Question

Astha Ltd. invited applications for issuing 1,00,000 equity shares of Rs 10 each. The amount per share was payable as follows: Rs 2 on application; Rs 3 on allotment; Rs 3 on first call and Rs 2 on second and final call. Applications were received for 1,50,000 shares. Applications for 30,000 shares were rejected and application money refunded. The shares were allotted on pro-rata basis to the applicants of 1,20,000 shares. Excess money received with applications was adjusted towards sums due on allotment. All shareholders paid the allotment money except Sarthak, who was allotted 2,000 shares. These shares were forfeited. The first call was made thereafter and duly received. The second and final call was not yet made. Pass necessary journal entries for the above transactions in the books of Astha Ltd. Open Calls-in-Arrears Account, wherever required.

Hint:

Pro rata ratio is 5 : 6. Excess application money is Rs. 40,000 and Sarthak owes Rs. 5,200 on allotment, so Rs. 10,000 of capital is forfeited. The first call is on 98,000 shares.

Answer 1

Step 1: Understand the question:
Astha Ltd. offered 1,00,000 shares of Rs. 10. Applications came for 1,50,000 shares. Applications for 30,000 shares were rejected, so 1,20,000 shares remain to be allotted pro rata.
Pro rata ratio = 1,00,000 : 1,20,000 = 5 : 6. Sarthak was allotted 2,000 shares, so he had applied for 2,000 x 6/5 = 2,400 shares.

Step 2: Working Note 1: Application money:
Total received = 1,50,000 x Rs. 2 = Rs. 3,00,000.
Refund to rejected applicants = 30,000 x Rs. 2 = Rs. 60,000.
Transferred to Share Capital = 1,00,000 x Rs. 2 = Rs. 2,00,000.
Excess kept for allotment = Rs. 3,00,000 - Rs. 2,00,000 - Rs. 60,000 = Rs. 40,000.
Check: the pro rata applicants paid 1,20,000 x Rs. 2 = Rs. 2,40,000, and Rs. 2,40,000 - Rs. 2,00,000 = Rs. 40,000.

Step 3: Working Note 2: Allotment and Sarthak:
Allotment due = 1,00,000 x Rs. 3 = Rs. 3,00,000. Excess adjusted = Rs. 40,000. So cash due = Rs. 2,60,000.
Sarthak paid Rs. 2 on 2,400 shares = Rs. 4,800. Application on his 2,000 shares = Rs. 4,000, so his excess = Rs. 800.
His allotment due = 2,000 x Rs. 3 = Rs. 6,000. Unpaid = Rs. 6,000 - Rs. 800 = Rs. 5,200. This is the Calls in Arrears.
Cash received = Rs. 2,60,000 - Rs. 5,200 = Rs. 2,54,800.

Step 4: Working Note 3: Forfeiture and first call:
Capital called up on forfeited shares = 2,000 x Rs. 5 (Rs. 2 + Rs. 3) = Rs. 10,000.
Amount paid by Sarthak = Rs. 4,000 + Rs. 800 = Rs. 4,800. This is credited to Share Forfeiture. The unpaid Rs. 5,200 is credited to Calls in Arrears.
Shares left = 1,00,000 - 2,000 = 98,000. First call = 98,000 x Rs. 3 = Rs. 2,94,000, fully received.

Step 5: Journal:

Particulars	Dr. Amount (Rs.)	Cr. Amount (Rs.)
Bank A/c ... Dr.	3,00,000
To Equity Share Application A/c		3,00,000
(Application money received on 1,50,000 shares at Rs. 2 per share)
Equity Share Application A/c ... Dr.	3,00,000
To Equity Share Capital A/c		2,00,000
To Equity Share Allotment A/c		40,000
To Bank A/c		60,000
(Application money transferred to Share Capital and Allotment, and balance refunded)
Equity Share Allotment A/c ... Dr.	3,00,000
To Equity Share Capital A/c		3,00,000
(Share allotment due on 1,00,000 shares at Rs. 3 per share)
Bank A/c ... Dr.	2,54,800
Calls in Arrears A/c ... Dr.	5,200
To Equity Share Allotment A/c		2,60,000
(Allotment money received except on 2,000 shares)
Equity Share Capital A/c ... Dr.	10,000
To Share Forfeiture A/c		4,800
To Calls in Arrears A/c		5,200
(2,000 shares forfeited for non-payment of allotment money)
Equity Share First Call A/c ... Dr.	2,94,000
To Equity Share Capital A/c		2,94,000
(First call due on 98,000 shares at Rs. 3 per share)
Bank A/c ... Dr.	2,94,000
To Equity Share First Call A/c		2,94,000
(First call money received on 98,000 shares)

Final Answer:
The 2,000 shares are forfeited with Share Forfeiture Rs. 4,800 and Calls in Arrears Rs. 5,200 credited against Share Capital Rs. 10,000. The first call on 98,000 shares is Rs. 2,94,000.