A limited company offered for subscription of 1,00,000 equity shares of Rs.10 each at a premium of Rs.2 per share, 2,00,000 10% Preference shares of Rs.10 each at par. The amount on share was payable as under:
Equity Shares | Preference Shares On Application Rs.3 per share | Rs.3 per share On Allotment Rs.5 per share (including premium) | Rs.4 per share On First Call Rs.4 per share | Rs.3 per share
All the shares were fully subscribed, called-up and paid. Record these transactions in the journal and cash book of the company:
Journal Entries
| Date | Particulars | L.F. | Debit (Rs.) | Credit (Rs.) |
|---|---|---|---|---|
| Bank A/c Dr. | 3,00,000 | |||
| To Equity Share Application A/c | 3,00,000 | |||
| (Being application money received on 1,00,000 equity shares @ Rs. 3) | ||||
| Bank A/c Dr. | 6,00,000 | |||
| To 10% Preference Share Application A/c | 6,00,000 | |||
| (Being application money received on 2,00,000 preference shares @ Rs. 3) | ||||
| Equity Share Application A/c Dr. | 3,00,000 | |||
| To Equity Share Capital A/c | 3,00,000 | |||
| (Being application money transferred to Share Capital) | ||||
| 10% Preference Share Application A/c Dr. | 6,00,000 | |||
| To 10% Preference Share Capital A/c | 6,00,000 | |||
| (Being application money transferred to Share Capital) | ||||
| Equity Share Allotment A/c Dr. | 5,00,000 | |||
| To Equity Share Capital A/c | 3,00,000 | |||
| To Securities Premium A/c | 2,00,000 | |||
| (Being allotment money due on 1,00,000 shares @ Rs. 5 including premium) | ||||
| Bank A/c Dr. | 5,00,000 | |||
| To Equity Share Allotment A/c | 5,00,000 | |||
| (Being allotment money received) | ||||
| 10% Preference Share Allotment A/c Dr. | 8,00,000 | |||
| To 10% Preference Share Capital A/c | 8,00,000 | |||
| (Being allotment money due on 2,00,000 shares @ Rs. 4) | ||||
| Bank A/c Dr. | 8,00,000 | |||
| To 10% Preference Share Allotment A/c | 8,00,000 | |||
| (Being allotment money received) | ||||
| Equity Share First Call A/c Dr. | 4,00,000 | |||
| To Equity Share Capital A/c | 4,00,000 | |||
| (Being first call money due on 1,00,000 shares @ Rs. 4) | ||||
| Bank A/c Dr. | 4,00,000 | |||
| To Equity Share First Call A/c | 4,00,000 | |||
| (Being first call money received) | ||||
| 10% Preference Share First Call A/c Dr. | 6,00,000 | |||
| To 10% Preference Share Capital A/c | 6,00,000 | |||
| (Being first call money due on 2,00,000 shares @ Rs. 3) | ||||
| Bank A/c Dr. | 6,00,000 | |||
| To 10% Preference Share First Call A/c | 6,00,000 | |||
| (Being first call money received) |
Cash Book (Bank Column Only)
| Date | Particulars | L.F. | Amount (Rs.) | Date | Particulars | L.F. | Amount (Rs.) |
|---|---|---|---|---|---|---|---|
| To Equity Share Application A/c | 3,00,000 | By Balance c/d | 32,00,000 | ||||
| To 10% Preference Share Application A/c | 6,00,000 | ||||||
| To Equity Share Allotment A/c | 5,00,000 | ||||||
| To 10% Preference Share Allotment A/c | 8,00,000 | ||||||
| To Equity Share First Call A/c | 4,00,000 | ||||||
| To 10% Preference Share First Call A/c | 6,00,000 | ||||||
| 32,00,000 | 32,00,000 |
Explanation
The solution involves calculating the specific amounts for each stage (Application, Allotment, First Call) for both Equity and Preference shares based on the number of shares and the amount payable per share as provided in the context. For Equity shares, the premium is calculated separately on allotment. Since all shares were subscribed and paid, the full amounts are received in the Bank. The Journal entries record the receipt of money and the transfer to Share Capital and Premium accounts. The Cash Book summarizes all bank receipts.
Solution Steps
Step 1: Calculate Equity Share amounts. Application: 1,00,000 shares × Rs. 3 = Rs. 3,00,000. Allotment: 1,00,000 shares × Rs. 5 = Rs. 5,00,000 (Capital Rs. 3,00,000 + Premium Rs. 2,00,000). First Call: 1,00,000 shares × Rs. 4 = Rs. 4,00,000.
Step 2: Calculate Preference Share amounts. Application: 2,00,000 shares × Rs. 3 = Rs. 6,00,000. Allotment: 2,00,000 shares × Rs. 4 = Rs. 8,00,000. First Call: 2,00,000 shares × Rs. 3 = Rs. 6,00,000.
Step 3: Pass Journal entries for receipt of application, allotment, and call money, and transfer those amounts to respective Capital and Premium accounts.
Step 4: Prepare Cash Book by recording all receipts on the debit side and calculating the closing balance (Total Receipts = Rs. 32,00,000).