Arushi Computers Ltd. issued 10,000 equity shares of Rs.100 each at 10% premium. The net amount payable as follows:
On application Rs.20 On allotment Rs.50 (Rs.40 + premium Rs.10 ) On first call Rs.30 On final call Rs.10
A shareholder holding 200 shares did not pay final call. His shares were forfeited. Out of these 150 shares were reissued to Ms.Sonia at Rs.75 per share.
Give journal entries in the books of the company. (Answer: Capital Reserve = Rs.9,750)
Journal Entries in the books of Arushi Computers Ltd.
| Date | Particulars | L.F. | Debit (Rs.) | Credit (Rs.) |
|---|---|---|---|---|
| 1 | Bank A/c Dr. | 2,00,000 | ||
| To Share Application A/c | 2,00,000 | |||
| (Application money received on 10,000 shares @ Rs.20) | ||||
| 2 | Share Application A/c Dr. | 2,00,000 | ||
| To Share Capital A/c | 2,00,000 | |||
| (Application money transferred) | ||||
| 3 | Share Allotment A/c Dr. | 5,00,000 | ||
| To Share Capital A/c | 4,00,000 | |||
| To Securities Premium A/c | 1,00,000 | |||
| (Allotment due on 10,000 shares @ Rs.50 including premium Rs.10) | ||||
| 4 | Bank A/c Dr. | 5,00,000 | ||
| To Share Allotment A/c | 5,00,000 | |||
| (Allotment money received) | ||||
| 5 | Share First Call A/c Dr. | 3,00,000 | ||
| To Share Capital A/c | 3,00,000 | |||
| (First call due @ Rs.30) | ||||
| 6 | Bank A/c Dr. | 3,00,000 | ||
| To Share First Call A/c | 3,00,000 | |||
| (First call money received) | ||||
| 7 | Share Final Call A/c Dr. | 1,00,000 | ||
| To Share Capital A/c | 1,00,000 | |||
| (Final call due @ Rs.10) | ||||
| 8 | Bank A/c Dr. | 98,000 | ||
| Calls-in-Arrears A/c Dr. | 2,000 | |||
| To Share Final Call A/c | 1,00,000 | |||
| (Final call received on 9,800 shares; 200 shares failed to pay) | ||||
| 9 | Share Capital A/c Dr. | 20,000 | ||
| To Share Forfeiture A/c | 18,000 | |||
| To Calls-in-Arrears A/c | 2,000 | |||
| (200 shares forfeited for non-payment of final call) | ||||
| 10 | Bank A/c Dr. | 11,250 | ||
| Share Forfeiture A/c Dr. | 3,750 | |||
| To Share Capital A/c | 15,000 | |||
| (150 shares reissued @ Rs.75 fully paid up) | ||||
| 11 | Share Forfeiture A/c Dr. | 9,750 | ||
| To Capital Reserve A/c | 9,750 | |||
| (Profit on reissue transferred to Capital Reserve) |
Calculation of Capital Reserve:
Amount forfeited on 200 shares = 200 × Rs.90 = Rs.18,000
Proportionate forfeiture for 150 shares = Rs.18,000 × (150/200) = Rs.13,500
Loss on reissue of 150 shares = 150 × Rs.25 = Rs.3,750
Capital Reserve = Rs.13,500 - Rs.3,750 = Rs.9,750
Explanation
This question tests understanding of share issue at premium, forfeiture for non-payment of final call, and reissue at discount. The key points are: (1) Premium is received on allotment and goes to Securities Premium A/c, not Share Forfeiture; (2) Forfeiture amount = Amount received before default (Application Rs.20 + Allotment Rs.40 + First Call Rs.30 = Rs.90 per share); (3) On reissue at Rs.75 (discount of Rs.25), Share Forfeiture A/c is debited; (4) Capital Reserve = Proportionate forfeiture credit minus loss on reissue.
Solution Steps
Step 1: Pass journal entries for share issue - application, allotment (including premium), first call, and final call
Step 2: Record forfeiture entry - Share Capital A/c debited by called-up amount (Rs. = Rs.20,000), Share Forfeiture credited with amount received (Rs. = Rs.18,000), Calls-in-Arrears credited with unpaid amount (Rs. = Rs.2,000)
Step 3: Pass reissue entry - Bank debited with amount received (150 × Rs.75 = Rs.11,250), Share Forfeiture debited with discount (150 × Rs.25 = Rs.3,750), Share Capital credited with face value (150 × Rs.100 = Rs.15,000)
Step 4: Calculate Capital Reserve = (Rs.18,/200) - Rs.3,750 = Rs.13,500 - Rs.3,750 = Rs.9,750