Question

'Parimal Company Ltd.' issued 1,00,000 preference shares of ₹ 20 each payable as .... On application ₹ 8
On allotment ₹ 6
On first call ₹ 4
On final call ₹ 2
Company received application for all these shares and received all the money.
Pass journal entries in the books of 'Parimal Company Ltd.'

Hint:

When all money is received in advance, the journal entries reflect only the installment amounts and are recorded under their respective heads such as Share Application, Share Allotment, First Call, and Final Call.

Answer 1

We need to pass the journal entries for the issuance and receipt of the money for the preference shares. The total value of each share is ₹ 20, and payments are received in installments.

Step 1: Journal Entry for Share Application The company received ₹ 8 per share on 1,00,000 shares. Therefore, the total amount received is: \[ 1,00,000 \times 8 = ₹ 8,00,000 \] The journal entry for the receipt of the application money is: \begin{verbatim} Bank A/c Dr. 8,00,000 To Share Application A/c 8,00,000 \end{verbatim}

Step 2: Journal Entry for Share Allotment The company received ₹ 6 per share on 1,00,000 shares. Therefore, the total amount received is: \[ 1,00,000 \times 6 = ₹ 6,00,000 \] The journal entry for the receipt of the allotment money is: \begin{verbatim} Bank A/c Dr. 6,00,000 To Share Allotment A/c 6,00,000 \end{verbatim}

Step 3: Journal Entry for Share First Call The company received ₹ 4 per share on 1,00,000 shares. Therefore, the total amount received is: \[ 1,00,000 \times 4 = ₹ 4,00,000 \] The journal entry for the receipt of the first call money is: \begin{verbatim} Bank A/c Dr. 4,00,000 To Share First Call A/c 4,00,000 \end{verbatim}

Step 4: Journal Entry for Share Final Call The company received ₹ 2 per share on 1,00,000 shares. Therefore, the total amount received is: \[ 1,00,000 \times 2 = ₹ 2,00,000 \] The journal entry for the receipt of the final call money is: \begin{verbatim} Bank A/c Dr. 2,00,000 To Share Final Call A/c 2,00,000 \end{verbatim}

Final Answer: \begin{verbatim} 1. Bank A/c Dr. 8,00,000 To Share Application A/c 8,00,000 2. Bank A/c Dr. 6,00,000 To Share Allotment A/c 6,00,000 3. Bank A/c Dr. 4,00,000 To Share First Call A/c 4,00,000 4. Bank A/c Dr. 2,00,000 To Share Final Call A/c 2,00,000 \end{verbatim}