A company issued 4000 shares of Rs. 100 each at a premium of Rs. 10 per share payable Rs. 20 on application, Rs. 50 on allotment (including premium) and Rs. 40 on final call per share. Application…

Journal Entries for Share Application, Allotment, and Final Call

Given:

• Face value (FV) of each share: Rs. 100
• Premium per share: Rs. 10
• Issue price per share: Rs. 110 (Rs. 100 + Rs. 10 premium)
• Payment terms:
  • Application: Rs. 20 per share
  • Allotment: Rs. 50 per share (including premium)
  • Final call: Rs. 40 per share
• Shares applied for: 6000
• Shares allotted: 5000 (on pro-rata basis)
• Excess application money used for allotment

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Step 1: Calculate the Pro-Rata Allotment

Since applications were received for 6000 shares but only 4000 shares were issued, the allotment was made on a pro-rata basis to applicants for 5000 shares (as per the question).

• Ratio of allotment: $$\text{Allotment ratio}=\frac{\text{Shares allotted}}{\text{Shares applied for}}=\frac{5000}{6000}=\frac{5}{6}$$ This means applicants for 6000 shares were allotted 5000 shares in the ratio 5:6.

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Step 2: Calculate Application Money Received

• Application money per share: Rs. 20
• Total application money received: $$6000\text{ shares}\times Rs.20=Rs.120,000$$

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Step 3: Calculate Allotment Money Due and Excess Application Money

• Allotment money per share: Rs. 50 (including premium)

• Total allotment money due for 5000 shares: $$5000\times Rs.50=Rs.250,000$$

• Excess application money available (from Rs. 120,000): Since only 5000 shares were allotted, the application money for these shares was: $$5000\times Rs.20=Rs.100,000$$ The excess money (Rs. 120,000 - Rs. 100,000 = Rs. 20,000) was used towards the allotment (as per the question).

• Remaining allotment money to be collected: $$Rs.250,000-Rs.20,000=Rs.230,000$$

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Step 4: Calculate Final Call Money

• Final call money per share: Rs. 40
• Total final call money due for 5000 shares: $$5000\times Rs.40=Rs.200,000$$

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Journal Entries

1. Entry for Application (Received Rs. 120,000)

Date: [Date]
Particulars                     | L.F. | Amount (Rs.) | Amount (Rs.)
---------------------------------|------|--------------|--------------
To Share Application A/c        |      | Dr.          | 120,000
---------------------------------|------|--------------|--------------
By Bank A/c                     |      |              | 120,000
---------------------------------|------|--------------|--------------
(Being application money received for 6000 shares @ Rs. 20 each)

2. Entry for Allotment (Allotted 5000 shares, excess money adjusted)

Date: [Date]
Particulars                     | L.F. | Amount (Rs.) | Amount (Rs.)
---------------------------------|------|--------------|--------------
To Share Allotment A/c          |      | Dr.          | 250,000
To Share Capital A/c            |      | Dr.          | 500,000
To Share Premium A/c            |      | Dr.          | 50,000
---------------------------------|------|--------------|--------------
By Share Application A/c        |      |              | 100,000
By Bank A/c                     |      |              | 230,000
---------------------------------|------|--------------|--------------
(Being 5000 shares allotted @ Rs. 110 each (Rs. 100 + Rs. 10 premium), excess application money adjusted)

Explanation:

• Share Capital (5000 × Rs. 100) = Rs. 500,000
• Share Premium (5000 × Rs. 10) = Rs. 50,000
• Total Allotment Due (5000 × Rs. 50) = Rs. 250,000
• Excess Application Money (Rs. 20,000) adjusted against allotment
• Remaining Allotment Money (Rs. 230,000) received from Bank

3. Entry for Final Call (Called Rs. 40 per share)

Date: [Date]
Particulars                     | L.F. | Amount (Rs.) | Amount (Rs.)
---------------------------------|------|--------------|--------------
To Share Final Call A/c         |      | Dr.          | 200,000
---------------------------------|------|--------------|--------------
By Bank A/c                     |      |              | 200,000
---------------------------------|------|--------------|--------------
(Being final call of Rs. 40 per share on 5000 shares)

4. Transfer of Allotment and Final Call to Share Capital and Premium

After all calls are received, the following closing entry is passed to transfer amounts to Share Capital and Share Premium:

Date: [Date]
Particulars                     | L.F. | Amount (Rs.) | Amount (Rs.)
---------------------------------|------|--------------|--------------
To Share Capital A/c            |      | Dr.          | 500,000
To Share Premium A/c            |      | Dr.          | 50,000
---------------------------------|------|--------------|--------------
By Share Allotment A/c          |      |              | 250,000
By Share Final Call A/c          |      |              | 200,000
By Share Application A/c        |      |              | 100,000
---------------------------------|------|--------------|--------------
(Being allotment and call money transferred to Share Capital and Premium)

Note:

• The Share Application A/c (Rs. 100,000) is closed by transferring it to Share Capital (since it was for allotted shares).
• The remaining application money (Rs. 20,000) from rejected applicants (1000 shares) is refunded (not shown here, but in practice, it would be returned to applicants).

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Final Position of Share Capital and Premium

Total money received from shareholders: $$Rs.120,000(\text{Application})+Rs.230,000(\text{Allotment})+Rs.200,000(\text{Final Call})=Rs.550,000$$

This matches the total issued capital (Rs. 500,000) + premium (Rs. 50,000).