Question

Zee Ltd. invited applications for issuing 40,000 shares of ₹10 each at a premium of ₹2 per share. The amount was payable as follows: On Application – ₹4 per share On Allotment – ₹5 per share (including premium) On First Call – ₹2 per share On Second and Final Call – Balance Applications were received for 60,000 shares. Applications for 12,000 shares were rejected and money returned to the applicants. The shares were allotted on a pro-rata basis to the applicants of 48,000 shares. The excess money received on application was adjusted towards sums due on allotment. All shareholders paid the allotment money except one shareholder who had applied for 1,200 shares. His shares were forfeited immediately after allotment. First call was made thereafter and all the money due was received. The second and final call was not yet made. Pass necessary journal entries for the above transactions in the books of Zee Ltd.

Hint:

In pro-rata allotments, excess application money is first adjusted towards allotment before refunding the remaining amount.

Answer 1

Journal Entries: \[ \begin{array}{|l|r|l|r|} \hline \textbf{Date} & \textbf{Particulars} & \textbf{Debit (₹)} & \textbf{Credit (₹)} \\ \hline -- & \text{Bank A/c Dr.} & 2,40,000 & -- \\ & \text{To Share Application A/c} & -- & 2,40,000 \\ & \text{(Application money received for 60,000 shares at ₹4 per share)} & & \\ \hline -- & \text{Share Application A/c Dr.} & 2,40,000 & -- \\ & \text{To Share Capital A/c} & -- & 1,60,000 \\ & \text{To Share Allotment A/c} & -- & 64,000 \\ & \text{To Bank A/c} & -- & 16,000 \\ & \text{(Application money adjusted for 40,000 shares and excess refunded)} & & \\ \hline -- & \text{Share Allotment A/c Dr.} & 2,00,000 & -- \\ & \text{To Share Capital A/c} & -- & 1,20,000 \\ & \text{To Securities Premium A/c} & -- & 80,000 \\ & \text{(Allotment money due at ₹5 per share including ₹2 premium)} & & \\ \hline -- & \text{Bank A/c Dr.} & 1,94,000 & -- \\ & \text{To Share Allotment A/c} & -- & 1,94,000 \\ & \text{(Allotment money received, except for 1,200 shares)} & & \\ \hline -- & \text{Share Capital A/c Dr.} & 6,000 & -- \\ & \text{Securities Premium A/c Dr.} & 2,400 & -- \\ & \text{To Share Forfeiture A/c} & -- & 8,400 \\ & \text{(1,200 shares forfeited for non-payment of allotment money)} & & \\ \hline -- & \text{Share First Call A/c Dr.} & 80,000 & -- \\ & \text{To Share Capital A/c} & -- & 80,000 \\ & \text{(First call money due at ₹2 per share)} & & \\ \hline -- & \text{Bank A/c Dr.} & 80,000 & -- \\ & \text{To Share First Call A/c} & -- & 80,000 \\ & \text{(First call money fully received)} & & \\ \hline \end{array} \] Working Notes:

• Application money received: \( 60,000 \times ₹4 = ₹2,40,000 \).
• Application money adjusted to capital for 40,000 shares: \( 40,000 \times ₹4 = ₹1,60,000 \).
• Excess application money adjusted to allotment: \( 48,000 - 40,000 = 8,000 \) shares' worth, i.e., \( 8,000 \times ₹4 = ₹32,000 \).
• Allotment dues: \( 40,000 \times ₹5 = ₹2,00,000 \).
• Forfeiture of 1,200 shares:
  • Called-up capital: \( ₹10 - ₹2 = ₹8 \times 1,200 = ₹9,600 \).
  • Premium not received: \( ₹2 \times 1,200 = ₹2,400 \).
  • Forfeited amount: \( ₹4 (application money) \times 1,200 = ₹4,800 \).