Advanced Corporate Accounting -I

Online Class Materials Prepared

By

Dr. R. Balaguru,
Assistant Professor,
Department of Commerce,
Ramakrishna Mission Vivekananda College,
Mylapore, Chennai – 600 004.
 Advanced Corporate Accounting -I

Problem No.55
N limited offered to the public 10,000 equity
shares of Rs.10 each at a premium of Rs.2
per share payable as follows:
On application Rs.2
On allotment Rs.4 (including premium)
On first call Rs.3 and
On final call Rs.3
 Advanced Corporate Accounting -I
Applications were received for 15,000 shares.
All application were placed under four
categories and allotment was made as
follows:
Cat. A: To applicants of 5,000 shares – in full
Cat. B: To applicants of 6,000 shares – 4,000
shares
Cat. C: To applicants of 3,000 shares – 1000
shares
Cat. D: To applicants of 1,000 shares – Nil
 Advanced Corporate Accounting -I

Except in the cases where applications were

wholly rejected, excess application money
was not to be refunded but to be adjusted
against money due on allotment and calls.
Mr.Sam an applicant under category B to
whom 400 shares were allotted failed to
pay the allotment money and on his
subsequent failure to pay the first call, his
shares were forfeited.
 Advanced Corporate Accounting -I
Mr. Tharani an applicant under category C to
whom 300 shares were allotted failed to pay
the two calls and his shares were also
forfeited.
500 of the shares thus forfeited were issued to
Mr. Vahaab as fully paid for Rs.8 per share.
Show the journal entries, necessary ledger
account and balance sheet in the books of N
company limited. You are to assume that the
whole of Sam’s shares were reissued.
 Working Note: No.1
Categor Share Share Application Transferre Excess Amoun
y Applied Allotted Money d to share money trf to t Re-
Received capital share Funded
allotment
A 5,000 5,000 10,000 10,000 -/20,000 -

B 6,000 4,000 12,000 8,000 4,000/16,000 -

C 3,000 1,000 6,000 2,000 4,000/4,000 -

D 1,000 Nil 2,000 - - 2,000

 Solution: Journal Entries
Date Journal LF Dr. Cr.

Bank A/c Dr 30,000

To Equity share application A/c 30,000
[Being application money Rs.2received on
15,000 applications]

Equity share application A/c Dr 30,000

To Equity share capital A/c 20,000
To Equity share allotment A/c 8,000
To Bank A/c 2,000
[Being application money transferred to
respective accounts]
Equity share allotment A/c Dr 40,000
To Equity share capital A/c 20,000
To Securities Premium A/c 20,000
[Being allotment become due]
 Solution: Journal Entries
Date Journal LF Dr. Cr.

Bank A/c Dr 30,800

Equity share allotment A/c Dr 8,000
Calls -in-arrears A/c Dr 1,200
To Equity share allotment A/c 40,000
[Being excess application money adjusted
towards allotment and money received]

Amount Receivable
at the time of allotment is 40,000
Amount already trf. to allot. 8,000
-------
Actual Amount receivable 32,000
Less: Calls in arrears 1,200
-------
Amount Received 30,800
 Solution: Journal Entries
Date Journal LF Dr. Cr.

Mr. Sam become defaulter for his 400 shares

As per the pro-rata allotment:
6,000 shares applied ; 4,000 shares allotted
Therefore 6,000: 4,000
6 : 4
If 6 shares applied 4 shares were allotted
If 400 shares were allotted how much shares was he
applied
If the pro-rata is 6:4 if 400 shares are 4 times then what
is 6 time.
6,000
---------- x 400 =600 shares
4,000
He was applied for 600 shares and allotted 400 shares
 Solution: Journal Entries
Date Journal LF Dr. Cr.

Shares applied : 600x2=1,200

Shares allotted : 400X2= 800
-------
Excess money 400

Amt. Payable at allotment : 400x4=1,600

Less: already received 400
Actually receivable 1,200

Amount receivable at allotment 32,000

Less: calls in arrears 1,200
Amount Received 30,800
 Solution: Journal Entries
Date Journal LF Dr. Cr.

Equity share 1st call A/c Dr 30,000

To Equity share capital A/c 30,000
[Being call money become due]

Bank A/c Dr 27,900

Calls in arrears A/c Dr 2,100
To Equity share 1st call A/c 30,000
[Being first call money received]
Mr. Tharun become the defaulter under C
Category his pro-rata is 3:1
If 1 time is 300 then 3 times is 900
900 x2= 1,800
300x2= 6,00
Balance 1,200
 Solution: Journal Entries
Date Journal LF Dr. Cr.

Amount payable at allotment

300 x4 =1,200
Less: already received 1,200
Amt Receivable at allotment Nil
No excess money beyond allotment
Amount due on 1st call 300x3=900
Therefore Sam’s Rs. 1,200 +Tharun’s Rs.
900
Totally 2,100 not received at first call

Sam’ Equity share capital A/c Dr 2,800

s Securities Premium A/c Dr 800
To Calls in arrears A/c 2,400
To Share Forfeiture A/c 1,200
[Being Y shares cancelled]
 Solution: Journal Entries
Date Journal LF Dr. Cr.

Equity share 2nd and final call A/c Dr 28,800

To Equity share capital A/c 28,800
[Being final call money become due]

Bank A/c Dr 27,900

Calls in arrears A/c Dr 900
To Equity share final call A/c 28,800
[Being final call money received]

Thar Equity share capital A/c Dr 3,000

un ’s To Calls in arrears A/c 1,800
To Share Forfeiture A/c 1,200
[Being Tharun’s shares were cancelled]
 Solution: Journal Entries
Date Journal LF Dr. Cr.

Vaha Bank A/c Dr 4,000

ab ‘s Share Forfeiture A/c Dr 1,000
To Equity share capital A/c 5,000
[Being forfeited shares reissued to W]

Share Forfeiture A/c Dr 600

To Capital Reserve A/c 600
[Being profit on re-issued shares
transferred to capital reserve account]

Profit of Sam’s share = 1,200

Profit of Tharun’s share =
1,200/300x100=400
Tota profit of 500 shares 1,600
Less : Loss on reissue is 1,
000
Net profit on 500 shares is 6,00
 Ledger accounts and balance sheet
Bank Account
Particulars Amount Particulars Amount

To Equity sh. application a/c 30,000 By Eq. sh. application a/c 2,000
To Equity sh. allotment a/c 30,800 By Balance c/d 1,18,600
To Equity sh. 1st call a/c 27,900
To Equity sh. final call a/c 27,900
To Equity sh. Capital a/c 4,000

1,20,600 1,20,600

To Balance b/d 1,18,600

 Ledger Accounts and Balance sheet
Share Capital Account
Particulars Amount Particulars Amount

To Share forfeiture a/ 2,800 By Equity share application a/ 20,000

c 3,000 c 20,000
To Share forfeiture a/ 98,000 By Equity share allotment a/c 30,000
c By Equity sh. 1st call a/c 28,800
To Balance c/d By Equity sh. 2nd & final call a/ 4,000
c 1,000
By Bank a/c
By Share Forfeiture a/c
1,03,800 1,03,800

By Balance b/d 98,000

 Ledger accounts and balance sheet
Securities Premium Account

Particulars Amount Particulars Amount

To Share Forfeiture a/c 800 By Equity share allot. a/ 20,000
To Balance c/d 19,200 c

20,000 20,000

By Balance b/d 19,200

 Ledger accounts and balance sheet
Shares Forfeiture Account
Particulars Amount Particulars Amount

To Eq.Sh.Capital a/c 1,000 By Equity share Cap. a/c 1,200

To Capital Reserve 600 By Equity share Cap. a/c 1,200
To Balance c/d 800

2,400 2,400

By Balance b/d 800

 Ledger accounts and balance sheet
Capital Reserve Account

Particulars Amount Particulars Amount

To Balance c/d 600 By Eq. sh. Forfeiture a/ 600
c

600 600

By Balance b/d 600

 Balance Sheet
Balance Sheet of X Company Limited

Liabilities Amount Assets Amount

Share Capital 98,000 Bank 1,18,600

Securities 19,200
premium 800
Share Forfeiture 600
Capital Reserve
1,18,600 1,18,600
Corporate Accounting -I