Question 39 of 61intermediate🔧 ApplyNumerical6 marks

Journalise the following transactions in the books Bhushan Oil Ltd.:

(a) 200 shares of Rs.100 each issued at a premium of Rs.10 were forfeited for the non-payment of allotment money of Rs.60 per share. The first and final call of Rs.20 per share on these shares were not made. The forfeited shares were reissued at Rs.70 per share as fully paid-up. (b) 150 shares of Rs.10 each issued at a premium of Rs.4 per share payable with allotment were forfeited for non-payment of allotment money of Rs.8 per share including premium. The first and final calls of Rs.4 per share were not made. The forfeited shares were reissued at Rs.15 per share fully paid-up. (c) 400 shares of Rs.50 each issued at par were forfeited for non-payment of final call of Rs.10 per share. These shares were reissued at Rs.45 per share fully paid-up.

(Answer: Capital Reserve = (a) NIL (b) Rs. 300 (c) Rs.14,000)

(a)
Answer

Journal Entries for Case (a):

  1. Share Capital A/c Dr. Rs. 16,000 Securities Premium A/c Dr. Rs. 2,000 To Share Allotment A/c Rs. 12,000 To Share Forfeiture A/c Rs. 6,000 (200 shares forfeited for non-payment of allotment money)

  2. Bank A/c Dr. Rs. 14,000 Share Forfeiture A/c Dr. Rs. 6,000 To Share Capital A/c Rs. 20,000 (200 shares reissued at Rs. 70 per share fully paid-up)

Capital Reserve = NIL

(b)
Answer

Journal Entries for Case (b):

  1. Share Capital A/c Dr. Rs. 900 Securities Premium A/c Dr. Rs. 600 To Share Allotment A/c Rs. 1,200 To Share Forfeiture A/c Rs. 300 (150 shares forfeited for non-payment of allotment money)

  2. Bank A/c Dr. Rs. 2,250 To Share Capital A/c Rs. 1,500 To Securities Premium A/c Rs. 750 (150 shares reissued at Rs. 15 per share fully paid-up)

  3. Share Forfeiture A/c Dr. Rs. 300 To Capital Reserve A/c Rs. 300 (Transfer to Capital Reserve)

(c)
Answer

Journal Entries for Case (c):

  1. Share Capital A/c Dr. Rs. 20,000 To Share Final Call A/c Rs. 4,000 To Share Forfeiture A/c Rs. 16,000 (400 shares forfeited for non-payment of final call)

  2. Bank A/c Dr. Rs. 18,000 Share Forfeiture A/c Dr. Rs. 2,000 To Share Capital A/c Rs. 20,000 (400 shares reissued at Rs. 45 per share fully paid-up)

  3. Share Forfeiture A/c Dr. Rs. 14,000 To Capital Reserve A/c Rs. 14,000 (Transfer to Capital Reserve)

Explanation

This question tests the accounting treatment for share forfeiture and reissue. The key steps involve: (1) calculating the called-up amount, amount received, and amount not received at the time of forfeiture, (2) passing the forfeiture entry by debiting Share Capital with called-up amount, debiting Securities Premium if premium was called but not received, crediting unpaid calls, and crediting Share Forfeiture with amount actually received, and (3) passing reissue entry and calculating Capital Reserve as the balance in Share Forfeiture Account after adjusting for discount on reissue.

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