Question

Altima Ltd. invited applications for 2,00,000 equity shares of ₹ 10 at a premium of ₹ 4 per share. Amount payable:
On application and allotment – ₹ 7 (incl. ₹ 1 premium)
On first and final call – Balance.
Applications received for 2,40,000 shares. 30,000 rejected. Manvi allotted 4,000 shares failed to pay first and final call. Her shares were forfeited. These were reissued at ₹ 4 per share fully paid-up.
Pass journal entries in the books of Altima Ltd.

Hint:

Always adjust the securities premium and forfeiture correctly. Any amount unpaid including premium must be debited during forfeiture.

Answer 1

1. On receipt of application money:

\[ \text{Bank A/c Dr.} ₹ 16,80,000 \\ \text{To Share Application A/c} ₹ 16,80,000 \] (2,40,000 × ₹7)

2. On allotment (pro-rata):

\[ \text{Share Application A/c Dr.} ₹ 16,80,000 \\ \text{To Share Capital A/c} ₹ 12,00,000 \\ \text{To Securities Premium A/c} ₹ 1,20,000 \\ \text{To Bank A/c (excess refund)} ₹ 3,60,000 \]

3. On first and final call due (1,70,000 × ₹7):

\[ \text{Share First and Final Call A/c Dr.} ₹ 11,90,000 \\ \text{To Share Capital A/c} ₹ 10,20,000 \\ \text{To Securities Premium A/c} ₹ 1,70,000 \]

4. On receipt of call money (except Manvi’s 4,000 shares):

\[ \text{Bank A/c Dr.} ₹ 11,62,000 \\ \text{To Share First and Final Call A/c} ₹ 11,62,000 \]

5. Forfeiture of Manvi’s shares (4,000 shares):

\[ \text{Share Capital A/c Dr.} ₹ 40,000 \\ \text{Securities Premium A/c Dr.} ₹ 12,000 \\ \text{To Share Forfeiture A/c} ₹ 28,000 \\ \text{To Share First and Final Call A/c} ₹ 24,000 \]

6. Reissue of 4,000 shares at ₹4 fully paid-up:

\[ \text{Bank A/c Dr.} ₹ 16,000 \\ \text{Share Forfeiture A/c Dr.} ₹ 24,000 \\ \text{To Share Capital A/c} ₹ 40,000 \]