JOURNAL ENTRIES - ISSUE OF

SHARES
Journal Entries for Issue of Shares
1.
1 On receipt of application money
Bank A/c Dr ( for the full amount received on
application)

To Share application A/c

2.
2 On acceptance of application
Share application A/c Dr ( with the application money on
allotted shares)

To Share capital A/c

When shares are issued at premium, and premium is payable with application
money

Share application A/c Dr ( with the application money + premium

on allotted shares)

To Share capital ( application money only)

To Security Premium A/c (amount of premium)

When excess of application money is returned

Share application A/c Dr

To Bank A/c
3.
3 On making allotment due
Share allotment A/c Dr ( with the allotment money on allotted
shares)

To Share capital
 When shares are issued at premium, and premium is payable with allotment
money

Share allotment A/c Dr ( with the allotment money + premium

on allotted shares)

To Share capital ( allotment money only)

To Security Premium A/c (amount of premium)

When shares are issued at discount

Share allotment A/c Dr (with the allotment money on allotted

shares)

Discount on issue of shares A/c Dr (amount of discount)

To Share capital ( allotment money + discount )

4 When excess application money if any is adjusted towards allotment

Share application A/c Dr (amount adjusted to allotment)

To Share allotment A/c

4. On receipt of allotment money

Bank A/c Dr (with the actual amount received)

To Share allotment A/c

When any advance money is paid towards any calls together with the allotment
money
Bank A/c Dr (with the actual amount received)

To Share allotment A/c

To Calls in advance A/c (advance amount received)

5.
5 On making first/second/final call

Share first call A/c Dr ( with the call money on allotted

shares)

To Share capital A/c

6 When excess application money if any is adjusted towards call

Share application A/c Dr (amount adjusted to call)

To Share first/second/final A/c

When adjusting calls in advance to first/second/final call

Calls in advance A/c Dr (advance amount)

To Share first/second/final A/c

6. On receipt of first/second/final call money

Bank A/c Dr (with the actual amount received)

To Share first/second/final call

Journal entries for the issue of shares for consideration

other than cash
a. When property is acquired
Property or Asset A/c Dr (with cost)
To Vendor

b. When shares are issued in exchange for the value of property

Vendor A/c Dr
Discount on Issue A/c Dr (in case of discount)
To Share Capital (face value)
To Security Premium A/c (in case of premium)

Journal For forfeiture of shares

 Share Capital A/c Dr (with the amount called up, ie amount
paid +unpaid)
Security Premium A/c Dr (with the unpaid amount of
premium)
To Share Allotment (with the unpaid amount on
allotment)
To Share Call (with the unpaid amount
on call)
To Discount on Issue of Shares A/c (if shares are issued
at discount)
To Forfeited Shares A/c (with the amount paid
excluding premium)

Journal For re issue of forfeited shares

Bank A/c Dr (amount received on re-issue)

Discount on Issue of Shares A/c Dr (with the amount of original discount if the

Shares originally were issued at

discount)

Forfeited Shares A/c Dr (with the discount or loss on re-issue)

To Share Capital A/c (with the amount credited as

paid up)

To Security Premium A/c (with the amount of premium on

re-issue)

If all forfeited shares have been re-issued, the credit balance left in the Forfeited Shares A/c
being a capital profit should be transferred to Capital Reserve A/c by passing the following
journal entry:

Forfeited Shares A/c Dr

To Capital Reserve A/c

 If only a part of the forfeited shares have been re-issued, only the profit on shares
which have been re-issued is transferred to Capital Reserve A/c.

PRACTICE QUESTIONS - ISSUE,

FORFEITURE, REISSUE AND
VALUATION OF RIGHTS
1. The Bharat Trading Co. Ltd with a registered capital of Rs.100000 issued 5000 equity shares

of Rs.10 each payable Rs.2 on application, Rs.2 on allotment, Rs.3 on first call and Rs.3 on final

call. Pass journal entries assuming the shares issued were fully subscribed and the money has

been received.

2. P Ltd issued a prospectus inviting applications for 100000 equity shares of Rs.10 each, payable

as Rs.2 with application, Rs.3 on allotment and the balance on first and final call. Applications

were received for 80000 shares. The call was also made in due course of time. All the money

were duly received. Journalize the transactions including cash transactions.

3. On 1st march 2001 Alpha Co. Ltd issued 25000 10% preference shares of Rs.25 each payable

as Rs.4 with application, Rs.6 with allotment and balance in two equal calls of Rs.7.50 each.

Applications were received 51000 shares. The Board of Directors rejected applications for 1000

shares and allotted shares on the remaining applications on prorate basis on 1st April 2001. First

call was made three months after allotment where as second call was made four months after

first call. In each case 14 days notice was served. All the money was duly received. Pass

journal entries.

4. Sunshine Ltd makes an issue of 100000 equity shares of Rs.10 each payable Rs.3 on

application, Rs.5 on allotment and Rs.2 on first and final call. Applications were received for

250000 shares. The directors returned the application money on 24000 shares and the excess

application money received from the remaining applicants was carried forward in part
 satisfaction on the accounts due on allotment on the shares allotted to them. The company did

not make first and final call. Show journal entries.

5. A Ltd issued a prospectus inviting application for 100000 equity shares of Rs.10 each payable

as to Rs.2 with application, Rs.3 on allotment and balance at the discretion of directors. The

number of applications amounted to 120000 shares. The allotment was made as follows;

To applicants of 80000 shares - full allotment

To applicants of 30000 shares - 20000 shares

To applicants of 10000 shares - nil

Give journal entries assuming the entire sum due on allotment has been received and no

call has been made.

6. Beta Ltd. having a nominal capital of Rs.2000000 in shares payable as follows:

On application Rs.25

On allotment Rs.25

On first call Rs.20

On final call Rs.20

The company received applications for 9000 shares. All the applications were accepted.

All money due are received with the exception of final call in 200 shares, later these shares

were forfeited and reissued as fully paid at Rs.90 per shares. Give journal entries.

7. The Directors of ABC Ltd. resolved on 1st May 2002 that 2000 ordinary shares of Rs.10 each,

Rs.7.50 paid, be forfeited for nonpayment of final call of Rs.2.50. On June 10, 2002 1800 of the

above shares were reissued for Rs.6 per share. Show journal entries required to give effect to

the above transactions.

8. A Ltd, had its issued share capital comprising 20000 equity shares of Rs.10 each payable as

Rs.2 on application, Rs.3 on allotment (including premium) Rs.3 on first call and Rs.3 on final

call. The shares were called up to first call. All the money was received except from A holding

300 shares, who paid only up to application and except from B holding 100 shares who paid up
 to allotment. All these shares are forfeited. All these shares were reissued to C on payment of

Rs.6 per share and as paid up to the same extent as other shares. Pass journal entries for

forfeiture and reissue of shares.

9. X Ltd issued 10000 equity shares of Rs.10 each payable as under;

Rs.2 on application

Rs.5 on allotment

Rs.3 on first and final call

The public applied for 8000 shares which were allotted. All the money due on shares

was received except the first and final call on 100 shares. These shares were forfeited and

reissued at Rs.8 per share. Show the journal entries in the books of the company.

10. Give journal entries for the above forfeiture and reissue of shares.

a) X Ltd forfeited 30 shares of Rs.10 each fully called up, held by Karim for nonpayment of

allotment money of Rs.3 per share and final call of Rs.4 per share. He had paid the application

of Rs.3 per share. These shares were reissued to Salim for Rs.8 per share.

b) X Ltd forfeited 10 shares of Rs.10 each (Rs.6 called up) issued at a discount of 10% to Neeta

on which she had paid Rs.2 per share. Out of these, 8 shares were reissued as Rs 8 called up

for Rs.6 per share.

11. A company issue 10000 shares of face value Rs.10 each payable Rs.3 on application, Rs.3 on

allotment, Rs.2 on first call and Rs.2 on final call. All cash is duly received, except the final call

on 200 shares. These are subsequently forfeited and later on issued as fully paid at Rs.7 per

share. Pass journal entries.

12. A Ltd issued 10000 shares of Rs.100 each at a premium of 5% payable as follows;

On application Rs.25, on allotment Rs.45 (including premium) on final call Rs.35. The

applications were received for 9000 shares and all of these shares were accepted. All money
 due were received except final call on 100 shares, which were forfeited. Of these 50 shares

were reissued at Rs.90 as fully paid. Draft journal entries.

13. A Ltd forfeited 100 shares of Rs.10 each issued at a premium of Re.1 per share to Hameed

who had applied for 150 shares for nonpayment of allotment money of Rs.4 per share (including

premium) and the first and final call of Rs.5 per share. Out of these 60 shares were re issued to

Sasi credited as fully paid for Rs.8 per share. Give journal entries relating to forfeiture and re

issue of shares.

14. A company forfeits 100 shares of Rs.10 each, originally issued at a premium of Rs.2 per share.

The shareholder paid Rs.4 per share on application did not pay the allotment money of Rs.4 per

share (including premium) and call money of Rs.4 per share. The company takes credit for the

premium as soon as it becomes due. The shares were subsequently re issued at Rs.11 per

share fully paid up. Pass journal entries.

15. 300 shares of Rs.10 each fully called up were forfeited by Bharat Ltd. for nonpayment of first

call of Rs.3 and final call of Rs.4 per share. Of these 100 shares were reissued at Rs.8 per

share and 80 shares at Rs.8.50 per share. Show journal entries for forfeiture and issue.

16. A company offers to its equity shareholders the right to buy one equity share of Rs.100 each at

Rs.120 for every four equity shares of Rs.100 each held. The market value of one equity share

is Rs.180. Calculate the value of right.

17. A Ltd has a share capital of 5000 equity shares of Rs.100 each having market value of Rs.150

per share. The company wants to raise additional funds of Rs.120000 and

offers to equity shareholders the right to apply for new shares at

Rs.120 for every 5 shares held. You are required to calculate value of right.

18. 100 shares of Rs.100 each issued at 5% discount are forfeited by a company for non-payment

of allotment money of Rs.20 per share. All these shares were reissued at Rs.80 per share. Give

journal entries for forfeiture and reissue of shares.

19. Bhim Sen Ltd. issued 60000 equity shares of Rs.20 each at a discount of 5% and 9000 10%

preference shares of Rs.100 each at 3% discount. The amounts payable in respect of the

shares were as under:

Equity shares Rs.10 on application, Rs.5 on allotment, and the balance on a call to be made

in 3 months time,

Preference shares - Rs.60 on application, Rs.25 on a call to be made in 3 months time, the

balance due is payable at the time of allotment.

All moneys were duly received. Journalize the transactions (excluding calls) in the companys

books.

20. The following particulars are given from the books and records of Standard Products Ltd.

relating to issue and forfeiture of equity shares during January to April 2006.

The amount per share was payable as under:

Rs.3 on application, Rs.5 on allotment (including Rs.2 as premium) Rs.4 on first and final call.

No. of shares No. of Shares

allotted for applied for

Category I 20000 30000

Category II 10000 10000

Category III NIL 5000

Allotment were made prorate to category I

Mr. Giri who applied for 450 shares in category I failed to pay allotment and call money

and his shares were forfeited by the Directors. Subsequently, 200 forfeited shares were

reissued to Mr. Puri as fully paid for Rs.9 per share.

 Show journal entries to record the above transactions.

21. Dhananjay Ltd. had issued 50000 equity shares of Rs.50 each at par, payable as Rs.25 on

application, Rs.10 on allotment, Rs.10 on first call and Rs.5 on second and final call.

Applications were received for all the shares and the company made the allotment to all

applicants and also made allthe calls. The company received all the amounts except;

a. First call on 1200 shares.

b. Second call on 2000 shares (including the above 1200 shares)

Having passed the necessary resolution, the company forfeited the above shares. All the

forfeited shares were reissued at Rs.12 per share. Pass journal entries.

22. A Ltd Co issued a prospectus inviting applications for 2000 shares of Rs.10 each at a premium

Rs.2 per share payable as follows;

On application Rs.2

On allotment Rs.5 (including premium)

On first call Rs.3

On second call Rs.2

Applications were received for 3000 shares and allotment made pro rata to the

applicants of 2400 shares. Money over paid on application was employed on account of sum

due on allotment.

Kumar, to whom 40 shares were allotted, failed to pay the allotment money and on his

subsequent failure to pay the first call, his shares were forfeited. Raja, the holder of 60 shares,

failed to pay the two calls, and his shares were forfeited after the second call. Of these shares

forfeited 80 shares were sold to Albert credited as fully paid for Rs.9 per share, the whole of

Kumars shares being included.

Show journal, cash book and the balance sheet.

23. Madan and Co. Ltd issued 12000 equity shares of Rs.10 each at a premium of Rs.2 per share

payable as follows;

On application Rs.2 per share

On allotment (including premium) Rs.5 per share

On first call Rs.5 per share

Applications were received for 20000 shares. 5000 applications were rejected and

application money refunded. Allotment was made pro rata to the applicants of 15000 shares and

money over paid on application was applied towards amount due on allotment.

Jain to whom 1200 shares were allotted failed to pay the allotment and first call money.

His shares were forfeited. Give entries in the books of the company.

24. M/s Blue Chips Ltd. issued 5000 equity shares of Rs.100 each at a premium of Rs.25 per

share. On 1st January 2000, the company received 12000 applications on which 2000

applications were totally rejected and their amount was refunded on 1st February 2000 when the

remaining applicants were allotted shares on pro rata basis. The amount of shares received is

as under:

On application Rs.30, on allotment Rs.45 (including premium), on first call Rs.25 and on second

call Rs.25.

Allotment money was received in full on 15th February.

First call was made on 15th May, 2000 and received on 1st June 2000 except on 25 shares held

by Mr. Govind. His shares were forfeited on 1st October 2000 and reissued on 15th October2000

credited at Rs.75 paid for Rs.110 per share to Mr. Anand. Final call was made on 1st November

and received on 15th November except on 100 shares held by Mr. Binu.

Pass journal entries.