A company issued 20,000 equity shares of Rs.10 each payable Rs.3 on application, Rs.3 on allotment, Rs.2 on first call and Rs.2 on second and the final call. The allotment money was payable on or before May 01, 2015; first call money on or before August 1st, 2015; and the second and final call on or before October 1st, 2015; ‘X’, whom 1,000 shares were allotted, did not pay the allotment and call money; ‘Y’, an allottee of 600 shares, did not pay the two calls; and ‘Z’, whom 400 shares were allotted, did not pay the final call. Pass journal entries and prepare the balance sheet of the company.
Books of the Company Journal
1. On receipt of application money: Bank A/c Dr. 60,000 To Equity Share Application A/c 60,000 (Application money received for 20,000 shares @ Rs.3 each)
2. On transfer of application money: Equity Share Application A/c Dr. 60,000 To Equity Share Capital A/c 60,000 (Application money transferred to Share Capital)
3. On allotment money due: Equity Share Allotment A/c Dr. 60,000 To Equity Share Capital A/c 60,000 (Allotment money due on 20,000 shares @ Rs.3 each)
4. On receipt of allotment money: Bank A/c Dr. 57,000 Calls in Arrears A/c Dr. 3,000 To Equity Share Allotment A/c 60,000 (Allotment money received; X did not pay for 1,000 shares: 1,000 × Rs.3 = Rs.3,000)
5. On first call money due: Equity Share First Call A/c Dr. 40,000 To Equity Share Capital A/c 40,000 (First call due on 20,000 shares @ Rs.2 each)
6. On receipt of first call money: Bank A/c Dr. 36,800 Calls in Arrears A/c Dr. 3,200 To Equity Share First Call A/c 40,000 (First call received; X: 1,000 × Rs.2 = Rs.2,000; Y: 600 × Rs.2 = Rs.1,200)
7. On second and final call due: Equity Share Second and Final Call A/c Dr. 40,000 To Equity Share Capital A/c 40,000 (Second and final call due on 20,000 shares @ Rs.2 each)
8. On receipt of second and final call money: Bank A/c Dr. 36,000 Calls in Arrears A/c Dr. 4,000 To Equity Share Second and Final Call A/c 40,000 (Final call received; X: 1,000 × Rs.2 = Rs.2,000; Y: 600 × Rs.2 = Rs.1,200; Z: 400 × Rs.2 = Rs.800)
Balance Sheet of the Company (Extract)
| Particulars | Amount (Rs.) |
|---|---|
| EQUITY AND LIABILITIES: | |
| Share Capital | |
| Authorized Capital | (Not given) |
| Issued Capital: 20,000 shares of Rs.10 each | 2,00,000 |
| Subscribed Capital: 20,000 shares of Rs.10 each | 2,00,000 |
| Less: Calls in Arrears | (10,200) |
| 1,89,800 | |
| ASSETS: | |
| Current Assets | |
| Bank | 1,89,800 |
Working Notes: Calls in Arrears Calculation:
- X (1,000 shares): Rs.3 + Rs.2 + Rs.2 = Rs.,000 = Rs.7,000
- Y (600 shares): Rs.2 + Rs.2 = Rs. = Rs.2,400
- Z (400 shares): Rs. = Rs.800
- Total Calls in Arrears = Rs.10,200
Explanation
This question tests the student's understanding of share capital accounting with calls in arrears. The key points are: (1) X defaulted on allotment and both calls, (2) Y defaulted on both calls only, and (3) Z defaulted only on the final call. The Calls in Arrears account is debited when shareholders fail to pay, and the total arrears of Rs.10,200 are deducted from the called-up capital in the Balance Sheet. The Bank balance equals total money received: Rs.60,000 + Rs.57,000 + Rs.36,800 + Rs.36,000 = Rs.1,89,800.
Solution Steps
Step 1: Calculate application money - 20,000 × Rs.3 = Rs.60,000 (fully received)
Step 2: Calculate allotment money - 20,000 × Rs.3 = Rs.60,000; arrears from X = Rs.3,000; received = Rs.57,000
Step 3: Calculate first call - 20,000 × Rs.2 = Rs.40,000; arrears from X (Rs.2,000) and Y (Rs.1,200) = Rs.3,200; received = Rs.36,800
Step 4: Calculate final call - 20,000 × Rs.2 = Rs.40,000; arrears from X (Rs.2,000), Y (Rs.1,200), Z (Rs.800) = Rs.4,000; received = Rs.36,000
Step 5: Total Calls in Arrears = Rs.3,000 + Rs.3,200 + Rs.4,000 = Rs.10,200 (but X's arrears counted once: Rs.7,000 + Rs.2,400 + Rs.800 = Rs.10,200)
Step 6: Prepare Balance Sheet with Share Capital Rs.2,00,000 minus Calls in Arrears Rs.10,200 = Rs.1,89,800