Question

R Co. Ltd. issued 5,000 shares of Rs. 100 each, payable Rs. 20 on application, Rs. 30 on allotment, Rs. 25 on first call, and Rs. 25 on second & final call. Applications were received for all the shares. Sohan, who was allotted 50 shares, did not pay first and second calls. All other amounts were received. The company forfeited shares held by Sohan and reissued them as fully paid shares for Rs. 3,000. Pass necessary journal entries in the books of the company.

Hint:

Forfeited shares are reissued at a discount to recover unpaid amounts, and the share forfeited account is used to adjust the capital accounts.

Answer 1

Step 1: Journal Entries for Issuance of Shares.
When the company issues the shares, the following journal entries are passed: \[ \text{Bank Account} \quad 1,00,000 \quad \text{(5,000 shares × Rs. 20)}
\text{To Share Capital Account} \quad 1,00,000 \] \[ \text{Bank Account} \quad 1,25,000 \quad \text{(5,000 shares × Rs. 25)}
\text{To Share Capital Account} \quad 1,25,000 \] \[ \text{Bank Account} \quad 1,50,000 \quad \text{(5,000 shares × Rs. 30)}
\text{To Share Capital Account} \quad 1,50,000 \]
Step 2: Journal Entries for Non-Payment by Sohan.
Sohan did not pay the first and second calls on his 50 shares, which means: \[ \text{Share Forfeited Account} \quad 1,250 \quad \text{(50 shares × Rs. 25)}
\text{To Share Capital Account} \quad 1,250 \] \[ \text{Share Forfeited Account} \quad 1,500 \quad \text{(50 shares × Rs. 30)}
\text{To Share Capital Account} \quad 1,500 \]
Step 3: Journal Entries for Forfeiture and Reissue of Shares.
The forfeited shares were reissued for Rs. 3,000: \[ \text{Bank Account} \quad 3,000 \quad \text{(Reissue of 50 shares)}
\text{To Share Capital Account} \quad 2,500
\text{To Share Forfeited Account} \quad 500 \quad \text{(Balance transferred from Share Forfeited Account)} \]
Step 4: Conclusion.
The journal entries above record the issuance, forfeiture, and reissue of shares in the books of R Co. Ltd. Final Answer: \[ \boxed{\text{The journal entries record the application, allotment, forfeiture, and reissue of shares.}} \]