Chapter 1 Accounting for Share Capital Solutions

Question - 21 : -
Software solution India Ltd inviting application for 20,000 equity share of Rs 100 each, payable Rs 40 on application, Rs 30 on allotment and Rs 30 on call. The company received applications for 32,000 shares. Application for 2,000 shares were rejected and money returned to Applicants. Applications for 10,000 shares were accepted in full and applicants for 20,000 share allotted half of the number of share applied and excess application money adjusted into allotment. All money received due on allotment and call. Prepare journal and cash book.

Answer - 21 : -

Books of Software Solution India Ltd. Journal
Date	Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
	Equity Share Application A/c		Dr.		12,00,000
		To Equity Share Capital A/c				8,00,000
		To Equity Share Allotment A/c				4,00,000
	(Application money transferred to Equity Share Capital for 20,000 shares @ Rs 40 and Rs 4,00,000 is adjusted towards allotment)

	Equity Share Allotment A/c		Dr.		6,00,000
		To Equity Share Capital A/c				6,00,000
	(Equity Share Allotment money due on 20,000 @ Rs 30 per share)

	Equity Share First and Final call A/c		Dr.		6,00,000
		To Equity Share Capital A/c				6,00,000
	(Equity share on First and Final call due on 20,000 @ Rs 30 per share)

Cash Book (Bank Column)
Dr.				Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
	Equity Share Application		12,80,000		Equity Share Application		80,000
	Equity Share Allotment		2,00,000		Balance c/d		20,00,000
	Equity Share First and Final Call		6,00,000
			20,80,000				20,80,000

Working Note:

Amount due on Allotment for 20,000 shares @ Rs 30 per share	6,00,000
Money adjusted on application 10,000 shares @ Rs 40 each	4,00,000
Money to be received on Allotment	2,00,000

Question - 22 : -
Rupak Ltd. issued 10,000 shares of Rs 100 each payable Rs 20 per share on application, Rs 30 per share on allotment and balance in two calls of Rs 25 per share. The application and allotment money were duly received. On first call all member pays their dues except one member holding 200 shares, while another member holding 500 shares paid for the balance due in full. Final call was not made.

Give journal entries and prepare cash book.

Answer - 22 : -

Books of Rupak Ltd. Journal
Date	Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
	Share Application A/c		Dr.		2,00,000
		To Share Capital A/c				2,00,000
	(Application money for 10,000 shares transferred to Share Capital Account)

	Share Allotment A/c		Dr.		3,00,000
		To Share Capital A/c				3,00,000
	(Allotment money due on 10,000 shares @ Rs 30 per share)

	Share First Call A/c		Dr.		2,50,000
		To Share Capital A/c				2,50,000
	(Share First Call due on 10,000 shares @ Rs 25 per share)

	Calls in Arrears A/c		Dr.		5,000
		To Share First Call A/c				5,000
	(Call in arrears on 200 shares @ Rs 25 per share)

Cash Book (Bank Column)
Dr.				Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
	Share Application		2,00,000
	Share Allotment		3,00,000
	Share first call		2,45,000		By Balance c/d		7,57,500
	Calls in Advance		12,500
			7,57,500				7,57,500

Working Note:

Money due on First Call for 10,000 shares @ 25 each		2,50,000
	Less: Calls in Arrear for 200 shares @ Rs 25 per Share	(5,000)
	Money Received on First Call	2,45,000
	Add: Calls received in advance on 500 shares @ Rs25 per share	12,500
		2,57,500

Question - 23 : -
Mohit Glass Ltd. issued 20,000 shares of Rs 100 each at Rs 110 per share, payable Rs 30 on application, Rs 40 on allotment (including Premium), Rs 20 on first call and Rs 20 on final call. The applications were received for 24,000 shares and allotted 20,000 shares and reject 4,000 shares and amount returned thereon. The money was duly received.
Give journal entries.

Answer - 23 : -

Books of Mohit Glass Ltd. Journal
Date	Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c		Dr.		7,20,000
		To Share Application A/c				7,20,000
	(Application money received on application for 24,000 shares @ Rs 30 per share)

	Share Application A/c		Dr.		7,20,000
		To Share Capital A/c (Bank Column)				6,00,000
		To Bank A/c				1,20,000
	(Share Application of 20,000 shares @ Rs 30 transferred to Share Capital Account and the balance returned)

	Share Allotment A/c		Dr.		8,00,000
		To Share Capital A/c				6,00,000
		To Share Premium A/c				2,00,000
	(Allotment money due on 20,000 shares @ 40 per share including Rs 10 for premium)

	Bank A/c		Dr.		8,00,000
		To Share Allotment A/c				8,00,000
	(Allotment money received on 20,000 shares @ Rs 40 per share)

	Share First Call A/c		Dr.		4,00,000
		To Share Capital A/c				4,00,000
	(Share First Call money due on 20,000 shares @ Rs 20 per share)

	Bank A/c		Dr.		4,00,000
		To Share First Call A/c				4,00,000
	(Share First Call money received on 20,000 shares @ Rs 20 per share)

	Share Final Call A/c		Dr.		4,00,000
		To Share Capital A/c				4,00,000
	(Share Final Call money due on 20,000 shares @ Rs 20 per share)

	Bank A/c		Dr.		4,00,000
		To Share Final Call A/c				4,00,000
	(Share Final Call money received on 20,000 shares @ Rs 20 per share)

Question - 24 : -
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 :

Answer - 24 : -

Books of A Ltd. Journal
Date	Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
	Equity Share Application A/c		Dr.		3,00,000
	10% Preference Share Application A/c		Dr.		6,00,000
		To Equity Share Capital A/c				3,00,000
		To 10% Preference Share Capital A/c				6,00,000
	(Application money transferred to Equity Share Capital )

	Equity Share Allotment A/c		Dr.		5,00,000
	10% Preference Share Allotment A/c		Dr.		8,00,000
		To Equity Share Capital A/c				3,00,000
		To Securities Premium A/c				2,00,000
		To 10% Preference Share Allotment A/c				8,00,000
	(Amount due on allotment)

	Equity Share First and Final Call A/c		Dr.		4,00,000
	10% Preference Share First and Final Call A/c		Dr.		6,00,000
		To Equity Share Capital A/c				4,00,000
		To 10% Preference Share Capital A/c				6,00,000
	(Amount on First and Final call due)

Cash Book( Bank Column)
Dr.				Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
	Equity Share Application		3,00,000
	10% Preference Share Application		6,00,000
	Equity Share Allotment		5,00,000
	10% Preference Share Allotment		8,00,000
	Equity Share First and Final Call		4,00,000		Balance c/d		32,00,000
	10% Preference Share First & Final Call		6,00,000
			32,00,000				32,00,000

Question - 25 : -
Eastern Company Limited, having an authorised capital of Rs 10,00,000 in shares of Rs 10 each, issued 50,000 shares at a premium of Rs 3 per share payable as follows :

Applications were received for 60,000 shares and the directors allotted the shares as follows :
(a) Applicants for 40,000 shares received shares, in full.
(b) Applicants for 15,000 shares received an allotment of 8,000 shares.
(c) Applicants for 500 shares received 200 shares on allotment, excess money being returned.
All amounts due on allotment were received.
The first call was duly made and the money was received with the exception of the call due on 100 shares.
Give journal and cash book entries to record these transactions of the company. Also prepare the Balance Sheet of the company.

Answer - 25 : -

Note: In order to solve this question, applicants of category C has been assumed as 5000 instead of 500 and allotment to the applicants of this category has been taken as 2000 in place of 200.

Books of Eastern Company Limited
Date	Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
	Share Application A/c		Dr.		1,80,000
		To Share Capital A/c				1,50,000
		To Share Allotment A/c				30,000
	(Share Application money for 50,000 shares transferred to Share Capital Account and the excess money transferred to Share Allotment Account)

	Share Allotment A/c		Dr.		2,50,000
		To Share Capital A/c				1,00,000
		To Share Premium A/c				1,50,000
	(Allotment money due on 50,000 share @ Rs 5 per share including Rs 3 security premium)

	Share First Call A/c		Dr.		1,50,000
		To Share Capital A/c				1,50,000
	(First call due on 50,000 share @ Rs 3 per share)

Cash Book (Bank Column)
Dr.							Cr.
Date	Particulars	J.F.	Amount Rs	Date	Particulars	J.F.	Amount Rs
	Share Application		1,80,000
	Share Allotment		2,20,000		Balance c/d		5,49,700
	Share First Call		1,49,700
			5,49,700				5,49,700

Eastern Company Limited
Balance Sheet
Particulars	Note No.	Amount (Rs)
I. Equity and Liabilities
1.Shareholders’ Funds
a. Share Capital	1	3,99,700
b. Reserves and Surplus	2	1,50,000
2.Non-Current Liabilities
3.Current Liabilities
Total		5,49,700

II. Assets
1.Non-Current Assets
2.Current Assets
a. Cash and Cash Equivalents	3	5,49,700
Total		5,49,700

NOTES TO ACCOUNTS

Note No.	Particulars		Amount (Rs)
1	Share Capital
	Authorised Share Capital
	1,00,000 shares of Rs 10 each		10,00,000
	Issued Share Capital
	50,000 shares of Rs 10 each		5,00,000
	Subscribed, Called up and Paid up Share Capital
	50,000 shares of Rs 10 each, Rs 8 called-up	4,00,000
	Less: Calls-in-Arrears	(300)	3,99,700

2	Reserves and Surplus
	Securities Premium		1,50,000

3	Cash and Cash Equivalents
	Cash at Bank		5,49,700

Question - 26 : -
Sumit Machine Ltd. issued 50,000 shares of Rs. 100 each at premium of 5%. The shares were payable Rs. 25 on application, Rs. 50 on allotment and Rs. 30 on first and final call. The issue was fully subscribed and money was duly received except the final call on 400 shares. The premium was adjusted on allotment.
Give journal entries and prepare balance sheet.

Answer - 26 : -

Books of Sumit Machine Ltd.
Date	Particulars			L.F.	Debit Amount (₹)	Credit Amount (₹)
	Bank A/c		Dr.		12,50,000
		To Share Application A/c				12,50,000
	(Share Application money received on application for 50,000 shares @ ₹25 per share)

	Share Application A/c		Dr.		12,50,000
		To Share Capital A/c				12,50,000
	(Share Application money of 50,000 shares transferred to Share Capital Account)

	Share Allotment A/c		Dr.		25,00,000
		To Share Capital A/c				22,50,000
		To Securities Premium A/c				2,50,000
	(Share Allotment money due on 50,000 shares @ ₹45 each at a premium of ₹5)

	Bank A/c		Dr.		25,00,000
		To Share Allotment A/c				25,00,000
	(Allotment money received for 50,000 shares @ ₹50 per share)

	Share First and Final Call A/c		Dr.		15,00,000
		To Share Capital A/c				15,00,000
	(Share First and Final call due on 50,000 shares @ ₹30 per share)

	Bank A/c		Dr.		14,88,000
	Calls in Arrears A/c		Dr.		12,000
		To Share First and Final Call A/c				15,00,000
	(Share First and Final Call received except 400 shares)

Sumit Machine Ltd.
Balance Sheet
Particulars	Note No.	Amount (₹)
I. Equity and Liabilities
1. Shareholders’ Funds
a. Share Capital	1	49,88,000
b. Reserves and Surplus	2	2,50,000

2. Non-Current Liabilities
3. Current Liabilities
Total		52,38,000
II. Assets
Non-Current Assets
Current Assets
a. Cash and Cash Equivalents	3	52,38,000
Total		52,38,000

NOTES TO ACCOUNTS

Note No.	Particulars		Amount (₹)
1	Share Capital
	Authorised Share Capital
	…….. shares of ₹ 100 each		-
	Issued Share Capital
	50,000 shares of ₹ 100 each		50,00,000
	Subscribed, Called-up and Paid-up Share Capital
	50,000 shares of ₹ 100 each	50,00,000
	Less: Calls-in-Arrears	(12,000)	49,88,000

2	Reserves and Surplus
	Securities Premium Reserve		2,50,000

3	Cash and Cash Equivalents
	Cash at Bank		52,38,000

Question - 27 : -
Kumar Ltd. purchased assets of Rs. 6,30,000 from Bhanu Oil Ltd. Kumar Ltd. issued equity share of Rs. 100 each fully paid in consideration. What journal entries will be made, if the shares are issued, (a) at par, and (b) at premium of 20%.

Answer - 27 : -

Case (a)

Books of Kumar Ltd
Date	Particulars			L.F.	Debit Amount (₹)	Credit Amount (₹)
	Sundry Assets A/c		Dr.		6,30,000
		To Bhanu Oil Ltd				6,30,000
	(Assets purchased from Bhanu Oil Ltd.)

(a)	Bhanu Oil Ltd		Dr.		6,30,000
		To Share Capital A/c				6,30,000
	(6,300 shares issued at par to Bhanu Ltd.)

Case (b)

Date	Particulars				L.F.	Debit Amount (₹)	Credit Amount (₹)
	Sundry Assets A/c			Dr.		6,30,000
		To Bhanu Oil Ltd					6,30,000
	(Assets purchased from Bhanu Oil Ltd.)

	Bhanu Oil Ltd			Dr.		6,30,000
			To Share Capital A/c				5,25,000
			To Securities Premium A/c				1,05,000
	(5,250 share are issued at 20% premium to Bhanu Ltd. in consideration of assets purchased)

Question - 28 : -
Bansal Heavy machine Ltd purchased machine worth Rs 3,20,000 from Handa Trader. Payment was made as Rs 50,000 cash and remaining amount by issue of equity share of the face value of Rs 100 each fully paid at an issue price of Rs 90 each.
Give journal entries to record the above transaction.

Answer - 28 : -

Book of Bansal Heavy Machine Ltd
Date	Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
	Machinery A/c		Dr.		3,20,000
		To Cash A/c				50,000
		To Handa Traders				2,70,000
	(Machine purchased from Handa Traders paid Rs 50,000 in cash immediately)

	Handa Trader		Dr.		2,79,000
	Discount on Issue of Shares A/c		Dr.		30,000
		To Share Capital A/c				3,00,000
	(3,000 share issued at Rs 90 face value of Rs 100 each to Handa Traders in consideration of amount due to him for machinery purchased)

Working Notes:-

1. Number of share issued

Question - 29 : -
Naman Ltd issued 20,000 shares of Rs 100 each, payable Rs 25 on application, Rs 30 on allotment , Rs 25 on first call and The balance on final call. All money duly received except Anubha, who holding 200 shares did not pay allotment and calls money and Kumkum, who holding 100 shares did not pay both the calls. The directors forfeited shares of Anubha and kumkum.

Answer - 29 : -

Books of Naman Ltd
Date	Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c		Dr.		5,00,000
		To Share Application A/c				5,00,000
	(Shares Application money received for 20,000 shares @ Rs 25 each)

	Share Application A/c		Dr.		5,00,000
		To Share Capital				5,00,000
	(Share Application money of 20,000 shares @ Rs 25 each transferred to Share Capital Account)

	Share Allotment A/c		Dr.		6,00,000
		To Share Capital A/c				6,00,000
	(Share Allotment due on 20,000 shares @ Rs 30 each)

	Bank A/c		Dr.		5,94,000
		To Share Allotment A/c				5,94,000
	(Allotment money received for 19,800 shares @ Rs 30 per share)

	Share First Call A/c		Dr.		5,00,000
		To Share Capital A/c				5,00,000
	(Share First Call money due on 20,000 @ Rs 25 per share)

	Bank A/c		Dr.		4,92,500
		To Share First Call A/c				4,92,500
	(Share First Call received @ Rs 25 per share for 19,700 shares)

	Share Final Call A/c		Dr.		4,00,000
		To Share Capital A/c				4,00,000
	(Share Final Call money due on 20,000 shares @ 20 per share)

	Bank A/c		Dr.		3,94,000
		To Share final call A/c				3,94,000
	(Share Final Call received @ Rs 20 per Share for 19,700 shares and 300 shares failed to pay the call)

	Share Capital A/c		Dr.		30,000
		To Share Forfeiture A/c (200×25+100×55)				10,500
		To Share Allotment (200×30)				6,000
		To Share First Call A/c (300×25)				7,500
		To Share Final Call A/c (300×20)				6,000
	(300 Shares forfeited)

Alternatively this question can be solved by debiting Callsin Arrears Account

Books of Naman Ltd
Date	Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c		Dr.		5,00,000
		To Share Application A/c				5,00,000
	(Share Application money received on application for 20,000 shares @ Rs 25 per share)

	Share Application A/c		Dr.		5,00,000
		To Share Capital A/c				5,00,000
	(Share Application money for 20,000 shares @ Rs 25 per share transferred to Share Capital Account)

	Share Allotment A/c		Dr.		6,00,000
		To Share Capital A/c				6,00,000
	(Share Allotment money due on 20,000 shares @ Rs 30 per share)

	Bank A/c		Dr.		5,94,000
	Calls in Arrears A/c		Dr.		6,000
		To Share Allotment A/c				6,00,000
	(Allotment money received for 19,800 shares @ Rs 30 per share and 200 shares failed to pay the Allotment)

	Share First Call A/c		Dr.		5,00,000
		To Share Capital A/c				5,00,000
	(Share First Call money due on 20,000 shares @ Rs 25 per share)

	Bank A/c		Dr.		4,92,500
	Calls in Arrears A/c		Dr.		7,500
		To Share First Call A/c				5,00,000
	(Share First Call money for 19,700 shares @ Rs 25 each received except 300 shares)

	Share Final Call A/c		Dr.		4,00,000
		To Share Capital A/c				4,00,000
	(Share Final Call money due on 20,000 shares @ Rs 20 per share)

	Bank A/c		Dr.		3,94,000
	Calls in Arreras A/c		Dr.		6,000
		To Share final call A/c				4,00,000
	(Share Final Call money received for 19,700 shares @ Rs 20 per share except 300 shares)

	Share Capital A/c		Dr.		30,000
		To Share Forfeiture A/c (200×25+100×55)				10,500
		To Calls in Arrears A/c				19,500
	(300 Shares forfeited on account failed to pay the money due)

Working Note:

1. Forfeited Amount

Amount on application	(300 shares @ Rs 25 each)	=	7,500
Amount on allotment	(100 Shares @ Rs 30 each)	=	3,000
			10,500

Question - 30 : -
Kishna Ltd issued 15,000 shares of Rs 100 each at a premium of Rs 10 per share, payable as follows:

All the shares subscribed and the company received all the money due, With the exception of the allotment and call money on 150 shares. These shares were forfeited and reissued to Neha as fully paid share of Rs 12 each.
Give journal entries in the books of the company.

Answer - 30 : -

Books of Krishna Ltd
Date	Particulars			L.F.	Debit Amount Rs	Credit Amount Rs
	Bank A/c		Dr.		4,50,000
		To Share Application A/c				4,50,000
	(Share Application money received for 15,000 shares @ Rs 30 per share)

	Share Application A/c		Dr.		4,50,000
		To Share Capital A/c				4,50,000
	(Share Application money of 15,000 shares transferred to Share Capital Account)

	Share Allotment A/c		Dr.		7,50,000
		To Share Capital A/c				6,00,000
		To Securities Premium A/c				1,50,000
	(Share Allotment money on 15,000 shares @ Rs 50 per share including Rs 10 securities premium due)

	Bank A/c		Dr.		7,42,500
		To Share Allotment A/c				7,42,500
	(Share Allotment received on 14,850 shares and 150 shares failed to pay the money due)

	Share First and Final Call A/c		Dr.		4,50,000
		To Share Capital A/c				4,50,000
	(Share First and Final Call for 15,000 shares @ Rs 30 per share due)

	Bank A/c		Dr.		4,45,500
		To Share First and Final Call A/c				4,45,500
	(Share First and Final Call received for 14,850 shares @ Rs 30 per share and 150 shares failed to pay amount due)

	Share Capital A/c (150×100)		Dr.		15,000
	Share Premium A/c (150×10)		Dr.		1,500
		To Share Allotment A/c (150×50)				7,500
		To Share First and Final Call A/c (150×30)				4,500
		To Share Forfeiture A/c (150×30)				4,500
	(150 shares forfeited for non-payment of Share Allotment and Share First and Final Call )

	Bank A/c		Dr.		18,000
		To Share Capital A/c				15,000
		To Securities Premium A/c				3,000
	(150 shares of Rs 100 each reissued @ Rs 120 to Neha)

	Share Forfeiture A/c		Dr.		4,500
		To Capital Reserve A/c				4,500
	(Balance of Share Forfeiture Account transferred to Capital Reserve Account)

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