Question

Mayank Ltd. invited applications for issuing 70,000 equity shares of 100 each. The amount was payable as follows: 
On Application  – 20 per share 
On Allotment  – 40 per share 
On First Call  – 20 per share 
On Second and Final Call  – Balance 
Applications for 1,00,000 shares were received and allotment was made to all the applicants on pro-rata basis. Jay, a shareholder who had applied for 1,000 shares, failed to pay the allotment money and his shares were forfeited immediately after the allotment. Meenakshi, the shareholder of 1,400 shares, failed to pay the first call money and her shares were forfeited just after the first call. The second and final call has not been made. 
Pass necessary journal entries in the books of the company for the above transactions.

Hint:

Always adjust excess application money in pro-rata allotment cases. Forfeiture entries must reverse the called-up amount and recognize any paid portion to Share Forfeiture A/c.

Answer 1

Step 1: Pro-rata Allotment Ratio
Applications Received = 1,00,000
Shares Issued = 70,000
Pro-rata = 10:7 ⇒ 1,000 applied = (7/10) × 1,000 = 700 shares allotted to Jay
⇒ Jay failed to pay allotment on 700 shares.
Similarly, Meenakshi = 1,400 shares (already allotted)

Step 2: Forfeiture Entry for Jay (700 shares)
Share Capital A/c Dr. 60 × 700 = 42,000
To Share Allotment A/c 40 × 700 = 28,000
To Share Forfeiture A/c 14,000

Step 3: Forfeiture Entry for Meenakshi (1,400 shares)
Share Capital A/c Dr. 80 × 1,400 = 1,12,000
To Share First Call A/c 20 × 1,400 = 28,000
To Share Forfeiture A/c 84,000

Journal Entries:

Particulars	Dr. Amount	Particulars	Cr. Amount
Share Capital A/c	42,000	To Share Allotment A/c	28,000
		To Share Forfeiture A/c	14,000
Share Capital A/c	1,12,000	To Share First Call A/c	28,000
		To Share Forfeiture A/c	84,000