Alfa Company Ltd. issued 10,000 shares of Rs.10 each for cash payable Rs.3 on application, Rs.2 on allotment and the balance in two equal instalments. The allotment money was payable on or before March 31, 2015; the first call money on or before 30 June, 2015; and the final call money on or before August, 31. 2015. Mr. ‘A’, to whom 600 shares were allotted, paid the entire remaining face value of shares allotted to him on allotment. Record journal entries in company’s books and also exhibit the share capital in the balance sheet on the date.
JOURNAL ENTRIES IN THE BOOKS OF ALFA COMPANY LTD.
| Date 2015 | Particulars | L.F. | Debit (Rs.) | Credit (Rs.) |
|---|---|---|---|---|
| Bank A/c Dr. | 30,000 | |||
| To Share Application A/c | 30,000 | |||
| (Application money received for 10,000 shares @ Rs.3 each) |
| Share Application A/c Dr. | | 30,000 | | | To Share Capital A/c | | | 30,000 | (Application money transferred to Share Capital) | | | |
| Share Allotment A/c Dr. | | 20,000 | | | To Share Capital A/c | | | 20,000 | (Allotment money due on 10,000 shares @ Rs.2 each) | | | |
| Bank A/c Dr. | | 23,000 | | | To Share Allotment A/c | | | 20,000 | To Calls-in-Advance A/c | | | 3,000 | (Allotment money received; Mr. A paid Rs.4,200 including Rs.3,000 as calls-in-advance) | | | |
| Share First Call A/c Dr. | | 25,000 | | | To Share Capital A/c | | | 25,000 | (First call due on 10,000 shares @ Rs.2.50 each) | | | |
| Bank A/c Dr. | | 23,500 | | | Calls-in-Advance A/c Dr. | | 1,500 | | | To Share First Call A/c | | | 25,000 | (First call received from 9,400 shares; Mr. A's advance adjusted) | | | |
| Share Final Call A/c Dr. | | 25,000 | | | To Share Capital A/c | | | 25,000 | (Final call due on 10,000 shares @ Rs.2.50 each) | | | |
| Bank A/c Dr. | | 23,500 | | | Calls-in-Advance A/c Dr. | | 1,500 | | | To Share Final Call A/c | | | 25,000 | (Final call received from 9,400 shares; Mr. A's advance adjusted) | | | |
BALANCE SHEET EXTRACT AS ON AUGUST 31, 2015
| Particulars | Amount (Rs.) |
|---|---|
| I. Equity and Liabilities | |
| 1. Shareholder's Funds: | |
| (a) Share Capital | |
| Authorised Capital ... | |
| Issued Capital: 10,000 shares of Rs.10 each | 1,00,000 |
| Subscribed and Fully Paid Capital | 1,00,000 |
Explanation
This question tests the concept of calls-in-advance. When a shareholder pays the remaining face value before the calls are made, the excess amount is credited to 'Calls-in-Advance A/c'. Mr. A paid Rs.4,200 (Rs. shares) on allotment, which includes allotment money (Rs.1,200) and calls-in-advance (Rs.3,000). As each call is made, the advance is adjusted against the call amount due.
Solution Steps
Step 1: Calculate amount payable per share - Application Rs.3, Allotment Rs.2, First Call Rs.2.50, Final Call Rs.2.50 (Balance Rs.5 ÷ 2 instalments)
Step 2: Calculate Mr. A's advance payment - Remaining face value after application = Rs.7 per share × 600 shares = Rs.4,200. This includes allotment Rs.1,200 + advance Rs.3,000
Step 3: Pass journal entries for application, allotment, first call and final call with proper adjustment of calls-in-advance
Step 4: Prepare Balance Sheet showing subscribed and fully paid capital of Rs.1,00,000 (all calls received by August 31, 2015)