A company issued 5,000 shares of Rs.100 each at a discount of 10%. On application: Rs. 30 per share On allotment: Rs. 40 per share On first and final call: Rs. 20 per share Applications were…

Journal Entries

1. Entry for Application

The company received applications for 7,000 shares, but only 5,000 shares were issued. The excess applications (2,000 shares) were rejected, and the money received was Rs. 210,000 (7,000 × Rs. 30).

• Application Account (Dr.) – Rs. 210,000
  • To Share Application A/c (5,000 shares) – Rs. 150,000 (5,000 × Rs. 30)
  • To Share Forfeiture A/c (2,000 shares) – Rs. 60,000 (2,000 × Rs. 30)

2. Entry for Allotment

The allotment was made as follows:

• 2,000 applicants received 2,000 shares (full allotment).
• 4,000 applicants received 3,000 shares (pro-rata allotment).
• 1,000 applicants received Nil shares (rejected).

The allotment money was Rs. 40 per share, but the excess application money (Rs. 30 per share) was adjusted against the allotment.

• Share Allotment A/c (Dr.) – Rs. 360,000 (5,000 × Rs. 70)
  • To Share Capital A/c (5,000 × Rs. 90) – Rs. 450,000
  • To Securities Premium A/c (Nil, since discount is allowed) – Rs. 0
  • To Share Application A/c (5,000 × Rs. 30) – Rs. 150,000

Explanation:

• The company issued shares at a discount of 10%, so the issue price was Rs. 90 per share.
• The allotment money (Rs. 40) was adjusted against the application money (Rs. 30), leaving a balance of Rs. 10 per share to be paid.
• The total amount due on allotment was Rs. 360,000 (5,000 × Rs. 70), but since Rs. 150,000 was already received on application, the net amount to be received was Rs. 210,000 (5,000 × Rs. 40).

However, since Rs. 30 per share was already received, the actual amount to be received on allotment was Rs. 10 per share (Rs. 40 - Rs. 30). But the total allotment money due was Rs. 200,000 (5,000 × Rs. 40), and the excess application money (Rs. 150,000) was adjusted, leaving Rs. 50,000 to be received.

Correction: The correct entry should be:

• Share Allotment A/c (Dr.) – Rs. 200,000 (5,000 × Rs. 40)
  • To Share Capital A/c (5,000 × Rs. 90) – Rs. 450,000
  • To Share Application A/c (5,000 × Rs. 30) – Rs. 150,000

But since the discount is allowed, the actual amount received on allotment was Rs. 200,000, and the discount (Rs. 50,000) was adjusted in the Share Capital A/c.

3. Entry for First and Final Call

The first and final call of Rs. 20 per share was made, but a shareholder holding 300 shares failed to pay.

• Call A/c (Dr.) – Rs. 100,000 (5,000 × Rs. 20)
  • To Share Capital A/c (5,000 × Rs. 20) – Rs. 100,000

Adjustment for Default:

• Call in Arrears A/c (Dr.) – Rs. 6,000 (300 × Rs. 20)
  • To Call A/c – Rs. 6,000

Final Position:

• Total amount received on calls = Rs. 94,000 (4,700 × Rs. 20)
• Amount in arrears = Rs. 6,000 (300 × Rs. 20)

Final Journal Entries

1. Application Entry

2. Allotment Entry

3. First and Final Call Entry

Final Amounts

• Total Share Capital (Issued) = Rs. 450,000 (5,000 × Rs. 90)
• Total Amount Received = Rs. 504,000 (210,000 + 200,000 + 94,000)
• Amount in Arrears = Rs. 6,000 (300 × Rs. 20)