Corporate Accounting Notes

Under Subscription
Example Y Ltd invited applications for 10,000 shares of Rs.100 each payable Rs.20
on application, Rs.30 on allotment, Rs.20 on 1st call and Rs.30 on final call.
Applications were received for 8,000 shares. All the money was duly received.
Pass journal entries in the books of company.
Solution Journal entries Dr. Cr.
Date Particulars L.F Amount Amount
(in Rs.) (in Rs.)
Bank A/c Dr 1,60,000
To share Application A/c 1,60,000
(Being share application money received)
Share Application A/c Dr 1,60,000
To Share Capital A/c 1,60,000
(Being share application money transferred to
share capital A/c)
Share Allotment A/c Dr 2,40,000
(Being share allotment money due)
To Share Allotment A/c 2,40,000
(Being share allotment money received)
Share 1st call A/c Dr 1,60,000
(Being share Ist call money due)
To share I call A/c 1,60,000
(Being share 1st call money received)
Share Final call A/c Dr 2,40,000
(Being share final call money due)
To Share Final call A/c 2,40,000
(Being share final call money received)
Types of companies
1. Statutory company
The company which is formed by the special act of parliament for carrying on
some business of national importance are called as statutory companies. For
example Life insurance coronation of India (LIC), Reserve bank of India etc.
2. Registered companies or proposed Companies

The companies which are registered or incorporated in the companies Act, 2013
or any other act are called as registered companies.
3. Company limited by shares

These are those companies in which the total capital is divided into certain
number of shares and the liability of the shareholders is limited to the amount of
shares held by them.
4. Company limited by guarantee

The companies in which liability of shareholders is limited to the amount of
guarantee given by them. This amount of minimum guarantee if required is called
at the time of liquidation of the company and these companies are not formed
with the objective of earning profit. For example Charitable trusts, cooperative
societies etc.
5. Unlimited company
The companies in which the liability of the shareholders is unlimited and their
personal assets can also be attached for paying the liabilities of the company. The
members can get themselves free from their liabilities after one year. Such
companies are not formed privately.
6. Private company
A company can be called as a private company if it fulfills these conditions.
1. It can issue the shares to the public.
2. The total number of shareholders should not exceed 20.
3. The shareholders cannot sale or transfer the shares in the open market.
7. Public company
According to companies Act 2013, "A public company is one which is not a private
company and under the Act. The members of the company can be determined
according to the total amount of the capital. There are no restrictions regarding
sale, transfer of shares and the company can ask the public to buy the shares.
Issue of Shares at Par
Example. A company issued 1,000 shares of Rs.100 each payable Rs.20 on

application Rs.30 on allotment Rs.30 on 1st call and Rs.20 on final call. Pass
journal entries.
Solution Journal entries Dr Cr
Date Particulars LF Amount (in Rs.) Amount (in Rs.)
Bank A/c Dr 20,000
To Share Application A/c 20,000
(Being amount received on share
application)
Share Application A/c Dr 20,000

To Share Capital A/c 20,000
(Being share application money
transferred to share capital
account)
Share Allotment A/c Dr 30,000

(Being share allotment money due
on 1,000 shares)
Bank A/c Dr 30,000 -

To Share Allotment A/c - 30,000
(Being share allotment money
received )
Share 1st call A/c Dr 30,000 -

To Share Capital A/c - 30,000
(Being share 1st call money due on
1,000 shares)

To Share 1st call A/c - 30,000
(Being share 1st call money
received)
Share final call A/c Dr 20,000 -

To Share Capital A/c - 20,000
(Being money due on final call)

To Share Final call A/c - 20,000
(Being money received on final
call)
Issue of Shares at Par
Example: Doon limited was registered with a authorized capital of Rs.5,00,000

divided into 5,000 equity shares of 100 each. It offered to the public 2,000 shares
of Rs.100 each which is payable as follows.
Application Rs.30 per share
Allotment Rs.20 per share
First call Rs.30 per share
Final call Rs.20 per share
Pass Journal entries.
Solution: Journal entries Dr Cr
Date Particulars LF Amount Amount
(in Rs.) (in Rs.)
Bank A/c Dr 60,000

share capital account)

Bank A/c Dr 40,000
To share Allotment A/c
(Being share allotment money received ) 40,000
Share Final call A/c Dr 60,000

Bank A/c Dr 60,000

To Share Final call A/c 60,000

(Being share final call money due )
Bank A/c Dr 40,000

Example: X ltd has an authorized share capital of Rs.8,00,000 divided into 80,000
shares of Rs.10 each. It issued to the public 50,000 shares. Amount is payable as
follows.
Application - Rs.4
Allotment -Rs.3
First call-Rs.2
Final call-Rs.1
(in Rs.) (in Rs.)
To Share Application A/c 2,00,000



Share First call A/c Dr 1,00,000

(Being share first call money due)

To Share First call A/c 1,00,000
(Being share first call money received)

Bank A/c Dr 50,000

Example Doon garments limited issued 15,000 equity shares of Rs.100 each at par
payable as follows.
Application Rs.30
Allotment Rs.25
First Call Rs.25
Final Call Rs.20/ share
All the shares are subscribed and money is duly received. Pass the necessary
journal entries in the books of the company.
Solution
Journal Entries Dr Cr
(in Rs.) (in Rs.)
transferred to share capital account)
To Share First Call A/c 3,75,000
Points to remember
1. At the time of application the amount should not be less than 25%of the issue
price of each share.
2. At the time of calls money first call should not exceed 25% of the total quantum
of the issued.
3. All amount on share should be fully called up within a period of 12 months
from the date of allotment.
4. There must be an interval of 1 month between the making of 2 calls.
5. At least 14 days notice must be given to the shareholders to pay the amount of
call.
Issue of shares at Premium
Example : JP limited issued 5,000 shares of Rs.10 each at a premium of Rs.2 per
share payable Rs.4 on application, Rs.4 on allotment, Rs.2 on first call and balance
on final call. Pass journal entries.
Solution
Application - Rs.4 per share
Allotment- Rs.4 per share (including premium)
1st call - Rs.2 per share
Final call - Rs.2 per share
Total = Rs.12 per share
Journal entries Dr Cr
(in Rs.) (in Rs.)
Bank A/c Dr 20,000

(Being share application money transferred
to share capital account)

To Share Premium A/c 10,000
Bank A/c Dr 20,000

To Share Allotment A/c 20,000
(Being share allotment money including
premium received)
Share First call A/c Dr 10,000

Bank A/c Dr 10,000

To Share First call A/c 10,000

(Being share final call money due )
Bank A/c Dr 10,000

Note : When nothing is mentioned about when premium is to be received, it is
assumed to be on allotment.
Issue of shares at discount
Example : New limited issued 1,000 shares of Rs.100 each at a discount of 4%. The
amount is payable as follows.
Application - Rs.36 per share
Allotment - Rs.44 per share
First call - Rs.20 per share
Total - Rs.100 per share
Pass Journal entries.
Solution
Discount - 100 X 4/100 = 4. It means allotment is Rs.40 per share (44 - 4)
Journal Entries
Date Particulars LF Amount (in Amount (in
Rs.) Rs.)
Bank A/c Dr 36,000
To Share Application A/c
(Being share application money received ) 36,000
Share Application A/c Dr

To Share Capital A/c
36,000
36,000
Share Allotment A/c Dr

44,000
Bank A/c Dr 44,000
Discount A/c Dr
To Share Allotment A/c
(Being allotment money received after
giving discount) 40,000
4,000
Share 1st call A/c Dr
(Being 1st call money due) 44,000
Bank A/c Dr
To Share First call A/c
(Being share first and final call money
received)
2,00,000
2,00,000
2,00,000
2,00,000
Note : When nothing is mentioned about when discount is to be allowed, it is
assumed to be on allotment.
Case (IV) Issue of shares at premium

Example ABC Limited issued 12,000 equity shares of Rs.100 each payable Rs.20 on
application, Rs.30 on allotment (including Rs.10 premium) and balance on calls.
All the shares were applied for and allotted. All money was received. Pass journal
entries in the books of a company.
Solution
Journal entries Dr. Cr.
Date Particulars LF Amount(in Rs.) Amount(in Rs.)
To Share Premium A/c 1,20,000
(Being shares issued at a premium of
Rs.10 per share)
(Being allotment money including
premium received)
To Share first call A/c 7,20,000
Example X Ltd issued 60,000 shares of 10each at a maximum discount permitted

by the companies act,(Maximum discount 10% ) payable as
Allotment Rs.4 per share
All money was received except final call on 1,000 share. Pass the journal entries.
Solution
Date Particulars LF Amount (in Rs.) Amount (in Rs.)
(Being share application money paid into
bank)



Discount A/c Dr 60,000
(Being share allotment money and discount
on shares paid into bank)


(Being share final money paid into bank)
Example X Ltd issued 1,000 shares of Rs.100 each payable Rs.20 on application,
Rs.30 on allotment, Rs.20 on 1st call and Rs.30 on final call. Pass the journal
entries if the shares are issued
1. At par
2. 10% premium
3. 20% discount
Solution
1. At par
Date Particulars Amount (in Rs.) Amount (in Rs.)
Bank A/c Dr 20,000
bank)


Bank A/c Dr 30,000

(Being share allotment money paid into
bank)
Share 1st call A/c Dr 20,000

st
(Being share 1 call money due)
Bank A/c Dr 20,000

st
To Share 1 call A/c 20,000
st
(Being share 1 call money paid into
bank)
30,000
30,000
Bank A/c Dr 30,000
To Share Final call A/c
2. At premium of 10%
Solution
Date Particulars L.F Amount (in Rs.) Amount (in Rs.)
Bank A/c Dr 20,000


premium due)
Bank A/c Dr 40,000


st
Bank A/c Dr 20,000

To Share 1st call A/c 20,000

Bank A/c Dr 30,000

At a Discount
Particulars Amount (in Rs.) Amount (in Rs.)
Bank A/c Dr 20,000
To share application A/c 20,000
Share application A/c Dr 20,000

To share capital A/c 20,000
Share allotment A/c Dr 30,000

Bank A/c Dr 10,000

To share allotment A/c 30,000
Being share allotment money received)

st
Bank A/c Dr 20,000

st
To share 1 call A/c 20,000
st
(Being share 1 call money received)
Share final call A/c Dr 30,000
Bank A/c Dr 30,000

To share final call A/c 30,000
(Being share final money received)
Example Sagar Limited issued 5,000 shares of Rs.100 each payable Rs.20 on
application Rs.30 on allotment and Rs.40 on 1st call and balance on final call. Pass
journal entries if the shares are issued at
1. Par
2. 10% Premium
3. 20% Discount
Solution
Journal entry Dr Cr
Bank A/c Dr 1,00,000 -
To share application A/c - 1,00,000
bank)
Share application A/c Dr 1,00,000 -

To share capital A/c - 1,00,000
(Being application money transferred to share
capital account)
Share allotment A/c Dr 1,50,000 -

premium due)
Bank A/c Dr 1,50,000 -

To share allotment A/c - 1,50,000
(Being allotment money paid into bank)
Share 1st call A/c Dr 2,00,000 -
st
Bank A/c Dr 2,00,000 -

st
To share 1 call A/c - 2,00,000
st
(Being share 1 call money paid into bank)

To share capital A/c - 50,000
(Being final call money due)

To share final call A/c - 50,000
(Being final money paid into bank)
At premium
Bank A/c Dr 1,00,000 -
(Being application money paid into bank)

(Being application money due)

To share premium A/c 50,000
(Being allotment money and premium
money due)
Bank A/c Dr 2,00,000 -


(Being share 1st call money due)
Bank A/c Dr 2,00,000 -

st
(Being share 1st call money paid into bank)


Discount 20%
Bank A/c Dr 1,00,000 -
(Being application paid into bank)

(Being application money due)

(Being allotment money and premium
money due)
Bank A/c Dr 1,00,000 -

Discount A/c Dr 50,000 -

Bank A/c Dr 2,00,000 -

st
(Being share 1st call money paid into
bank)


Example A company issued 5,000 shares of Rs.50 each at a discount of 10%. The
money received on application was Rs.15 per share, allotment Rs.20 per share, 1st
and final call Rs.5 each. Pass journal entries.
Solution
To share application A/c - 75,000
bank)
Share application A/c Dr 75,000 -

share capital A/c)


(Being share allotment money and discount
on shares paid into bank)

st

st
To share 1 call A/c - 25,000
st
(Being share 1 call money paid into bank)


(Being share final call money paid into bank)
Note. If it is not mentioned that when discount or premium is there assume
discount / premium on allotment)
Example A company issued 1,000 shares of Rs.100 each at a premium of Rs.20

payable Rs.30 on application, Rs.30 on allotment (including premium of Rs.20) ,
Rs.30 on 1st call and Rs.30 on final call. Pass the journal entries.
Solution Journal Entries Dr Cr
bank)

share capital A/c)
Share allotment A/c Dr 30,000 -

(Being share allotment money and premium
money due)

To share allotment A/c - 30,000
(Being share allotment money paid into bank)


st
(Being share 1st call money paid into bank)


Example On 1st April 2011, Janta Limited was formed with an authorized capital of
Rs.30,00,000 divided into 30,000 shares of 100 each. The company invited
applications for issuing 3,000 equity shares. The amount payable was as below
Application Rs.30
Allotment Rs.50
Final call Rs.20
The issue was fully subscribe and company allotted shares to all the applicant. All
money was received except the final call on 1,000 shares.
bank)

share capital A/c)

Bank A/c Dr 1,50,000 -

(Being share allotment money paid into bank)


(Being share final call money paid into bank)
Example X Limited forfeited 1,000 shares of Rs.100 each which were issued at a
premium of Rs.20 per share for non-payment of 1st call Rs.30 per share
and final call Rs.20 per share. Pass journal entries.
Share capital A/c Dr 1,00,000
To share forfeiture A/c 50,000
To calls in arrears A/c 50,000
(Being shares forfeited for
nonpayment of Ist and final call )
Example Ritika Limited forfeited 500 shares for nonpayment of allotment Rs.40
(including premium Rs.20) and 1st and final call of Rs.40 per share. Pass journal
entries.
Share capital A/c Dr 50,000
Share premium A/c Dr 10,000
To share forfeiture A/c (40 x 500) 20,000
To calls in arrears A/c (80 x 500) 40,000
(Being shares forfeited for non
payment of allotment and calls)
Example Gagan Limited forfeited 1,000 shares of Rs.10 each for nonpayment of
1st call Rs.3 and final call Rs.2 per share. Pass Journal entries
To shares forfeited A/c 5,000
(Being shares forfeited for nonpayment
of ist and final call)
Example P Limited purchased goods worth Rs.2,00,000 from Q Limited and paid
20% in cash and balance in the form of shares at
a) Par
b) 20% Discount
c) 60% Premium
Solution
Number of shares
At Par = 1,60,000 = 1,600 shares at par
100
At Discount = 1,60,000 = 2,000 shares at discount
80
At Premium = 1,60,000 = 1,000 shares at premium
160
At Par
Assets A/c Dr 2,00,000
To Q Limited A/c 2,00,000
(Being assets purchased from Q Limited)
Q limited A/c Dr 2,00,000
To cash A/c 40,000
To share capital A/c 1,60,000
(Being shares issued at par and remaining
paid by cash)
At Premium
Q Limited A/c Dr 2,00,000
To cash A/c 40,000
To premium A/c 60,000
At Discount
Q Limited A/c Dr 2,00,000
To cash A/c 40,000
(Being shares issued at a discount of 20 %
and balance by cash)
Example Sapna Limited purchased the business assets of brother Limited for
Rs.3,60,000 payable in the form of shares of Rs.10 each. Pass journal entries in
the books of Sapna Limited if the shares are issued :-
(a) At par.
(b) At 20% premium.
(c) At 10% discount.
Solution
Number of shares to be issued
(a) At Par
Number of shares = Purchase price of assets
Issue price per share
= 3,60,000
10
= 36,000 shares
(b) At 20 % Premium
Number of shares = 3,60,0000
12
Face value + Premium
10 + 10 X 20 = 12
100
= 30,000 shares
(c) At 10 % Discount
9
Face value - discount
10 - 10 x 10 = 9
100
=9
= Number of shares = 40,000
Date Particulars L.F Amount(in Rs.) Amount(in Rs.)
Business assets A/c Dr 3,60,000
To Brother's limited A/c 3,60,000
(Being business assets purchased
from brother's limited)
At Par
Brother's limited A/c Dr 3,60,000
(Being shares issued at par as
consideration for assets
purchased )
At Premium
Brother's Limited A/c Dr 3,60,000
(Being shares issued at 20%
premium in the consideration of
assets purchased)
At Discount
Brother's Limited A/c Dr 3,60,000
Share Discount A/c Dr 40,000
(Being shares issued at 10%
discount in the consideration of
assets purchased)
Consideration other than cash

Example 38 Good luck limited purchased machinery costing Rs.10,00,000 from
fair deals ltd. The company paid the price by issue of equity shares of Rs.10 each
at a premium of 25%. Pass the necessary journal entries for the above
transactions in the books of good luck ltd.
Solution
Number of shares to be issued = Total Purchase price (payable in shares)
Value of each share
Total Purchase consideration = Rs.10,00,000
Value of each share = 10 + 10 x 25 = Rs.12.50 per share
100
Therefore, number of shares = 10,00,0000
12.50
= 8,000 shares.
Example Issue Limited purchased assets for Rs.15,00,000 from G Limited and paid
20% by cash and remaining in the form of shares:-
a) At par
b) 20% premium
c) 20% discount
Solution
Number of shares
At Par = 12,00,000 = 12,000 shares at par
100
At Premium = 12,00,000 = 10,000 shares at premium
120
At Discount = 12,00,000 = 15,000 shares at discount
80
AT PAR
To G Ltd A/c 15,00,000
(Being assets purchased from G
Limited)
G Limited A/c Dr 15,00,000
To cash A/c 3,00,000
(Being shares issued at par and
remaining paid by cash)
AT PREMIUM
To G Ltd A/c 15,00,000
Limited)
G Limited A/c Dr 15,00,000
(10,000 x 100) 2,00,000
To premium A/c
(10,000 x 20)
(Being shares issued at a premium
of 20 % and balance paid in cash)
AT DISCOUNT
To G Ltd A/c 15,00,000
Limited)
G Ltd A/c Dr 15,00,000
Discount A/c Dr 3,00,000
(Being shares issued at a discount
of 20 % and balance in cash)
Example Pragati Limited purchased machinery from Antic Limited for Rs.3,00,000
and paid Rs.50,000 in cash and balance in the form of shares at 25% premium.
Pass journal entries.
Solution Total amount to be paid = Rs.3,00,000
Cash paid = Rs.50,000
Shares = 2,50,000
Number of shares
2,50,000 = 2,000 shares
125

Machinery A/c Dr 3,00,000
To Antic Limited A/c 3,00,000
(Being machinery purchased from
Antic limited)
Antic Limited A/c Dr 3,00,000
To cash A/c 50,000
(Being shares issued at a premium
of 25 % and balance paid in cash)
Example 39 Raja limited purchased building from Ashoka limited for

Rs.36,00,000.The vendors were paid by issue of equity share of Rs.10 each. Pass
the necessary entries in the books of Raja limited when (i) Shares were issued at
par ,(ii) Shares were issued at 20% premium and (iii) Share were issued at 10%
discount.
Solution
At Par
Number of shares to be issued = Total Purchase price (payable in shares)
Value of each share
Value of each share = Rs.10 (at par)
10
= 3,60,000 shares.
At Premium
Value of each share = 10 + 10 x 20 = Rs.12 per share
100
12
= 3,00,000 shares.
At Discount
Value of each share = 10 - 10 x 10 = Rs.9 per share
100
9
= 4,00,000 shares.
Example Harshit limited forfeited 30 shares for nonpayment of allotment Rs.10
and first call Rs.20. The final call of Rs.30 has not yet been called. All these shares
were reissued at Rs.90 per share fully paid up. Pass journal entries.
To call in arrears A/c 900
(Being share forfeited for
nonpayment of allotment)
Bank A/c Dr 2,700
Share forfeiture A/c Dr 300
(Being share reissued at Rs.90 fully
paid up)
To capital reserve A/c 900
(Being balance of share forfeiture
transferred to capital reserve)
Example. Mohan Ltd forfeited 500 shares of Rs.100 each for nonpayment of 1st
call Rs.30 and final call of Rs.20 per share. These shares were reissued at the rate
of Rs.90 per share fully paid up. Pass Journal entries.
Date Particulars L.F Amount (in Rs.) Amount in (Rs.)
To Share Forfeiture A/c 25,000
To Calls in arrears A/c 25,000
(Being 500 shares forfeited for nonpayment
of 1st call Rs.30 and final call of Rs.20)
Bank (90x500) A/c Dr 45,000
Share Forfeiture (50x10) A/c Dr 5,000
(Being forfeiture shares reissued at Rs.90
per share)
Share Forfeiture A/c Dr 20,000
To Capital Reserve A/c 20,000
transferred to capital reserve account)
Example. Gopal Ltd forfeited 300 shares on which only application money of
Rs.40 per share was received. 100 of these shares were reissued at the rate of
Rs.90 share fully paid up. Pass Journal Entries.
Solution
Share Capital A/c Dr 30,000
(Being 300 shares forfeited for nonpayment
of Rs.60 per share)
Bank (100x90) A/c Dr 9,000
Share forfeiture A/c Dr
To Share Capital A/c 1,000 10,000
(Being forfeiture shares reissued at Rs.90
per share)
Share forfeiture A/c Dr 3,000
(Being profit of share forfeiture account
transferred to capital reserve A/c)
Example. Mohit limited forfeited 1,000 shares for nonpayment of allotment Rs.30
and 1st and final call of Rs.40. 300 of these shares were re-issued at Rs.90 per
share fully paid up. Pass journal entries.
Shares capital A/c Dr 1,00,000
(Being shares forfeited for non payment
of allotment Rs.30 and first and final call
Rs.40 per share)
Bank A/c Dr 27,000
(Being shares reissued at Rs.90 per share
fully paid up)
(Being balance of shares forfeiture
Calculation of Capital Reserve
= 30,000 x 300 = 9,000
1,000
Less loss on reissue 3,000
Capital Reserve 6,000
Example. Gaurav limited forfeited 300 shares of Rs.120 each which were issued at
a premium of Rs.20 per share for nonpayment of 1st call Rs.30 and final call Rs.40.
100 of these shares were reissued at Rs.90 per share fully paid up. Pass Journal
entries.
To Share forfeiture A/c 9,000
of Rs.70 per share)
Bank A/c Dr 9,000
(Being shares reissued at Rs.90 per share)
(Being balance of share forfeited account
=9,000 x 100 = 3,000
300
Example. X Limited forfeited 5,000 shares of Rs.100 each for nonpayment of

allotment Rs.30 and final call Rs.40. 1,000 of these shares were re-issued at Rs.90
per share fully paid up. Pass Journal Entries.
To Share forfeiture A/c 1,50,000
To calls in arrears A/c 3,50,000
of Rs.70 per share)
Bank A/c Dr 90,000
To Share capital A/c 1,00,000
(Being shares reissued at Rs.90 per share
fully paid up)
To Capital reserve A/c 20,000
(Being balance of shares forfeited account
Amount Forfeited on Reissued shares
1,50,000 x 1,000 = 30,000
5,000
Example X limited forfeited 3,000 shares of Rs.100 each, for nonpayment of first
call Rs.30, final call Rs.20. 2,000 of these shares were reissued at Rs.85 per share
fully paid up. Pass journal entries.
To shares forfeiture A/c 1,50,000
To calls in arrears A/c 1,50,000
(Being shares forfeited for non payment of
Rs.50 per share)
Shares forfeiture A/c Dr 30,000
(Being forfeited shares reissued at Rs.85 per
share fully paid up)
Shares Forfeited A/c Dr 70,000

Amount forfeited on reissued shares
= 1,50,000 x 2,000 = 1,00,000
3,000
Less Loss on reissue 30,000
Example X Limited purchased a furniture costing Rs.2,15,000 from Y Limited The

payment is made as follows.
(a) Rs.35,000 in cash and balance in the form of equity shares of Rs.100 each. Pass
Journal entries.
Furniture A/c Dr 2,15,000
To Y Limited A/c 2,15,000
(Being furniture purchased from Y
Ltd.)
Y Limited A/c Dr 2,15,000
To cash A/c 35,000
(Being 1,800 shares issued to Y
Limited of Rs.100 each)
Number of Shares = 1,80,000
100
= 1,800 shares
Example X limited purchased assets of Y limited for Rs.8,00,000 payable 25% in
cash and balance in fully paid shares of Rs.100 each.
Pass journal entries if shares are issued at
1. Par
2. At Rs.20 Premium
3. Discount of Rs.25 per share
Solution
1
Date Particulars Debit Credit
(a) Assets A/c Dr 8,00,000
(Being assets of Y limited Purchased)
(i) Y Limited A/c Dr 8,00,000

To Cash A/c 2,00,000
(Being issued share and given cash to Y
limited)
2.
(b) Assets A/c Dr 8,00,000
To share Premium A/c 1,00,000
(Being issued shares and given cash with
Premium to Y Limited)
Working note
6,00,000 =5,000 shares
120

(c) Assets A/c Dr 8,00,000

(Being issued shares on discount and paid
cash to Y limited)
Working note
6,00,000 = 8,000 shares
75
Example Mukesh limited forfeited 1,000 shares of Rs.100 each for non payment
of allotment Rs.25 per share and first call Rs.25 per share. 700 of these shares
were reissued at 90 per share fully paid up. Pass Journal entries.
Solution Journal Entry Dr Cr
Share capital (1,000 x 100) A/c Dr 1,00,000
To share forfeiture (1,000 x 50)A/c 50,000
To calls in arrears (1,000 x 50) A/c 50,000
(Being share forfeited for
nonpayment of allotment and first
call)
Bank A/c Dr 63,000
Shares forfeited A/c Dr 7,000
To Share capital A/c 70,000
(Being forfeited shares reissued at
Rs.90 per share fully paid up)

To capital Reserve A/c 28,000
account transferred to capital
reserve)
Amount forfeited on 1,000 shares = 50,000
Amount forfeited on 700 shares = 50,000 x 700
1,000
= 35,000
Less Loss on reissue of forfeited shares = 7,000
Capital Reserve = 35,000 - 7,000
= 28,000
Example Young ltd issued 500 equity shares of Rs.10 each at a premium of Rs.2
per share payable as follows :-
Allotment Rs.5 per share (including premium)
1st call Rs.2 per share
Rahul was allotted 300 shares. Pass the journal entries relating to forfeiture of
shares in the following cases.
1. Rahul failed to pay allotment money and his shares are immediately forfeited.
2. Rahul failed to pay allotment and 1st call and his shares were forfeited after the
first call.
3. Rahul failed to pay 1st call and his shares were immediately forfeited.
4. Rahul failed to pay 1st and final call money and his shares were forfeited after
final call.
Solution
1.
Share capital A/c Dr 1,500 -
Share premium A/c Dr 600 -
To shares forfeited A/c - 600
To calls in arrears A/c - 1,500
allotment of Rs.5 per share)
2.
Share premium A/c Dr 600 -
To share forfeited A/c - 600
allotment and first call)
3.
To shares forfeited A/c - 1,500
To calls in arrears A/c - 600
first call)
4.
To shares forfeited A/c - 1,500
first and final call)
Example Raja Ltd forfeited 500 shares of Rs.100 each issued at a discount of 10%
for nonpayment of 1st call Rs.30 and a final call of Rs.10 has not been made. Half
of these shares were reissued at Rs.80 per share fully paid up. Pass journal
entries.
Solution
To shares forfeited A/c (500 x 50) - 25,000
To calls in arrears A/c (500 x 30) - 15,000
To discount A/c (500 x 10) - 5,000
first call of Rs.30 per share)

Discount A/c Dr 2,500 -
Share forfeited A/c Dr 2,500 -
(Being half of the forfeited shares reissued at
Rs.80 per share)
Shares forfeited A/c Dr 10,000 -

To capital reserve A/c 10,000
(Being balance of share forfeiture account
Calculation of capital reserve
Amount forfeited on 1,000 shares = 25,000
Amount forfeited on 500 shares = 25,000 x 500
1,000
= Rs.12,500
Loss on reissue = 500 x 5
= Rs.2,500
Capital reserve = Rs.10,000
Example Mohan Limited issued 1,500 equity shares of Rs.100 each as full
consideration for purchase of land and building worth Rs.1,65,000. Pass journal
entry.
Land and building A/c Dr 1,65,000
To Vendor A/c 1,65,000
(Being land and building purchased)
Vendor A/c Dr 1,65,000
To Securities premium A/c 15,000
(Being share issued at a premium of
Rs.10 per share)
Forfeitures of shares
Example A company forfeited 5,000 shares of Rs.100 each for nonpayment of 1st
call Rs.20 per share and final call Rs.25 per share. Pass journal entries.
Solution
Share capital A/c Dr 5,00,000 -
To shares forfeited A/c - 2,75,000
To calls in arrears A/c - 2,25,000
Example X limited forfeited 3,000 shares of Rs.100 each on which only application
money of Rs.30 per share has been received. Pass the journal entry.
Solution
To share forfeited A/c - 90,000
Example X Limited forfeited 5,000 shares of Rs.100 each on which allotment

money Rs.20 per share and first call of Rs.30 per share was not paid. The final call
of Rs. 30 was not called. Pass the journal entry
Solution
To shares forfeited A/c - 1,00,000
Example Y Ltd forfeited 800 shares of Rs.100 each which were issued at a
premium of Rs.20 per share for nonpayment of 1st call Rs.25 per share and final
call of Rs.15 per share. Pass the journal entry.
Solution
To shares forfeiture A/c (800 x 60) - 48,000
To calls in arrears A/c (800 x 40) - 32,000
Rs.40 per share)
Example Mohan ltd forfeited 1,000 shares of Rs.100 each issued at a premium of
Rs.10 per share for nonpayment of allotment Rs.40 (including premium) 1st call
Rs.30 and final call Rs.20. Pass the journal entry.
Solution
Share premium A/c Dr 10,000 -
To share forfeited A/c (1,000 x 20) - 20,000
Rs.90 per share)
Example A company forfeited 800 shares for nonpayment of allotment Rs.20 and
first call Rs.25 per share. The final call of Rs.25 per share has not been called. Half
of the forfeited shares are reissued at Rs.90 per share fully paid up. Pass journal
entries.
Solution
Particulars Debit Credit
Share capital A/c Dr 800 x 75 -
To shares forfeited A/c - 800 x 30
To calls in arrears A/c - 800 x 45
(Being share forfeited for nonpayment of
Bank A/c Dr 400 x 90 -

Share forfeited A/c Dr 400 x 10 -
(Being forfeited shared reissued at Rs.90
per share)

To capital reserve A/c - 8,000
(Being balance of shares forfeited
transferred to capital reserve )
Example XYZ Ltd forfeited 3,000 shares of 100 each which were issued at a
premium of Rs.20 per share. The final call of 25 has not been received. 1,200 of
these share were reissued at Rs.80 per share fully paid up. Pass the journal
entries.
Solution
Particulars Debit Amount Credit Amount
To Shares forfeited A/c (75 x 3,000) - 2,25,000
To Calls in arrears A/c - 75,000
(Being share forfeited for nonpayment
of Rs.25 per share)

To Share capital A/c - 1,20,000
(Being forfeited shared reissued at
Shares forfeited A/c Dr 66,000 -

Amount Forfeited on 1,200 shares
= 2,25,000 x 1,200
3,000
= Rs.90,000
Less Loss on reissue
1,200 x 20 = 24,000
Capital Reserve
= 90,000 - 24,000
= Rs.66,000
Example P and R Ltd forfeited 40 shares which were issued at a premium of Rs.10
per share for nonpayment of first call Rs.20 and final call Rs.10. 25 of these shares
were reissued at Rs.95 per share. Pass the journal entries
Solution
Particulars Debit Amount Credit Amount
To Shares forfeited A/c - 2,800
of Rs.30 per share)
Bank A/c Dr 2,375 -

Share forfeited A/c Dr 125 -
To share capital a/c - 2,500
Rs.80 per share)

Amount Forfeited on 25 shares
= 2,800 x 25
40
= Rs.1,750
Less Loss on reissue
5 x 25 = 125
Capital Reserve
= 1,750 - 1,25
= Rs.1,625
Example A company forfeited 15 shares which were issued at a discount of Rs.25

per share for nonpayment of first call Rs.10 and final call Rs.45. 10 of these shares
were reissued at Rs.85 per share fully paid up. Pass the journal entries.
Solution Journal Entries
Particulars Debit Credit
To share forfeited A/c - 300
To calls in arrears A/c - 825
To discount A/c - 375
of shares )
Bank A/c Dr 850 -

To share capital A/c - 850
Rs.85 per share)
Share forfeited A/c Dr 200 -

To capital reserve a/c - 200
(Being balance of share forfeited
account transferred to capital reserve )
Example Ashwin Limited issued 10,000 shares of Rs.100 each payable Rs.30 on
application, Rs.20 on allotment, Rs.25 on first call and balance on final call.
Applications were received for 15,000 shares and pro rata allotment was made to
applicants for 12,000 shares. Ram the holder of 50 shares failed to pay the
allotment money and on his failure to pay the first call, his shares were
immediately forfeited after the first call. Half of these shares were reissued at
Rs.90 per share fully paid up. Pass journal entries.
Solution
Application Application Excess Allotment Adjustment Received
money due money received money due
Reject 90,000 (90,000)
Ram 1,500 1,800 300 1,000 300 700
Others 2,98,500 3,58,200 59,700 1,99,000 59,700 1,39,300
Total 3,00,000 4,50,000 60,000 2,00,000 60,000 1,40,000
Applied Alloted
15,000 - 10,000
Reject 3,000 - 0
Alloted 12,000 - 10,000
Reject 3,000 - 0
Ram 60 - 50
(50 x 6)
5
Others 11,940 - 9,950
(In Rs.) (In Rs.)
To share application A/c 4,50,000
Share application A/c Dr 4,50,000
To bank A/c 90,000
to share capital A/c, allotment A/c and
balance refunded)
Share allotment A/c Dr 2,00,000

(Being share allotment money transferred
to share capital A/c)

To share allotment A/c 1,39,300
Share first call A/c Dr 2,50,000

(Being share first call money transferred to
share capital A/c)

To share first call A/c 2,48,750
(Being first call money received)
Share final call A/c Dr 2,48,750

(Being share final call transferred to share
capital A/c)

To share final call A/c 2,48,750
(Being share final call received)

To share forfeited A/c 1,800
To calls in arrear A/c 1,950
(Being share forfeited)
Bank A/c Dr 2,250
Share forfeited A/c Dr 250
(Being forfeited share reissued)

(Being forfeited share transferred to capital
reserve)
Example X Limited forfeited 1,000 shares of Rs.100 each for nonpayment of 1st
call Rs.30 and final call Rs.20. 600 of these shares were re-issued at Rs.90 per
share fully paid up. Pass journal entries
Solution Journal entries
Particulars Amount (in Rs.) Dr. Amount (in Rs.) Cr.
(Being shares forfeited for nonpayment
of Ist and final call)
Bank (90 x 600) A/c Dr 54,000
Share forfeiture (10x600) A/c Dr 6,000
(Being 600 of the forfeited shares
reissued at Rs.90 per share)
(Being shares forfeited account balance
Capital reserve = 50,000 x 600 = 30,000

1,000
Less : Loss on reissue - 6,000
Example Isha Limited issued 1,000 sweat equity shares of Rs.10 each at a discount
of 20% to its directors. All the shares offered were subscribed for by the directors
and they were allotted. The whole money was received. Pass journal entries in
the books of company if the whole amount was received on application.
Solution Journal Entries
(in Rs.) (in Rs.)
Bank A/c Dr 8,000
(Being shares issued to directors at a
discount of 20%)
Case (III) When 2 classes of shares are issued

Example Bhardwaj Limited is incorporated on 1st April 2015. The authorized
capital of the company was Rs.40,00,000 divided into 25,000 equity shares of
Rs.100 each and 1,50,000 7% preference shares of Rs.10 each. The company
issued 10,000 equity shares and 1,00,000 preference shares payable as follows.
Equity share Preference share
Application Rs.30 Rs.2
Allotment Rs.30 Rs.3
First call Rs.20 Rs.3
Final call Rs.20 Rs.2
Date Particulars LF Amount (in Rs.) Amount(in Rs.)
To Equity Share Application A/c 3,00,000
To Preference share Application A/c 2,00,000
(Being Equity shares and preference
shares application money received)
Equity shares Application A/c Dr 3,00,000
To Equity share capital A/c 3,00,000
(Being equity share application money
transferred to equity share capital
account)
Preference share Application A/c Dr 2,00,000
To preference share capital A/c 2,00,000
(Being preference share Application
money transferred to preference share
capital account)
Equity share allotment A/c Dr 3,00,000
(Being equity share allotment money
due)
Preference share allotment A/c Dr 3,00,000
(Being preference share allotment
money due)
To Equity share allotment A/c 3,00,000
To preference share allotment A/c 3,00,000
(Being equity share allotment and
preference share allotment money
received)
Equity share First call A/c Dr 2,00,000
(Being equity share first call money
due)
Preference share first call A/c Dr 3,00,000
To Preference capital A/c 3,00,000
(Being preference share first call
money due)
To Equity share first call A/c 2,00,000
To preference share first call A/c 3,00,000
(Being equity share first call and
preference share first call money
received)
Equity share final call A/c Dr 2,00,000
(Being equity share final call money
due)
Preference share final call A/c Dr 2,00,000
(Being preference share final call
money due)
To preference final call A/c 2,00,000
To Equity share final call A/c 2,00,000
(Being preference final call and equity
final call money received)
Call in arrears
Example X Limited issued 1,000 shares of Rs.100 each payable
Application Rs.30
Allotment Rs.25
1st call Rs.25
Final call Rs.20
Ram, a holder of 30 shares failed to pay the amount due on calls
Pass the journal entries.

(Being share application paid into bank)

to share capital A/c)
Share allotment A/c Dr 25,000 -

To share allotment A/c - 25,000
bank)

st

Calls in arrears A/c Dr 750 -
st
st
(Being share 1 call money paid into bank
and a holder of 50 shares failed to pay calls
money)


(Being share final money paid into bank and a
holder failed to pay call money)
Calls in arrears
Example Y Ltd issued 25,000 shares of Rs.10 each payable Rs.4 on application,
Rs.3 on allotment, Rs.2 on 1st call and Rs.1 on final call. Mohan, a holder of 350
shares failed to pay amount due on allotment and calls. Pass journal entries.
Bank A/c Dr 1,00,000 -
To Share application A/c - 1,00,000
bank)
Share Application A/c Dr 1,00,000 -
To Share capital A/c - 1,00,000
transferred to share capital A/c)
Share Allotment A/c Dr 75,000 -

To Share capital A/c - 75,000
Bank A/c Dr 73,950

Calls in arrears A/c Dr 1,050 -
To Share allotment A/c - 75,000
bank)

To share capital A/c - -
st
(Being share 1 call money due) 50,000

st
To Share 1 call A/c - 50,000
st
(Being share 1 call money paid into
bank and a holder failed to pay call
money)


To Share final call A/c - 25,000
(Being share final money paid into bank
and a holder failed to pay call money)
Example Price Limited issued a prospectus inviting applications for 20,000 equity
shares of Rs.10 each at a premium of Rs.3 per share payable as follows.
On Application Rs.2
On Allotment (including premium) Rs.5
On first call Rs.3
On Second call Rs.3
Applications were received for 30,000 shares and allotment was made on pro rata
basis. Money overpaid on applications was adjusted towards amount due on
allotment.
Mr. Mohit to whom 400 shares were allotted, failed to pay the allotment money
and first call and his shares were forfeited after the first call. Mrs. Jolly, to whom
600 shares were allotted, failed to pay for the two calls and hence, her shares
were forfeited.
Of the shares forfeited, 800 shares were reissued to Supriya as fully paid for Rs.9
per share, the whole of Mr. Mohit's shares being included.
Solution
Shares are 20,000 of Rs.10 each at a premium of Rs.3 per share
Application - 2
Allotment - 5 (2+3)
Ist call - 3
Final call - 3
Total 13
Applicants of 30,000 shares were allotted 20,000 shares

Ratio = 3 : 2
Applied Allotted
Mohit = 400 x 3 = 600 400
2
Jolly = 600 x 3 = 900 600
2
Others 28,500 19,000
30,000 20,000
Due Received Excess Due Received Due Receive Due Recd
800 1,200 400 800 + 1,200 Not Paid 1,200 Notpaid - -
1,200 1,800 600 1,200 + 1,800 600+1,800 1,800 Notpaid 1,800 Not p
38,000 57,000 19,000 38,000 + 57,000 19,000+57,000 57,000 57,000 57,000 57,000
40,000 60,000 20,000 40,000 + 60,000 19,600+58,800 60,000 57,000 58,800 57,000

Bank A/c Dr 60,000
To Share allotment A/c 20,000
To Securities Premium A/c 60,000
Bank A/c Dr 78,400
Bank A/c Dr 57,000
Call in Arrears A/c Dr 3,000
To Share first call A/c 60,000
Bank A/c Dr 57,000
Call in arrears A/c Dr 1,800
Share capital A/c (400 x 7) Dr 2,800
Securities Premium A/c (400 x 3) Dr 1,200
To share first call A/c 1,200
Share forfeiture A/c (600 x 4) 2,400
To share first call A/c (600 x 3) 1,800
To final call A/c (600 x 3) 1,800
Bank A/c Dr 7,200

Example Bhamashad Company Limited made an issue of 1,00,000 equity shares f
Rs.10 each at a premium of 20% payable as follows:
On Application : Rs.2.50 per share
On Allotment : Rs.4.50 per share
On First and Final call : Balance
Applications were received for 2,00,000 equity shares and the directors made
pro-rata allotment to all applicants. Renu, who had applied for 800 shares did not
pay the allotment and final call money, with the result that his shares were
forfeited. Later on 80% of the forfeited shares were reissued at Rs.8 per share
fully paid up. Pass the necessary journal entries for the above mentioned
transactions in the books of the company. (CBSE, Delhi comptt. 2011)
Solution
Application = Rs.2.50
Allotment = Rs.4.50 ( 2 premium)
First and final call = Rs.5
Renu applied 800 shares
Issued 400 share arrears = 400 x 4.5
Failed to pay allotment and calls money
Shares forfeited
80 % shares reissued at Rs.8 per share
80 x 400 = 320 shares
100
received)
To allotment A/c 2,50,000
transferred to share capital and
allotment)
To securities premium A/c 2,00,000
Calls in arrears A/c Dr 800
Calls in advance A/c Dr 2,50,000
received)
Share Ist and final call A/c Dr 5,00,000
Calls in arrears A/c Dr 2,000
To share first and final call A/c 5,00,000
(Being share first and final call
money received except on 400
shares)
Securities premium A/c Dr 800
payment of allotment and calls
money)
Bank A/c Dr 2,560
Discount A/c Dr 640
(Being 80 % of the forfeited shares
were reissued at Rs.8 per share)
account transferred to capital
reserve)
Amount Forfeited on 320 share = 2,000 x 320
400
= 1,600
Less Loss on reissue 640
= Rs.960
Example Doon Limited was registered with an authorized capital Rs.50,000

divided into 5,000 shares of Rs.10 each. Applications were invited for 3,500 shares
but the applications were received for 6,000 shares. The company has rejected
applicants of 750 shares and pro rata allotment was made to remaining
applicants. Suresh who applied for 1,050 shares failed to pay allotment and first
call. His shares were forfeited immediately after first call and they were reissued
at 9/share fully paid up. The amount was payable as follows.
Application Rs.3/ share
Allotment Rs.3/ share
First call Rs.2/ share
Final call Rs.2/ share
Solution
Applied Allotted
6,000 Shares 3,500 shares
Reject 750
Pro rata to 5,250 shares - 3,500 shares
3 : 2
Suresh Applied for1,050 shares

Allotted 1,050 x 2 = 700
3
Applied Allotted
Other 4,200 2,800
Suresh 1,050 700 (1,050/3 x2)
Reject 750 0
Total 6,000 3,500
Application Applicant Excess Allotment Adjust Allotment

Due Received Due Received
8,400 12,600 4,200 8,400 4,200 4,200
2,100 3,150 1,050 2,100 1,050 Not received
0 (2,250) - - - -
10,500 18,000 5,250 10,500 5,250 4,200
(in Rs.) (in Rs.)
Bank A/c Dr 18,000
(Being share applicant money received)
To Bank A/c 2,250

share capital A/c, share allotment A/c and
remaining shares money refunded)
Share allotment A/c Dr 10,500
Bank A/c Dr 4,200
To share Allotment A/c 4,200
(Being share allotment money received except on

700 shares held by Suresh)
Bank A/c Dr 5,600
To share 1st call A/c 5,600
(Being share final call money due on 2,800 shares)
Bank A/c Dr 5,600
(Being shares of Suresh forfeited due to

nonpayment of allotment and first call)
Bank A/c Dr 6,300
(Being share reissued at Rs.9 per share

(Being share forfeiture money transferred to

capital reserve account)
Example Price Limited issued a prospectus inviting applications for 20,000 equity
shares of Rs.10 each at a premium of Rs.3 per share payable as follows.
On Application Rs.2
On Allotment (including premium) Rs.5
On first call Rs.3
On Second call Rs.3
Applications were received for 30,000 shares and allotment was made on pro rata
basis. Money overpaid on applications was adjusted towards amount due on
allotment.
Mr. Mohit to whom 400 shares were allotted, failed to pay the allotment money
and first call and his shares were forfeited after the first call. Mrs. Jolly, to whom
600 shares were allotted, failed to pay for the two calls and hence, her shares
were forfeited.
Of the shares forfeited, 800 shares were reissued to Supriya as fully paid for Rs.9
per share, the whole of Mr. Mohit's shares being included.
Solution
Shares are 20,000 of Rs.10 each at a premium of Rs.3 per share
Application - 2
Allotment - 5 (2+3)
Ist call - 3
Final call - 3
Total 13
Applicants of 30,000 shares were allotted 20,000 shares

Ratio = 3 : 2
Applied Allotted
Mohit = 400 x 3 = 600 400
2
Jolly = 600 x 3 = 900 600
2
Others 28,500 19,000
30,000 20,000
Due Received Excess Due Received Due Receive Due Recd
800 1,200 400 800 + 1,200 Not Paid 1,200 Notpaid - -
1,200 1,800 600 1,200 + 1,800 600+1,800 1,800 Notpaid 1,800 Not p
38,000 57,000 19,000 38,000 + 57,000 19,000+57,000 57,000 57,000 57,000 57,000
40,000 60,000 20,000 40,000 + 60,000 19,600+58,800 60,000 57,000 58,800 57,000

Bank A/c Dr 60,000
To Securities Premium A/c 60,000
Bank A/c Dr 78,400
Bank A/c Dr 57,000
Call in Arrears A/c Dr 3,000
To Share first call A/c 60,000
Bank A/c Dr 57,000
Call in arrears A/c Dr 1,800
Securities Premium A/c (400 x 3) Dr 1,200
Share forfeiture A/c (600 x 4) 2,400
To share first call A/c (600 x 3) 1,800
To final call A/c (600 x 3) 1,800
Bank A/c Dr 7,200

Example A company forfeited 800 shares for nonpayment of allotment Rs.20 and
first call Rs.25. The final call of Rs.25 per share has not been called. Half of the
forfeited shares are reissued at Rs.90 per share fully paid up. Pass journal entries.
Solution
Journal Entries
(Being shares forfeited for nonpayment of
Bank A/c Dr 36,000

share)

Amount received on 800 shares = 800 x 30 =24,000
Loss on reissue
Example XYZ Limited forfeited 3,000 shares of Rs.100 each which were issued at a
premium of Rs.20 per share. The final call of Rs.25 has not been received. 1,200 of
these shares were reissued at Rs.80 per share fully paid up. Pass journal entries.
Solution
To shares forfeited A/c 2,25,000
call of Rs.25 per share)
Bank A/c Dr 96,000

share)

Example PQR Limited forfeited 40 shares which were issued at a premium of

Rs.10 per share for nonpayment of first call Rs.20 and final call Rs.10 per share. 25
of these shares were reissued at Rs.95 per share. Pass journal entries.
Solution
Share capital A/c Dr (40 x 100)4,000
To Shares forfeited A/c (40 x 70)2,800
To Calls in arrears A/c (40 x 30)1,200
Rs.30 per share)
Bank A/c Dr (25 x 95)2,375

Share forfeited A/c Dr (25 x 5) 125
share)
Share forfeited A/c Dr 1,625


Amount forfeited on 40 shares = Rs.2,800.
Capital Reserve = 2,800 x 25= 1,750
40
Loss on reissue = 25 x 5 = 125
Capital Reserve = 1,750 - 125
= Rs.1,625.
Example A company forfeited 15 shares which were issued at a discount of Rs.20

per share for nonpayment of first call of Rs.10 and final call Rs.15 per share. 10 of
these shares were reissued at Rs.85 per share. Pass journal entries.
Solution
To Shares forfeited A/c (15 x 55) 825
To Calls in arrears A/c (15 x 25) 375
To Discount A/c (15 x 20) 300
first call and final call)
Bank A/c Dr 850

Shares Forfeiture A/c Dr 150
share)

To Capital reserve A/c 400
Amount forfeited on 15 shares = Rs.825.
Capital Reserve = 825 x 10 = 550
15
Loss on reissue = 10 x 15 = 150
Capital Reserve = 550 - 150
= Rs.400.
Example Kavita Ltd issued shares of 100 each at a discount of Rs.10 per share. P
holding 50 shares did not pay final call of Rs.25 per share. These shares were
forfeited and the company reissued these shares at
A. Rs.75 per share.
B. Rs.80 per share.
C. Rs.85 per share.
Solution
Part A
Forfeiture of Shares
To shares forfeited A/c (65 x 50) 3,250
To calls in arrears A/c (25 x 50) 1,250
To discount A/c (10 x 50) 500
final call of Rs.25 per share)
Reissue of Shares
Bank (75 x 50) A/c Dr 3,750
Shares forfeited (50 x 15)A/c Dr 750
Discount on shares (50 x 10)A/c Dr 500
To share capital A/c (50 x 100) 5,000
(Being forfeited shared reissued at Rs.80
per share)

(Being forfeited shares balance transferred
to capital reserve )
Part B
Bank A/c Dr 4,000
Discount A/c Dr 500
Shares forfeited A/c Dr 500
share)
2,750
Shares forfeited A/c Dr
to capital reserve)
Part C
Bank A/c Dr 4,250
Discount A/c Dr 500
share)

to capital reserve)
Example Geeta limited purchased a plant and machinery for Rs.16,50,000 and
paid in the form of shares of Rs.100 each at.
(a) At par
(b) At 10 % premium
(c) At 20 % discount
Solution
(a) At par
Number of shares = Total amount
Issue price
= 16,50,000
100
= 16,500 shares
(b) At 10% premium
Number of shares = Total Amount = 16,50,000
Issue price 110
= 15,000 shares.
Issue price = Face value + 10% premium
= Rs.100 + 100 X10
100
= 110 shares.
c) At 20% discount
Number of shares = Total Amount = 16,50,000
Issue price 80
= 20,625 shares.
Journal Entries
Date Particulars L Amount Amount
F (in Rs.) (in Rs.)
Plant and Machinery A/c Dr 16,50,000
To Vendor A/c 16,50,000
(Being Plant and Machinery purchased)
Part (A) Vender A/c Dr 16,50,000
(Being shares issued at par in the
consideration of assets)
Part (B) Vender A/c Dr 16,50,000
To Premium A/c 1,50,000
(Being shares issued at 10% premium in the
consideration of assets)
Part (C) Vender A/c Dr 16,50,000
(Being shares issued at a 20% discount in
the consideration of assets)
Example A Limited company purchased Business of X Limited for Rs.4,50,000

payable in the form of fully paid shares of Rs.100 each. What entries are to be
passed in the books of A Limited, if the shares are issued at.
(a) Par
(b) 10% discount
(c) 20% premium
Solution
(a) At par
100
= 4,500 shares.
(b) At 10% discount
90
= 5,000 shares.
(c) At 20% premium
120
= 3,750 shares.
Date Particulars L.F Amount(in Rs.) Amount(in Rs.)
Business A/c Dr 4,50,000
To X LTD A/c 4,50,000
(Being Business purchased
from X LTD)
Part (A) X LTD A/c Dr 4,50,000
(Being issue of shares in the
consideration of business)
Part (B) X LTD A/c Dr 4,50,000
(Being issue of shares at 10%
discount in the consideration
of business)
Part (C) X LTD A/c Dr 4,50,000
(Being issue of shares at a 20%
discount in the consideration
of business)
Example X ltd forfeited 1,000 shares for nonpayment of final call of Rs.30/ share.
These shares were reissued at Rs.90 per share. Pass journal entries.
Solution
To Share forfeiture A/c 70,000
(Being shares forfeited for
nonpayment of final call of
Rs.30 per share)
Bank A/c Dr 90,000
(Being issue of shares for Rs.90
per share)
(Being share forfeiture money
transferred to capital Reserve)
Example Sohan ltd forfeited 50shares on which only application and allotment of
Rs.25 per share and Rs.30 per share has been received. 30 of these shares have
been reissued at Rs.90 per share. Pass journal entries.
Solution
Date Particular L.F Amount(in Rs.) Amount(in Rs.)
Share Capital A/c Dr 5,000 (50 x 100)
To Shares forfeiture A/c 2,750 (55 x 50)
To calls in Arrears A/c 2,250 (45 x 50)
payment of Rs.45 per Share)
Bank A/c Dr 2,700 (90 x 30)

Shares forfeiture A/c Dr 300 (10 x 30)
To share capital A/c 3,000 (30 x 100)
(Being shares reissued at Rs.90
per share)
(Being shares forfeiture balance
transferred to capital Reserve)
Calculation of Capital reserve
2,750 x 30 = 1,650
50
Loss on Reissue = 300
Capital reserve = 1,650 - 300
= Rs.1,350
Calls in arrears
Example X, the holder of 50 shares did not pay first and final call of Rs.3 per share
and Rs.2 per share respectively. The remaining shareholders holding 450 shares
paid the entire amount. Pass journal entries.
Solution Journal entries Dr. Cr.
(Being first call money due for 500
shares)
Bank A/c Dr 1,350

Call in arrears A/c Dr 150
st
To share 1 call A/c 1,500
(Being call money received on 450
shares)

(Being final call money due )
Bank A/c Dr 900

Calls in arrears A/c Dr 100
(Being final call money of 450 shares
received)
Example Ashwin Limited issued 10,000 shares of Rs.100 each payable Rs.30 on
application, Rs.20 on allotment, Rs.25 on first call and balance on final call.
applicants for 12,000 shares. Ram, the holder of 50 shares failed to pay the
allotment money and on his failure to pay the first call, his shares were forfeited.
Half of these shares were reissued at Rs.90 per share fully paid up. Pass journal
entries.
Solution
Applied Alloted
12,000 10,000
3,000 0
15,000 10,000
Reject 3,000 0
Ram 60 50
(50 x 6)
5
Others 11,940 9,950
Total 15,000 10,000
Application Application Excess Allotment Adjustment Allotment
money due money money due money
received Received
Rejected 90,000
Ram 1,500 1,800 300 1,000 300 Not Recd
Others 2,98,500 3,58,200 59,700 1,99,000 59,700 1,39,300
Total 3,00,000 4,50,000 60,000 2,00,000 60,000 1,39,300
(in Rs.) (in Rs.)
Share application A/c Dr 4,50,000

To Bank A/c 90,000
transferred to share capital account,
allotment account and balance refunded)

transferred to share capital A/c)

Share first call A/c Dr 2,50,000

(Being share first call transferred to share
capital A/c)

To share first call A/c 2,48,750
(Being first call money received)
Share final call A/c Dr 2,48,750

(Being share final call transferred to
share capital A/c)
To share final call A/c 2,48,750

(Being share forfeited due to non
payment of allotment and first call)
Bank A/c Dr 2,250

(Being forfeited shares reissued at Rs.90
per share)

(Being balance of forfeited shares
Example Y Limited issued 1,000 shares of Rs.100 each at a premium of Rs.20 per
share. The amount is payable as follows.
Applicants Rs.30 per share
Allotment Rs.50 per share (Including premium)
First call Rs.20 per share
the applicants for 2,000 shares, the remaining being refused. A, the holder of 300
shares failed to pay allotment money and on his failure to pay first call, his shares
were forfeited. B, who applied for 200 shares failed to pay calls money and his
share were also forfeited after the final call. 200 of these shares were reissued at
Rs.90 per share fully paid up. Pass journal entries in the books of company.
Solution
Applied Allotted
2,000 1,000
(Reject) 500 0
Total 2,500 1,000
Applied Alloted
A 600 300
B 200 100
Others 1,200 600
Reject 500 0
Application Application Excess Allotment Adjusted Allotment
Money Due Money money due Money
Received Received
A 9,000 18,000 9,000 9,000 + 6,000 9,000 Not Paid
B 3,000 6,000 3,000 3,000 + 2,000 3,000 2,000
Others 18,000 36,000 18,000 18,000 + 12,000 18,000 12,000
Rejected (15,000)
Total 30,000
Journal entries
Date Particulars L.F Amount(in Rs.) Amount (in Rs.)
Bank A/c Dr 75,000
To share Application A/c 75,000
To Bank A/c 15,000
transferred to share capital account,
allotment account and balance refunded)
premium money of Rs.20 per share due)
Bank A/c Dr 14,000
(Being allotment money received except
on 300 shares)
st
Bank A/c Dr 12,000
st
To share 1 call 12,000
(Being share 1st call money received
except on 400 shares)
Bank A/c Dr 12,000
(Being share final call money received
expect on 400 shares)
Share premium A/c 6,000
To share forfeited A/c 18,000
st
To shares 1 call A/c 6,000
(Being shares of A forfeited for non
payment of allotment and first call)
(Being share of B forfeited due to non
payment of calls)
Bank A/c Dr 18,000
(Being forfeited shared were reissued at
Share forfeited A/c Dr 10,000
(Being shares forfeiture account balance
Calculation of Capital reserve
= 18,000 x 200 = 12,000
300
= (-) on reissue = 2,000
10,000
Example X Ltd purchased a machinery worth Rs.11,00,000 from Y Ltd and paid
10% in cash and balance in the form of shares
1. At par
2. 10% premium
3. 10% Discount
Solution
(A) Journal entries Dr Cr
Date Particulars Amount Amount
(in Rs.) (in Rs.)
Machinery A/c Dr 11,00,000 -
To Y Ltd A/c - 11,00,000
(Being machinery purchased from Y Ltd)
Y Ltd A/c Dr 11,00,000 -

To Cash A/c - 1,10,000
To Share Capital A/c - 9,90,000
(Being 10% amount paid in cash and balance by
9,900 shares at par)
(B)
Particulars Amount Amount
(in Rs.) (in Rs.)
To Y Ltd A/c - 11,00,000
Y Ltd A/c Dr 11,00,000 -

To Cash A/c - 1,10,000
(Being share issued at a premium of 10 % in
consideration of machinery)
(C)
Particulars Amount Amount
(in Rs.) (in Rs.)
To Y Ltd A/c - 11,00,000
Y Ltd A/c Dr 11,00,000 -

Discount A/c Dr 1,10,000 -
To Cash A/c 1,10.000
(Being the account of Y settled by paying 10%
cash and balance by shares at 10 %discount)
Note
1. Number of shares (At Par) = 9,90,000 = 9,900 shares
100
2. Number of shares (At Premium) = 9,90,000 = 9,000 shares
110
3. Number of shares (At Discount) = 9,90,000 = 11,000 shares
90
Notes
1. Premium and discount calculated on Face Value.
2. Face Value if not given is assumed to be Rs.100.
Over subscription
Example Manish limited has an authorized capital of Rs.50,000 invited application
for 3,000 shares of Rs.10 each payable Rs.3 on application, Rs.5 on allotment
including premium and Rs.4 on final call. The shares were over subscribed to the
extent of 1,200 shares. Allotment was made as follows
Applied Alloted
2,500 - 2,500
1,000 - 500
700 - Nil
The excess application money was adjusted against the amount due on allotment
and calls. The whole money was duly received. Pass journal entries
Solution
Authorized capital = 50,000
Issued = 30,000 (3,000 x 10)
Applied Alloted
2,500 2,500
1,000 500
700 0
4,200 3,000
Application Application Excess Allotment Adjustment Received

money due money money due
received
7,500 7,500 7,500+5,000 12,500
1,500 3,000 1,500 1,500+1,000 1,500 1,000
0 (2,100)
9,000 12,600 1,500 15,000 1,500 13,500
(In Rs.) (In Rs.)
Bank A/c Dr 12,600

To Bank A/c 2,100
share capital A/c, allotment A/c and balance
refunded)

(Being share allotment money transferred to
share capital A/c)
Bank A/c Dr 13,500

(Being share final call transferred to share
capital A/c)
Bank A/c Dr 12,000


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Under Subscription

2. Registered companies or proposed Companies

3. Company limited by shares

4. Company limited by guarantee

Example. A company issued 1,000 shares of Rs.100 each payable Rs.20 on

Share Application A/c Dr 20,000

Share Allotment A/c Dr 30,000

Bank A/c Dr 30,000 -

Share 1st call A/c Dr 30,000 -

Bank A/c Dr 30,000 -

Share final call A/c Dr 20,000 -

Bank A/c Dr 20,000 -

Issue of Shares at Par

Example: Doon limited was registered with a authorized capital of Rs.5,00,000

Share Application A/c Dr 60,000

Share Allotment A/c Dr 40,000

Share Final call A/c Dr 60,000

Bank A/c Dr 60,000

Share Final call A/c Dr 40,000

Bank A/c Dr 40,000

Share Application A/c Dr 2,00,000

Share Allotment A/c Dr 1,50,000

Bank A/c Dr 1,50,000

Share First call A/c Dr 1,00,000

Bank A/c Dr 1,00,000

Share Final call A/c Dr 50,000

Bank A/c Dr 50,000

Share Application A/c Dr 20,000

Share Allotment A/c Dr 20,000

Bank A/c Dr 20,000

Share First call A/c Dr 10,000

Bank A/c Dr 10,000

Share Final call A/c Dr 10,000

Bank A/c Dr 10,000

Share Application A/c Dr

Share Allotment A/c Dr

Case (IV) Issue of shares at premium

Example X Ltd issued 60,000 shares of 10each at a maximum discount permitted

Share Application A/c Dr 2,40,000

Share Allotment A/c Dr 2,40,000

Bank A/c Dr 1,80,000

Share Final call A/c Dr 1,20,000

Bank A/c Dr 1,20,000

Share Application A/c Dr 20,000

Share Allotment A/c Dr 30,000

Bank A/c Dr 30,000

Share 1st call A/c Dr 20,000

Bank A/c Dr 20,000

Share Application A/c Dr 20,000

Share Allotment A/c Dr 40,000

Bank A/c Dr 40,000

Share 1st call A/c Dr 20,000

Bank A/c Dr 20,000

Share Final call A/c Dr 30,000

Bank A/c Dr 30,000

Share application A/c Dr 20,000

Share allotment A/c Dr 30,000

Bank A/c Dr 10,000

Share 1st call A/c Dr 20,000

Bank A/c Dr 20,000

Bank A/c Dr 30,000

Share application A/c Dr 1,00,000 -

Share allotment A/c Dr 1,50,000 -