Question

Alexia Limited invited applications for issuing 1,00,000 equity shares of ₹ 10 each at premium of ₹ 10 per share.
The amount was payable as follows:

• On application ₹ 9 per share (Including premium ₹ 6 per share)
• On allotment ₹ 8 per share (Including premium ₹ 4 per share)
• On first and final call ₹ 3 per share.

Applications were received for 1,50,000 equity shares and allotment was made to the applicants as follows:
Category A: Applicants for 90,000 shares were allotted 70,000 shares.
Category B: Applicants for 60,000 shares were allotted 30,000 shares.
Excess money received on application was adjusted towards allotment and first and final call.
Shekhar, who had applied for 1200 shares failed to pay the first and final call. Shekhar belonged to category B.
Pass necessary journal entries for the above transactions in the books of Alexia Limited. Open calls in arrears and calls in advance account, wherever necessary.

Hint:

For Pro-rata Allotment: Carefully track excess application money. Adjust it against allotment first. If excess still remains AND allowed, transfer to Calls in Advance. Calculate arrears considering any advance paid by the defaulter. For Forfeiture: Debit Share Capital with Called-up Face Value, Debit Securities Premium if unpaid, Credit Share Forfeiture with amount paid towards face value, Credit unpaid call accounts. For Reissue: Debit Bank with amount received, Credit Share Capital with paid-up value. Difference is discount (Dr Share Forfeiture) or premium (Cr Securities Premium). Transfer gain [(Forfeited Amt per share - Discount per share) x No. of shares reissued] from Share Forfeiture to Capital Reserve.

Answer 1

Journal Entries for Share Issue in Alexia Limited

1. Key Information Summarized:

• Issued Shares: 1,00,000
• Face Value: Rs. 10 per share
• Premium: Rs. 10 per share
• Application: Rs. 9 (including Rs. 6 premium)
• Allotment: Rs. 8 (including Rs. 4 premium)
• First & Final Call: Rs. 3
• Applications Received: 1,50,000 shares
• Allotment Ratio:
  • Category A: Applied 90,000, Allotted 70,000
  • Category B: Applied 60,000, Allotted 30,000
• Excess Application Money: Adjusted towards allotment and calls
• Calls in Arrears: Shekhar (Category B), 1200 applied shares, failed to pay First & Final Call.

2. Calculations Before Journal Entries:

• Excess Application Money:
  • Category A: (90,000 - 70,000) × Rs. 9 = Rs. 1,80,000
  • Category B: (60,000 - 30,000) × Rs. 9 = Rs. 2,70,000
  • Total Excess Money = 1,80,000 + 2,70,000 = Rs. 4,50,000
• Shares Allotted to Shekhar: 1200 shares applied for. 30000/60000 × 1200 = 600 shares allotted.
• Amount Due on First & Final Call from Shekhar: 600 shares × Rs. 3 = Rs. 1800

3. Journal Entries

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
1. Application Money Received
	Bank Account		13,50,000
	To Equity Share Application Account			13,50,000
(Application money received on 1,50,000 shares @ Rs. 9)
2. Application Money Transferred to Share Capital & Premium
	Equity Share Application Account		13,50,000
	To Equity Share Capital Account			3,00,000
	To Securities Premium Reserve Account			6,00,000
	To Equity Share Allotment Account			4,50,000
(Application money on 1,00,000 shares transferred to share capital & securities premium and excess application money adjusted toward allotment)
3. Allotment Money Due
	Equity Share Allotment Account		8,00,000
	To Equity Share Capital Account			4,00,000
	To Securities Premium Reserve Account			4,00,000
(Allotment money due on 1,00,000 shares @ Rs. 8)
4. Allotment Money Received
	Bank Account		3,50,000
	To Equity Share Allotment Account			3,50,000
(Allotment money received after adjustment of excess application money)
5. First & Final Call Money Due
	Equity Share First & Final Call Account		3,00,000
	To Equity Share Capital Account			3,00,000
(First & final call money due on 1,00,000 shares @ Rs. 3)
6. First & Final Call Money Received (Less Arrears)
	Bank Account		2,98,200
	Calls in Arrears Account		1,800
	To Equity Share First & Final Call Account			3,00,000
(First & final call money received except on 600 shares)

Explanation of Entries:

• Entry 1: Records the total application money received.
• Entry 2: Transfers the application money to share capital and securities premium. Adjust the excess application money to Share Allotment.
• Entry 3: Records the amount due on allotment, including the premium.
• Entry 4: Records the receipt of the allotment money. The debit to bank account represents the total amount received.
• Entry 5: Records the amount due on the first and final call.
• Entry 6: Records the receipt of the first and final call money. The debit to Calls in Arrears reflects the amount not received from Shekhar.