Question 19 of 61advanced🔧 ApplyNumerical5 marks

Journalise the following:

(a) The directors of a company forfeited 200 equity shares of Rs.10 each on which Rs. 800 had been paid. The shares were reissued upon payment of Rs.1,500. (b) A holds 100 shares of Rs.10 each on which he has paid Re.1 per share on application. B holds 200 shares of Rs.10 each on which he has paid Re.1 on application Rs.2 on allotment. C holds 300 shares of Rs.10 each who has paid Re.1 on applications, Rs.2 on allotment and Rs.3 on first call. They all failed to pay their arrears and second call of Rs.4 per share as well. All the shares of A, B and C were forfeited and subsequently reissued at Rs.11 per share as fully Paid-up.

(a)
Answer

Journal Entries for Case (a):

  1. Equity Share Capital A/c Dr. Rs. 800 To Share Forfeiture A/c Rs. 800 (Being 200 shares forfeited for non-payment)

  2. Bank A/c Dr. Rs. 1,500 Share Forfeiture A/c Dr. Rs. 500 To Equity Share Capital A/c Rs. 2,000 (Being forfeited shares reissued as fully paid)

  3. Share Forfeiture A/c Dr. Rs. 300 To Capital Reserve A/c Rs. 300 (Being profit on reissue transferred to Capital Reserve)

(b)
Answer

Journal Entries for Case (b):

  1. Equity Share Capital A/c Dr. Rs. 6,000 To Share Forfeiture A/c Rs. 2,500 To Calls-in-Arrears A/c Rs. 3,500 (Being 600 shares forfeited for non-payment)

  2. Bank A/c Dr. Rs. 6,600 To Equity Share Capital A/c Rs. 6,000 To Securities Premium A/c Rs. 600 (Being forfeited shares reissued at a premium)

  3. Share Forfeiture A/c Dr. Rs. 2,500 To Capital Reserve A/c Rs. 2,500 (Being profit on forfeiture transferred to Capital Reserve)

Explanation

For part (a), the shares were forfeited after receiving Rs. 800 (Rs. 4 per share). Upon reissue at Rs. 1,500 for 200 shares (Rs. 7.5 per share), a discount of Rs. 500 (Rs. 2.5 per share) arises, which is debited to Share Forfeiture. The gain of Rs. 300 (Rs. 800 credit - Rs. 500 debit) is transferred to Capital Reserve. For part (b), the total amount called up is Rs. 10 per share. Amounts paid are: A (Rs. 100), B (Rs. 600), and C (Rs. 1,800), totaling Rs. 2,500 credited to Share Forfeiture. The unpaid amount (Calls-in-Arrears) is Rs. 3,500. Shares are reissued at Rs. 11 (Rs. 1 premium), so no discount exists on reissue. The entire Share Forfeiture credit of Rs. 2,500 is transferred to Capital Reserve.

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