Poonam Ltd. forfeited 2,00,000 equity shares of ₹10 each issued at a premium of ₹5 per share for the non-payment of the first call of ₹2 per share. The second and final call of ₹3 per share was not yet made. The forfeited shares were reissued at a discount of ₹1 per share fully paid up. Pass necessary journal entries for the above transactions in the books of Poonam Ltd. Also prepare Share Forfeiture Account.
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Solution and Explanation
Face Value of Share = ₹10, Premium = ₹5, Issue Price = ₹15
Calls Made = Application (₹5) + Allotment (incl. premium) (₹5 + ₹5) + First Call (₹2)
Calls Not Paid = First Call ₹2 per share
Journal Entries:
(i) Forfeiture of 2,00,000 shares for non-payment of first call:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Share Capital A/c (2,00,000 × 10) | $20,00,000$ | |
| To Share Forfeiture A/c (6 paid + premium) | $18,00,000$ | |
| To Share First Call A/c (2,00,000 × 2) | $4,00,000$ |
(ii) Reissue of 2,00,000 forfeited shares at ₹14:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Bank A/c (2,00,000 × 14) | $28,00,000$ | |
| Share Forfeiture A/c (2,00,000 × 1) | $2,00,000$ | |
| To Share Capital A/c (2,00,000 × 10) | $20,00,000$ | |
| To Securities Premium A/c (2,00,000 × 5) | $10,00,000$ |
(iii) Transfer of gain on reissue to Capital Reserve:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Share Forfeiture A/c | $16,00,000$ | |
| To Capital Reserve A/c | $16,00,000$ |
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