Page 176 - ISCDEBK-12

7.12 Double Entry Book Keeping (Section A)—ISC XII

Notes:
1. Application money was received on 50,000 shares (i.e., 50,000 × ` 3 = ` 1,50,000) but against
these applications, 20,000 shares are allotted. Therefore, the allotment money for 20,000 shares
(i.e., 20,000 × ` 4) will be adjusted on allotment and the balance of ` 10,000 will be refunded, i.e.,
` 1,50,000 (Amount received) – ` 60,000 (Adjusted on application) – ` 80,000 (Adjusted on allotment).
2. Shares that have been forfeited are from first category, i.e., all the applicants were allotted shares as
were applied.
Illustration 10 (Comprehensive).
A limited company was registered with an authorised capital of ` 2,00,000 in ` 10 per
share, of these 6,000 shares were issued as fully paid to the vendors for the purchase of
building, 8,000 shares were subscribed for by the public and during the first year ` 5 per
share were called-up, payable ` 2 on application, ` 1 on allotment, ` 1 on the first call and
` 1 on the second call. The amounts received in respect of these shares were as follows:
On 6,000 shares the full amount called;
On 1,250 shares ` 4 per share;
On 500 shares ` 3 per share;
On 250 shares ` 2 per share.

The Directors forfeited 750 shares on which less than ` 4 per share had been paid.
Pass Journal entries in the books of the company and also show the share capital as it
would appear in Balance Sheet.
Solution: JOURNAL
Date Particulars L.F. Dr. (`) Cr. (`)
Building A/c ...Dr. 60,000
To Vendor 60,000
(Being the building purchased)
Vendor ...Dr. 60,000
To Share Capital A/c 60,000
(Being the issue of 6,000 shares of ` 10 each as fully paid in payment
of building purchased)
Bank A/c ...Dr. 16,000
To Shares Application A/c 16,000
(Being the amount received in respect of application money
on 8,000 shares @ ` 2 per share)
Shares Application A/c ...Dr. 16,000
To Share Capital A/c 16,000
(Being the transfer of application money to Share Capital Account
upon allotment)
Shares Allotment A/c ...Dr. 8,000
To Share Capital A/c 8,000
(Being the allotment money due on 8,000 shares @ ` 1 per share)

Bank A/c ...Dr. 7,750
Calls-in-Arrears A/c ...Dr. 250
To Shares Allotment A/c 8,000
(Being the amount received on the allotment except on 250 shares
@` 1 per share) (WN 1)