Rs. 18 called-up) on which he did not pay first call of Rs. 4. Of these, 300 shares were re-issued @ Rs. 15 per share as Rs. 18 paid-up. Journalese.
Sol.97

Point for Students:-
If Forfeiture shares issued at par:-
In this case,
(i) Share Capital Account is debited with the amount called-up upto the date of forfeiture on shares forfeited;
(ii) Shares Allotment Account and/or Shares Call Account is credited with amount called-up on forfeited shares but not paid by the shareholders. If Calls-in-Arrears Account is maintained, Calls-in-Arrears Account is credited.

Q98. X Ltd. forfeited 1,000 shares of Rs. 20 each issued at a premium of Rs. 2 per share to Ashok (Rs. 18 called -up) on which he did not pay allotment of Rs. 6 (including premium) and 1st Call of Rs. 4. Give Journal Entries for forfeiture and re-issued in the following Cases:
(i) 600 shares were re-issued to Mohan at Rs. 14 per share as Rs. 18 paid-up; (ii) 200 shares to Sohan as fully paid-up for Rs. 24 per share; and (iii) 200 shares to Suresh as fully paid-up for Rs. 10 per share at dierent interval of time.
Sol.98
(i)

Point for Students:-
Re-issue of forfeited shares means selling the shares that were cancelled by the company. These shares may be reissued by the company on the terms as it may decide. Thus, forfeited shares may be reissued by the company at par, at premium or at discount. However, if forfeited shares are reissued at discount, the amount of discount allowed on reissue of forfeited shares should not exceed the amount forfeited on reissue shares.

Q99. X ltd. forfeiture 1,000 shares of Rs, 10 (Rs. 8 called–up) issued at a premium of Rs. 2 pre share to Mr. R, for non-payment of allotment money of 5 per share (including premium). Out of these, 800 shares were re-issued to Mr. Sanjay as Rs. 8 called for Rs. 7 per share. Give the necessary Journal entries to relating to forfeiture and re-issued of shares.
Sol.99

Point for Students:-
Share Capital A/c Dr.
To Share Allotment A/c
To Share Call/Calls A/c
To Share forfeited A/c
Share Capital A/c Dr.
To Share Allotment A/c
To Share Call/Calls A/c
To Share forfeited A/c

Q100. Y Ltd. Forfeited 100 shares of Rs. 10 each issued at 20% premium (to be paid at the time of allotment) on which first call money of Rs. 3 was not collected; the final call money of Rs. 2 is not yet called. These shares were subsequently re- issued at Rs. 7 per share as Rs. 8 paid -up. Given necessary journal entries regarding forfeiture and re- issue of shares.
Sol.100

Point for Students:-
In case, forfeited shares are reissued at par, i.e. at nominal value of share, accounting entry passed is:
Bank A/c Dr.
To Share Capital A/c
In case, the forfeited shares are reissued at discount, accounting entry passed is:
Bank A/c Dr.
Forfeited Shares A/c Dr.
To Share Capital A/c

Q101. Y Ltd. Forfeited 2,000 shares of Rs. 10 each issued at 20% premium (to be paid at the time of allotment) on which first call money of Rs. 4(included premium) and first call money of Rs. 3 was not collected; the final call money of Rs. 2 is not yet called. 1,500 of these shares were re- issued at fully paid for Rs. 7 per share. Journalese.
Sol.101

Point for Students:-
The amount of forfeited shares not reissued will remain in forfeited share account till the off paid-up share capital under subscribed share capital under subscribed share capital in the note of accounts on shares capital and shown against the main head shares capital under shareholders fund is equity and liabilities part of the balance sheet.

Q102. Z Ltd. Forfeiture 1,200 shares of Rs.100 each, issued at premium of 30 % to dinesh on which he had paid application money of Rs. 50 per share and allotment money of Rs. 50 per share (including premium), for non payment of a first call of Rs. 10 per share. Out of these shares were re-issued as paid for Rs. 105 per share. Journalese.
Sol.102

Point for Students:-
The company before forfeiture must first give clear 14 days’ notice to the defaulting shareholder that unless due is paid the amount along with interest, if any, by the specified date, the shares shall be forfeited. If the shareholder still does not pay, the company may forfeit the shares by passing an appropriate resolution.

Q103. Z Ltd. Forfeiture 700 shares of Rs.100 each, issued at premium of 30 % to Ghanshyam on which he had paid application money of Rs. 35 per share, for non payment of allotment money of Rs. 50 per share (including premium), and first call of Rs. 15 per share. Out of these 400 shares were re-issued as Rs. 70 paid -up for Rs. 65 per share. Journalese.
Sol.103

Point for Students:-
Till the time forfeited shares are reissued, balance of the Forfeited Shares Account is added to paid-up capital under Subscribed Capital in the Note to Accounts on ‘Share Capital’, being part of Shareholders’ Fund shown under Equity and Liabilities part of the Balance Sheet.

Q104. 500 shares of Rs. 10 each, issued at a premium of Rs. 1 on which Rs. 8 (including premium) was called and Rs. 6 (including premium) was paid, have been forfeited. 400 of these shares were re-issued as fully paid in such a way that Rs. 800 were transferred to capital reserve. Journalese.
Sol.104

Point for Students:-
If Forfeiture shares issued at par:-
In this case,
(i) Share Capital Account is debited with the amount called-up upto the date of forfeiture on shares forfeited;
(ii) Shares Allotment Account and/or Shares Call Account is credited with amount called-up on forfeited shares but not paid by the shareholders. If Calls-in-Arrears Account is maintained, Calls-in-Arrears Account is credited.

Q105. Raja Ltd. Forfeited 400 shares of Rs. 25 each (Rs. 20n Called up) held by Asha, for non-payment of allotment money of Rs. 10 per share (including Rs. 5 per share premium) and the first call of Rs. 6 per share. Out of these, 300 shares were reissued to X as Rs. 20 called up for Rs.16 per shares.
Give journal entries for forfeiture and reissue of shares.
Sol.105

Note:
Profit on 400 shares= Rs. 3,600

Point for Students:-
Re-issue of forfeited shares means selling the shares that were cancelled by the company. These shares may be reissued by the company on the terms as it may decide. Thus, forfeited shares may be reissued by the company at par, at premium or at discount. However, if forfeited shares are reissued at discount, the amount of discount allowed on reissue of forfeited shares should not exceed the amount forfeited on reissue shares.

Q106. On April 1, 2018 the Directors of Ashoka Metals Ltd. Issued 60,000 equity shares of Rs. 10 each at Rs. 12 per share, the (Rs.) payable as Rs. 5 on application (including premium), Rs. 4 on allotment and the balance on July 15,2018.
On April 10,2018 applications were collected for 80,000 shares. Of the cash collected in excess, Rs. 40,000 were returned and Rs. 60,000 were applied towards the (Rs.) pending on allotment. The balance of allotment money was collected on April 30,2018. All the shareholders paid the call pending on July 15,2018, with the exception of one shareholder holding 500 shares. These shares were forfeited on August 31,2028.
You are required to submit Journal Entries regarding the above transactions and also prepare the Balance Sheet of the Company on August 31,2018
Sol.106

Point for Students:-
Share Capital A/c Dr.
To Share Allotment A/c
To Share Call/Calls A/c
To Share forfeited A/c
Share Capital A/c Dr.
To Share Allotment A/c
To Share Call/Calls A/c
To Share forfeited A/c

Q107. Mahadev Ltd. With an authorized capital pf Rs. 5,00,000 divided onto 50,000 equity shares pf Rs. 10 each, issues the entire (Rs.) of the shares payable as follows:

All shares money is collected in full with the exception of the allotment on 200 shares and the call money on 500 shares (including the 200 shares on which the allotment money has not been paid).
The above 500 shares are duly forfeited and 400 of these (including the 200 share on which allotment money has not been paid) are re-issued at rs. 8 per share as fully paid up. Pass journal entries (including cash transactions) and show the balances in the Balance Sheet giving effect to the above transactions.
Sol.107

Point for Students:-
The company before forfeiture must first give clear 14 days’ notice to the defaulting shareholder that unless due is paid the amount along with interest, if any, by the specified date, the shares shall be forfeited. If the shareholder still does not pay, the company may forfeit the shares by passing an appropriate resolution.

Q108. R. K. Ltd. Invited applications for issuing 70,000 Equity Shares of Rs. 10 each at a premium of Rs. 35 per share. The (Rs.) was payable as follows:

Applications for 65,000 shares were collected and allotment was made to all the applicants. A shareholder, Ram, who was allotted 2,000 shares failed to pay the allotment money. His shares were forfeited immediately after allotment. Afterwards, the first and final call was made. Sohan, who had 3,000 shares, failed to pay the first and final call. His shares were also forfeited. Out of the forfeited shares, 4,000 shares were re-issued at Rs. 50 per share fully paid up. The re-issued share included all the share of Ram.
Pass necessary journal entries for the above transactions in the books of R.K. Ltd.
Sol.108

Working Note:
Calculation of Capital Reserve:

Point for Students:-
Issue expenses are always written off by securities premium. Below are the necessary entries will be passed for this expense:-
To Share issued Expenses A/c

Q109. X Ltd. Invited applications for issuing 5,00,000 equity shares of Rs. 10 each at par. The (Rs.) per share was payable as follows:

Applications for 8,00,000 shares were collected. Applications for 1,00,000 shares were rejected and pro-rata allotment was made to the remaining applicants. Excess money collected with application was adjusted towards sums pending on allotment. All calls were made. Ashok, a shareholder holding 5,000 shares failed to pay the allotment and the call money. Mohan, a shareholder who had applied for 7,000 shares, failed to pay the first and second and final call. Shares of Ashok and Mohan were forfeited after the second and final call. Of the forfeited shares 8,000 shares were re-issued at Rs. 12 per share fully paid up. The re-issued shares included all the forfeited shares of Ashok.
Pass necessary journal entries for the above transactions in the books of X Ltd.
Sol.109

Working Note:
Calculation of Capital Reserve:

Point for Students:-
Shares Application and Allotment Account is being increasingly used to record entries with respect to shares application and shares allotment when Shares Application Money is received in lump sum. In that case entries are as follows:
Bank a/c
To Share Application and Allotment A/c
Entry for appropriation of Money received and allotment of shares is passed as follows:
Shares Application and Allotment A/c Dr.
To Share Capital A/c
To Bank A/c

Q109. X Ltd. Invited applications for issuing 5,00,000 equity shares of Rs. 10 each at par. The (Rs.) per share was payable as follows:

Applications for 8,00,000 shares were collected. Applications for 1,00,000 shares were rejected and pro-rata allotment was made to the remaining applicants. Excess money collected with application was adjusted towards sums pending on allotment. All calls were made. Ashok, a shareholder holding 5,000 shares failed to pay the allotment and the call money. Mohan, a shareholder who had applied for 7,000 shares, failed to pay the first and second and final call. Shares of Ashok and Mohan were forfeited after the second and final call. Of the forfeited shares 8,000 shares were re-issued at Rs. 12 per share fully paid up. The re-issued shares included all the forfeited shares of Ashok.
Pass necessary journal entries for the above transactions in the books of X Ltd.
Sol.109

Working Notes:

Point for Students:-
In case, forfeited shares are reissued at par, i.e. at nominal value of share, accounting entry passed is:
Bank A/c Dr.
To Share Capital A/c
In case, the forfeited shares are reissued at discount, accounting entry passed is:
Bank A/c Dr.
Forfeited Shares A/c Dr.
To Share Capital A/c

Q111. X. Ltd. Invited applications for the issue of 10,00,000 equity shares of Rs. 10 each payable as follows:

Applications for 15,00,000 shares were collected and pro-rata allotment was made to all the applicants. Excess application money was adjusted on the sums pending on first call. When the first call was made one shareholder who had applied for 15,000 shares did not pay the first call money.
Pass necessary journal entries in the books of the company.
Sol.111

Working Notes:

Point for Students:-
A shareholder may sometimes pay a part, or whole of the amount not yet called upon his shares is order to save him-self the trouble of paying different called at different times. Thus the amount of future calls is received in advance by the Company. According to Section 50 of the Companies Act 2013, such amount of calls in advance can be accepted by the Company only when it is so authorised by its Articles of Association.

Q112. Amrit ltd. Issued 50,000 shares of Rs. 10 each at a premium of Rs. 2 per share payable as Rs. 3 on application. Rs. 4 on allotment (including premium), Rs. 2 on first call and the remaining in second call.
Applications were collected for 75,000 shares and a pro-rata allotment was made to all the applicants. All money pending were collected except allotment and first call from Sonu who applied for 1,200 shares. All his shares were forfeited. The forfeited shares were reissued for Rs. 9,600. Final call was not made. Pass the necessary journal entries.
Sol.112

Working Notes:-

Q113. X ltd. Invited applications for 50,000 equity Shares of Rs. 10 each, payable Rs. 3.50 on application; Rs. 5 on allotment (Including premium Rs. 2.50); and Rs. 4 on first and final call.
The company collected applications for 65,000 shares. It was decided:

All the money pending was collected except from one applicant to whom shares had been allotted on pro – rata basis. He failed to pay allotment and call money and his 300 shares were forfeited. These shares were re-issued at Rs. 9 fully paid.
Give journal entries to record the above transactions in the books of the company.
Sol.113

Working Notes:
1.Scheme of Allotment:

Point for Students:-
When shares belonging to pro rata category are forfeited, amount in arrears on allotment is to be determined. Following process may be followed to determine the amount in arrears:
1. Calculate total number of shares applied by the shareholder whose shares are being forfeited, applying the following formula:

We can chose one formula in above.

2. Calculate total application money received on shares applied by defaulting shareholder as under:
No. of shares applied by shareholder × Application money per share.
3. Calculate application money due on shares allotted to defaulting shareholder as under:
No. of shares allotted to shareholder × Application money per share.
= Application money received – Application money required
5. Calculate amount due on allotment and deduct from it the excess application money. The result is the amount in arrears on allotment.

Q114. New Industries Limited issued a prospectus, inviting applications for 1,00,000 shares of Rs. 10 each at a premium of Rs. 5 per share, payable as follows: On Application Rs. 4.50; On allotment Rs. 7.50 (including Premium); On 1st call Rs. 2.00 and On Final Call Rs. 1.00.
Application were collected for 1,25,000 shares and allotment was made pro -rata to the applicants of 1,20,000 shares, the remaining applications refused. Money collected in excess on the application was adjusted towards the (Rs.) pending on allotment.
D, to whom 2,000 shares were allotted, failed to pay allotment money and on his failure to pay the first call, his shares were forfeited. M, the holder of 3,000 shares, failed to pay the two calls, and so hos shares were also forfeited. All these shares were sold to R, credited as fully paid for Rs. 8 per share.
Pass Cash Book and journal entries (with narrations) to record the above issue of shares by the company.
Sol.114

Working Notes:

Point for Students:-
In the case of oversubscription, shares are allotted on pro rata basis, excess application money is adjusted toward allotment money. When the shares are allotted at premium, excess application money is first applied towards Share Capital and the balance, if any, towards Securities Premium Reserve.

Q115. X Limited offered to the public 10,000 equity shares of Rs. 10 each at a premium of Rs. 2 per share payable as follows:
On application Rs. 3; On allotment (including premium) Rs. 4; On first call rs. 3 and on second and final call Rs. 2.
Application were collected for 15,000 shares.
All applications were placed under four categories and allotment was made as follows:

Except in the cases where applications were wholly rejected, excess application money was not to be refunded but to be adjusted against money pending on allotment and calls.

Point for Students:-
If Forfeiture shares issued at par:-
In this case,
(i) Share Capital Account is debited with the amount called-up upto the date of forfeiture on shares forfeited;
(ii) Shares Allotment Account and/or Shares Call Account is credited with amount called-up on forfeited shares but not paid by the shareholders. If Calls-in-Arrears Account is maintained, Calls-in-Arrears Account is credited.

Q116. Amrit Ltd. Issued a prospectus inviting applications for 20,000 shares at a premium of Rs. 2 per share payable as follows:

Applications were collected for 30,000 shares and pro-rata allotment made on applications for 24,000 shares. Excess money paid on applications for these shares was utilized towards allotment money.
Atul. Who applied for 600 shares failed to pay the allotment money and on his subsequent failure to pay the call, his shares were forfeited.
Pass the necessary entries in the book of Amrit Limited.
Sol.116

Point for Students:-
The company before forfeiture must first give clear 14 days’ notice to the defaulting shareholder that unless due is paid the amount along with interest, if any, by the specified date, the shares shall be forfeited. If the shareholder still does not pay, the company may forfeit the shares by passing an appropriate resolution.

Q117. X Ltd. Invited applications for issuing 80,000 equity shares of Rs. 10 each at a premium of rs. 2 per share. The (Rs.) was payable as follows:

Applications for 90,000 shares were collected. Applications for 5,000 shares were rejected and pro- rata allotment was made to the remaining applicants. Over payments collected on application was adjusted towards sums pending on allotment. All calls were made and were duly collected except the allotment and final call on 1,600 shares allotted to Vijay. These shares were forfeited and the forfeited shares were re-issued for Rs. 18,400 fully paid up.
Pass necessary journal entries in the books of the company.
Sol.117

Q118. A Ltd. Forfeited 400 shares of Mr. X who had applied for 600 shares on account of non- payment of allotment, first call and final call. Shares were issued at Rs.2 premium payable as follows:
On Application Rs. 3, on Allotment Rs. 3 + 2, on First call Rs. 2 and Final Call Rs. 2. Out of these, 300 shares were re-issued to Mr. Y at the rate of Rs. 12 per share as fully paid shares. Give journal entries in the books of company to record above transactions.
Sol.118

Q119. K Limited has been registered with an authorized capital of Rs. 20,00,000 divided into 20,000 shares of Rs. 100 each, of which 10,000 shares were offered for public subscription at a premium of Rs. 5 per share, payable as under:

Application were collected for 18,000 shares, of which applications for 3,000 shares were rejected outright; the rest of the applications were allotted 10,000 shares on pro-rata basis. Excess application money was transferred to allotment.
All the money were duly collected except from Sundar, holder of 200 shares, who failed to pay allotment and first call money. His shares later forfeited, and re-issued to shyam at Rs. 60 per share, Rs. 70 paid up. Final Call has not been made. Pass necessary Cash Book and journal entries in the books of K Limited.
Sol.119

Working Note:

Point for Students:-
Re-issue of forfeited shares means selling the shares that were cancelled by the company. These shares may be reissued by the company on the terms as it may decide. Thus, forfeited shares may be reissued by the company at par, at premium or at discount. However, if forfeited shares are reissued at discount, the amount of discount allowed on reissue of forfeited shares should not exceed the amount forfeited on reissue shares.

Q120. Jeevan Dhara Ltd. Invited applications for issuing 1,20,000 equity shares of Rs. 10 each at a premium od Rs. 2 per share. The (Rs.) was payable as follows:

Applications for 1,50,000 shares were collected. Shares were allotted to all the applicants on pro-rata basis. Excess money collected on applications was adjusted towards sums pending on allotment. All class were made. Manu who had applied for 3,000 shares failed to pay the (Rs.) pending on allotment and first and final call. Shares of both Manu and Madhur were forfeited. The forfeited shares were re-issued at Rs. 9 per share as fully paid up.
Pass necessary journal entries for the above transactions in the books of Jeevan Dhara Ltd.
Sol.120

Working Note:-
(A) Excess (Rs.) collected from Manu on application:

Premium is pending with allotment and only Manu has not paid the (Rs.) of allotment. Therefore, Securities Premium Reserve account has been debited from the (Rs.) of premium pending from Manu only i.e., 2,400 shares × Rs. 2= Rs. 4,800.
Point for Students:-
The amount received as Securities Premium is not cancelled i.e., Securities Premium Reserve Account is not debited when the shares are forfeited. Securities Premium Reserve Account is not debited with the amount relating to forfeited shares because Securities Premium credited to Securities Premium Reserve Account and also received can be used only for the purposes prescribed in Section 52(2) of the Companies Act, 2013.

Q121. Ganesh Ltd. Issued a prospectus inviting applications for 20,000 shares of rs. 10 each at a premium of Rs. 4 per share, payable as follows:

Applications were collected for 30,000 shares and pro-rata allotment was made on the applications for 24,000 shares. It was decided to utilize excess applications money towards the sum pending on allotment.
X, who was allotted 500 shares, failed to pay the allotment money and on his subsequent failure to pay the first call, his share were forfeited.
Y, who applied for 1,800 shares, failed to pay the two calls and his shares were forfeited after the second call.
Of the shares forfeited, 1,700 shares were re-issued as fully paid up for Rs. 8 per share, the whole of Y’s shares included.
Prepare Cash Book, Journal and balance sheet.
Sol.121

Point for Students:-
Subscribed but not fully paid up: Shares are said to be ‘Subscribed but not fully paid-up’ under the following two situations:
(i) When the company has called-up the full nominal value of the share but the shareholder has not paid some part of the nominal value of the share.
(ii) When the company has not called-up the full nominal value of the share.

Q122. Vinod papers Ltd. Invited applications for issuing 1,00,000 shares of Rs. 10 each at a premium of Rs. 4 per share payable as follows:

Applications were collected for 1,30,000 shared and pro-rata allotment was made to all applicants as follows:

Y, who belonged to the second category and who applied for 1,000 shares also failed to pay the allotment and call money. Their shares were forfeited and 1,400 of the forfeited shares were re-issued @ Rs. 9 per share as fully paid. Re-issued included whole of Y’s shares.
Prepare Cash book. Journal entries and an opening Balance Sheet.
Sol.122

Calculation of (Rs.) collected on allotment:

Point for Students:-
The term “Paid-up” refers to that portion of called up capital which has been actually received from the shareholders. Usually the called-up Capital and the paid-up Capital are the same except that some shareholders may not have paid the amount of calls. Any update amount is called ‘Calls in arrear’. If a shareholder has paid Rs. 5 against the called-up amount of Rs. 8, then Rs. 5 is paid-up amount. Paid up capital will be called-up Capital less the amount of called in arrears.

Q123. A company issued for public subscription 40,000 equity shares of Rs. 10 each at a premium of Rs. 2 per share payable as under:

Application were collected for 70,000 shares. Allotment was made pro-rata to the applicants for 50,000 shares, the remaining applications refused. Money overpaid on application was applied towards sum pending on allotment. A, to whom 1,600 share were allotted failed to pay the allotment and call money. B, to whom 2,000 shares were allotted failed to pay the two calls. The shares of A and B were subsequently forfeited after the second call was made. 3,000 of the forfeited shares were re- issued at Rs. 8 per share fully paid. The re- issued shares included all of A’s shares.
Pass journal entries in the books of the company to record the above transactions.
Sol.123

Point for Students:-
As per section 65 of the Companies Act, 2013 only an unlimited company having a share capital while converting into a limited company, may have reserve capital. In such a case, the company by a resolution may
(i) Increase the nominal amount of its share capital by increasing the nominal amount of each of its shares, and determine that no part of the increased capital shall be called up except in the event of winding up of the company.
(ii) Provide that a specified portion of its uncalled share capital shall not be called except in the event of winding up of the company

Q124.
(A) PS Ltd. Forfeited 500 equity shares of Rs. 100 each for the non- payment of first call of Rs. 30 per share. The final call of Rs. 10 per shares was not yet made. The forfeited shares were re -issued for Rs. 65,000 fully paid up. Pass necessary journal entries in the books of the company.
(B) Samta Ltd. Forfeited 800 equity shares of Rs. 100 each for the non- payment of first call of Rs. 30 per share. The final call of Rs. 20 per share was not yet made. Out of the forfeited shares 400 were re-issued at the rate of Rs. 105 per share fully paid up. Pass necessary journal entries in the books of Samta Ltd. The above transactions.
Sol.124

Point for Students:-
If Forfeiture shares issued at par:-
In this case,
(i) Share Capital Account is debited with the amount called-up upto the date of forfeiture on shares forfeited;
(ii) Shares Allotment Account and/or Shares Call Account is credited with amount called-up on forfeited shares but not paid by the shareholders. If Calls-in-Arrears Account is maintained, Calls-in-Arrears Account is credited.

Q125. Jaya Ltd. Issued 60,000 shares of Rs. 10 each at a premium of Rs. 2 per share payable as Rs. 3 on Application, Rs. 5 (including premium) on Allotment and the balance on first and final call. Applications were collected for 82,000 shares. The Directors resolved to allot as follows:

Ramesh who had applied for 900 shares in category (A), and Suresh who allotted 600 shares in category (B) failed to pay the allotment money. Calculated the (Rs.) collected on Allotment.
Sol.125

Point for Students:-
Forfeited Shares Account is credited by the amount received on the shares forfeited. The entry for forfeiture of shares is:
Share Capital A/c Dr.
To Forfeiture Shares A/c
To Shares Allotment A/c
To Share Call A/c

Q126. X Ltd. Issued 50,000 shares of Rs. 10 each at a premium of Rs. 2 per share payable as follows:
Rs. 3 on Application
Rs. 6 on Allotment (including premium) and
Rs. 3 on call.
Application were collected for 75,000 shares and pro- rata allotment was made as follows:
To the applicants of 40,000 shares, 30,000 shares were issued and for the rest 20,000 shares were issued. All money pending were collected except the allotment and call money from Ram who had applied for 1,000 shares (out of the group of 40,000 shares). All his shares were forfeited. The forfeited shares were re- issued for Rs. 7 per share fully paid -up.
Pass necessary journal entries for the above transactions.
Sol.126

Point for Students:-
Sometimes, number of shares applied for by the public is less than the number of shares offered by the Company. Such an issue is said to be under-subscribed. In such a case the accounting entries are made on the basis of the number of shares applied for.
Forfeiture of shares means cancelling the shares for non-payment of calls due. But, shares can be forfeited only if the Articles of Association of the company allows forfeiture. If any shareholder does not pay the amount of call, the company may exercise the power of forfeit the shares held by him on which amount of call is not paid.

Q127. Shiva Ltd. Invited applications for issuing 2,00,000 Equity shares of Rs. 100 each at a premium of Rs. 60 per share. The (Rs.) was payable as follows:
On application Rs. 30 per share (including premium Rs. 10).
On allotment Rs. 70 per share (including premium Rs. 50).
On first and final call the balance (Rs.).
Application for 1,90,000 shares were collected. Shares were allotted to all the applicants and the company collected all money die on allotment except Jain who had been allotted 1,000 shares, and his shares were immediately forfeited. Afterwards first and final call was made. Gupta did not pay the first and final call on his 2,000 allotted shares. His shares were also forfeited. 50 % of the forfeited shares of both Jain and Gupta were re-issued for Rs. 90 per share fully paid up.
Pass necessary journal entries in the books of Shiva Ltd. For the above transactions.
Sol.127

Point for Students:-
The company before forfeiture must first give clear 14 days’ notice to the defaulting shareholder that unless due is paid the amount along with interest, if any, by the specified date, the shares shall be forfeited. If the shareholder still does not pay, the company may forfeit the shares by passing an appropriate resolution.

Q128. X Ltd. Issued 40,000 Equity Shares of Rs. 10 each at a premium of Rs. 2.50 per share. The (Rs.) was payable as follows:

It was decided that excess (Rs.) collected on applications would on allotment and surplus would be refunded.
Ram, to whom 1,000 shares were allotted, who belong to categories a (Failed to pay allotment money. His shares were forfeited after the call.
Pass the necessary journal entries in the book of X Ltd. Fot the above transactions.
Sol.128

Working Notes:
Money pending from Ram an Allotment

Point for Students:-
Subscribed but not fully paid up: Shares are said to be ‘Subscribed but not fully paid-up’ under the following two situations:
(i) When the company has called-up the full nominal value of the share but the shareholder has not paid some part of the nominal value of the share.
(ii) When the company has not called-up the full nominal value of the share.

Q129. (i) Vishesh Ltd. Forfeited 1,000 equity Shares of Rs. 10 each issued at a premium of Rs. 2 per share for non -payment of allotment money of Rs. 5 per share including premium. The final call of Rs. 2 per share was not yet called on these shares. Of the forfeited shares 800 shares were reissued at Rs. 12 per share fully paid- up. The remaining shares were reissued at Rs. 11 per share fully paid up.
(ii) G. Ltd. forfeited 7,000 equity shares of Rs. 100 each for the non- payment of first call of Rs. 30 per share. These shares were issued at a premium of Rs. 30 per share. The second and final call of Rs. 20 per share was not yet made. The forfeited shares were re-issued at Rs. 80 per share fully paid up.
Sol.129

Point for Students:-
The amount received as Securities Premium is not cancelled i.e., Securities Premium Reserve Account is not debited when the shares are forfeited. Securities Premium Reserve Account is not debited with the amount relating to forfeited shares because Securities Premium credited to Securities Premium Reserve Account and also received can be used only for the purposes prescribed in Section 52(2) of the Companies Act, 2013.

Q130. Sun Ltd. Issued shares of Rs. 50 each at a premium of 20 % payable as follows:

Dev, who applied for 2,500 shares and to whom 1,000 shares were allotted on prorate basis, did not pay allotment and first & final call and his shares were forfeited. Pass entry for forfeiture of shares.
Sol.130

Working note:
Excess Shares applied from Dev = 2,500 shares – 1,000 shares = 1,500 Shares
Excess application money collected from Dev = 1,500 shares × Rs. 15 = Rs. 22,500

Point for Students:-
Entries Shares Forfeited of unpaid Share:-
Share Capital A/c Dr.(Total Called-up amount of share)
To Share Allotment A/c (Amount not received)
To Share First and Final Call A/c (Amount not received)
To Share Forfeited A/c (Received amount)
(Forfeited of unpaid shares)

Q131. JJk Ltd. Invited applications for issuing 50,000 equity shares of Rs. 10 each at par. The (Rs.) was payable as follows:

The issue was oversubscribed three times. Applications for 30% shares were rejected and money refunded. Allotment was made to the remaining applicants as follows:

Excess money paid by the applicants who were allotted shares was adjusted towards the sums pending on allotment.
Deepak, a shareholder belonging to category I, who had applied for 1,000 shares, failed to pay the allotment money. Raju, a shareholder holding 100 shares, also failed to pay the allotment money. Raju belonged to Category II. Share of both Deepak and Raju were forfeited immediately after allotment. Afterwards, first and final call was made and was duly collected. The forfeited shares of Deepak and Raju were reissued at Rs 11 per share fully paid up.
Pass necessary journal entries for the above transactions in the books of the company.
Sol.131

Working Notes:
Applications were collected for 50,000 × 3 = 1,50,000 shares.
Applications for 1,50,000 × 30% = 45,000 shares were rejected.

Point for Students:-
Capital reserves are those reserves which are created out of Capital profits. Capital profits are those profits which are not earned in the normal course of the business. These reserves cannot be utilised for the distribution of dividends. Following are the item that gives rise to Capital profits and hence Capital reserves:
(i) Profit on sale of fixed assets.
(ii) Profit on revolution of fixed assets.
(iii) Premium on issue of shares and debentures.
(iv) Profit on redemption of debentures.
(v) Profit earned by a company prior to its incorporation.
(vi) Profit on forfeiture and re-issue of shares.
Capital Reserves are shown on the liabilities side of the Balance Sheet under the head “Reserve and Surplus.”

Q132. Janta Ltd. Had an authorized capital of 2,00,000 equity share of Rs. 10 each. The company offered to the public for subscription 1,00,000 share. Applications were collected for 97,000 shares. The (Rs.) payable on application was Rs. 2 per share, Rs. 4 was payable each on allotment and first and final call. A shareholder holding 600 shares failed to pay the allotment money. His shares were forfeited. The company did not make the first and final call.
Present the share capital in the Balance sheet of the company as per Schedule III of the Companies Act, 2013. Also prepare Notes to accounts.
Sol.132

Point for Students:-
Revised Schedule VI does not contain the head ‘Miscellaneous Expenditure’ in the Balance Sheet. As per AS-26, Preliminary Expenses are to be written off in the year in which they are incurred. However, share issue expenses, underwriting commission, discount on shares, discount/premium on borrowing etc., being special nature items are excluded from the scope of AS-26 (Intangible Assets). These Items can be amortized over the period of benefit, i.e. normally 3 to 5 years.
Guidance notes on Revised Schedule VI issued by ‘The institute of Chartered Accounts of India’ suggests that unamortized portion of above mentioned expenses be shown on the assets side of the balance sheet as, ‘Unamortized Expenses’ under the hear ‘Other Current/Non-Current Assets’ depending on whether the amount will be amortized in the next 12 months or thereafter. Amount to be amortized in the next 12 months will be shown under the head ‘Other Current Assets’ and the amount to be amortized after 12 months will be shown under the hear ‘Other Non-Current Assets’.

Mention the features of a Company.?

Features of a Company are –
● Artificial Person
● Limited Liability
● Continued Existence
● Can Buy or Sell Assets
● Freely transferable

What is meant by Forfeiture of Shares?

Forfeiture of a share is a legal process in which a firm, with the approval from its board of directors or partners, cancels the shares of an individual, which is usually done in case of any breach of terms in the purchase agreement, such as failure in payment of call money, selling of shares during the restricted duration, etc. In simple words, forfeiture is an official step taken to restrict a shareholder’s right in the firm.

What do you mean by Preferential Allotment?

Preferential Allotment depicts the allotment of a firm’s shares on a preferential basis to few selected investors. In this case, the share is distributed at a predefined price to a set of investors who desire to acquire a strategic stake in the company.

Why do companies prefer preferential allotment?

Generally, when the companies desire to scale up their business and accumulate a large share capital, they prefer preferential allotment. In these cases, the firms have three major options to allot shares, which are –
● Issue fresh shares to the existing shareholders.
● Make an open offer to investors.
● Bulk allotment of firm’s share to different companies or a group of individuals.

Can a company offer a share of discount? What terms and conditions must be compiled before issuing such shares?

A company can only issue shares of discount if a resolution about the same is passed by all the company partners in a general meeting and is approved by the Central Government. The resolution must clearly highlight the maximum rate of discount to be availed on the shares to be issued. However, as per the pre-defined norms of the Central Government, the discount rate must not exceed 10%.

Write the conditions for the issue of shares at a discount?

Here are the conditions when the shares can be issued at a discount –
● If a company desires to issue the share at a price lower than the face value, it must mandatorily get approval from the relevant authority.
● The discount on share comes with a limitation, i.e., the discount rate cannot exceed 10%.
● The company must issue the shares within 60 days after receiving permission from the authority.

Also refer to TS Grewal Solutions for Class 12