# 2nd PUC Accountancy Question Bank Chapter 1 Accounting for Share Capital

You can Download Chapter 1 Accounting for Share Capital Questions and Answers, Notes, 2nd PUC Accountancy Question Bank with Answers Karnataka State Board Solutions help you to revise complete Syllabus and score more marks in your examinations.

## Karnataka 2nd PUC Accountancy Question Bank Chapter 2 Accounting for Not for Profit Organisation

### 2nd PUC Accountancy Accounting for Share Capital NCERT Textbook Questions and Answers

2nd PUC Accountancy Accounting for Share Capital Short Answer Type Questions and Answers

Question 1.
What is public company?
A public company is defined as a company that offers a part of its ownership in the form of
shares, debentures, bonds, securities to the general public through stock market.

Question 2.
What is private limited company.
As defined by the Section 3 (1) (iii) of Companies Act 1956, private limited company is ; defined by the following characteristics:

• It restricts the right to transfer its shares.
• There must be at least two and a maximum of 50 members (excluding current and former employees) to form a private company.
• It cannot invite application from the general public to subscribe its shares, or debentures.
• It cannot invite or accept deposits from persons other than its members, Directors and their relatives.

Question 3.
Define Government Company?
As per the Section 617 of Company Act of 1956, a Government Company means any company in which not less than 51% of the paid up share capital is held by the Central Government, or by any State Government or Governments, or partly the Central Government and partly by one or more State Governments and includes a company which is a subsidiary of a Government Company as thus defined.

Question 4.
What do you mean by a listed company?
Those public companies whose shares are listed and can be traded in a recognised stock exchange for public trading like, Tata Motors, Reliance, etc are called Listed Company. These companies are also called Quota Companies.

Question 5.
What are the uses of securities premium?
As per the Section 78 of the Companies Act of 1956, the amount of securities premium can be used by the company for the following activities:

1. For paying up unissued shares of the company to be issued to members of the company as fully paid bonus share.
2. For Writing off the preliminary expenses of the company.
3. For writing off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company.
4. For paying up the premium that is to be payable on redemption of preference shares or debentures of the company.
5. Further, as per the Section 77A, the securities premium amount can also be utilised by the company to Buy-back its own shares.

Question 6.
What is buy-back of shares?
Buy-back of shares means repurchasing of its own shares by a company from the market for reducing the number of shares in the open market.

Question 7.
Write a brief note on ‘Minimum Subscription”.
When shares are issued to the general public, the minimum amount that must be subscribed by the public so that the company can ajlot shares to the applicants is termed as Minimum Subscription. As per the Company Act of 1956, the Minimum Subscription of share cannot be less than 90% of the issued amount. If the Minimum Subscription is not received, the company cannot allot shares to its applicants and it shall immediately refund the entire application amount received to the public.

2nd PUC Accountancy Accounting for Share Capital Long Answer Type Questions and Answers

Question 1.
What is meant by the word‘Company? Describe its characteristics.
The Section 3 (1) (i) of the Company Act of 1956 defines an organisation as a company that is formed and registered under the Act or any existing company that is formed and registered under any earlier company laws. In general, a company is an artificial person, created by law that has a separate legal entity, perpetual succession, common seal and has limited liability.

Characteristics of Company

1. Association of Person: A company is formed Voluntarily by a group of persons to perform a common business. Minimum number of person should be two for formation of a private company and seven for a public company.

2. Artificial Person: Company is an artificial and juristic person that is created by law.

3. Separate Legal Entity: A company has a separate legal entity from its members
(shareholders) and Directors. It can open a bank account, sign a contract and can own a property in its own name. ‘

4. Limited Liability: The liability of the members of a company is limited up to the nominal value or the face value of the shares. Unlike a partnership firm, on insolvency of a company, the members and the shareholders are not liable to pay the amount due to the creditors of the company. In fact, the members and the shareholders are only liable to pay the unpaid amount of the shares held by them.

5. Perpetual Existence: The existence of company is not affected by the death, retirement, and insolvency of its members. That is, the life of a company remains unaffected by the life and the tenure of its members in the company. The life of a company is infinite until it is properly wound up as per the Company Act.

6. Common Seal: The Company is an artificial person ‘and has no physical existence hence it cannot put its signature. Thus, the Common Seal acts as an official signature of a company that validates the official documents.

7. Transferability of Shares: The shares of public limited company are easily and freely transferable without any consent from other members. But the share of ownership of a private limited company is not transferable without the consent of the other members.

Question 2.
Explain in brief the main categories in which the share capital of a company is divided.
The division of the share capital of a company into main categories is diagrammatically
explained below:

• Authorised Capital: It is anamount which is stated in the Memorandum of Association. It is the maximum amount that the company can raise by issuing shares. This maximum amount can be increased as per the procedures laid down in the Company Act.
• Issued Capital: It is a part of authorised capital which is offered by the company tp the general public for subscription.
• Unissued Capital: It is a part of authorised capital that is not offered till now but can be offered to the general public in future.
• Subscribed Capital: It is a part of issued capital that is actually subscribed by the general public.
• Unsubscribed Capital: It is that part of the issued capital that is not subscribed by the public.
• Called up Capital: It is a part of subscribed capital that is called up by the Directors from the shareholders of a company to pay.
• Uncalled up Capital: It is that part of subscribed capital which is not called up till now but can be called up in future as per the need of the company.
• Paid up capital: It is that part of called up share capital which is actually received from the shareholders.

9. Reserved Capital: As per the Section 99 of the Company Act of 1956, a limited company may call up any portion of uncalled share capital in the event of winding up of the company to pay its creditors. This amount of uncalled share capital cannot be used for any other purpose and is reserved -for paying back the creditors that is why such portion of share capital is called reserve capital.

Question 3.
What do you mean by the term ‘share’? Discuss the type of shares, which can be issued under the Companies Act, 1956 as amended to date.
The total capital of a company is divided into equal units of small denomination termed as shares. The ownership of these shares is easily transferable, from one person to other, subject to certain conditions. The person who is contributing in the capital in the form of shares is known as shareholder.
Types of Shares As per the Section 86 of the Company Act of 1956, there are two types of shares:

1. Preference Shares: Section 85 of the Company Act, 1956 defines Preference Shares to be featured by the following rights: –
a) Preference Shares entitle its holder the right to receive dividend at a fixed rate or fixed amount.
b) Preference Shares entitle its holder the preferential right to receive repayment
of capital invested by them before their equity counterparts at the time of winding up of the company.

2. Equity Shares: Equity Shareholders have a voting right and control the affairs of a company. As per Section 85 (2) of Companies Act 1956; equity share is a share that is not a preference share. It does not possess any preferential right of payment of dividend or repayment of capital. The rate of dividend is not fixed on equity shares and varies from year to year, depending upon the amount of profit available for distribution after paying dividend to the preference shareholders.

Question 4.
Discuss the process for the allotment of shares of a company in case of over subscription.
When the total number of applications received for shares exceeds the number of shares offered by the company to the public, the situation of oversubscription arises. A company can opt for any of the three alternatives to allot shares in case of oversubscription of shares.

• Excess applications are refused and money received on excess applications is returned to the applicants.
• The company can allot shares on pro rata basis to all the share applicants. The excess, amount received in the application is adjusted on the allotment.
• In this case, the company follows acombination of both the method. It may reject some share applications and may allot some applications on the pro rata basis.

Question 5.
What is a preference Share’? Describe the different types of preference shares.
Preference Shares: Section 85 of the Company Act, 1956 defines Preference Shares to be featured by the following rights:

• Preference Shares entitle its holder the right to receive dividend at a fixed rate or fixed amount.
• Preference Shares entitle its holder the preferential right to receive repayment of capital invested by them before their equity counterparts at the time of winding up of the company.

Types of Preference Shares

1. Cumulative Preference Shares: When a preference shareholder has a right to recover any arrears of dividend, before any dividend is paid to the equity shareholders, then the type of Preference Shares held by the shareholder is known as Cumulative Preference Shares.

2. Non-Cumulative Preference Share: When a preference shareholder receives dividend only in case of profit and is not entitled any right to recover the arrears of dividend, then the type of Preference Shares held by the shareholder is known as Non-Cumulative Preference Shares.

3. Participating Preference Share When a preference shareholder enjoys the right to participate in the surplus profit (in addition to the fixed rate of dividend) that is left after the payment of dividend to the equity shareholders, the type of shares held by the shareholder is known as Participating Preference Share.

4. Non-participating Preference Share: When a preference shareholder receives only a fixed rate of dividend every year and do not enjoy the additional participation in the surplus profit, then the type of shares held by the shareholder is known as Non¬Participating Preference Shares.

5. Redeemable preference share: When a preference shareholder is repaid by the company after a certain specified period in accordance with the term specified in the Section 80 of Company Act of 1956, then the type of the shares held by him/her is known as Redeemable Preference Shares.

6. Non-Redeemable Preference share: These shares are not repaid by the company during its lifetime. As per the Section 80A of the Company Act of 1956, no company can issue Non-Redeemable Preference Shares. It is merely a theoretical concept.

7. Convertible Preference Share: The shareholders holding Convertible Preference Shares have a right to convert his/her shares into equity shares.

8. Non-Convertible Preference Share: Unlike Convertible Preference Shares, the shareholders holding Non-Convertible Preference Shares do not enjoy the right to convert their shares into equity shares.

Question 6.
Describe the provisions of law relating to ‘Calls-in-Arrears’ and ‘Calls-in-Advance’.
Calls-in-Arrears: When a shareholder fails to pay the amount due on allotment or any subsequent calls, then it is termed as Calls-in-Arrears. The Company is authorised by its Article of Association to charge interest at a specified rate on the amount of Call in Arrears from the due date till the date of payment. If the Article of Association is silent in this regard, then Table A shall be applicable that is interest at 5% p.a. is charged from the shareholders.

As per the Revised Schedule VI of the Companies Act, Calls-in-Arrears are deducted from the Called-up Share Capital in the Notes to Accounts (that is prepared outside the Balance Sheet) under the head ‘Share Capital’. The final amount of Share Capital is shown on the Equity and Liabilities side of the Company’s Balance Sheet. The company can also forfeit the shares on account of non-payment of the calls money after giving proper notice to the shareholders.

Calls-in-Advance: When a shareholder pays the whole amount or a part of the amount in advance, i.e. before the company calls, then it is termed as Calls-in-Advance. The company is authorized by its Article of Association to pay interest at the specified rate on call in advance from the date of payment tiJI the date of call made. If the Article of Association is silent in this regard, then Table A shall be applicable that is, interest at 6% p.a. is provided to the shareholders.

As per the Revised Schedule VI of the Companies Act, Calls-in-Advance (along with interest on it) is added to the ‘Other Current Liabilities’ in the Notes to Accounts. The final amount of Other Current Liabilities is shown under the main head of ‘Current Liabilities’ on the Equity and Liabilities side of the Company’s Balance Sheet.

Question 7.
Explain the terms ‘Over-subscription’ and ‘Under-subscription’. How are they dealt with in accounting records?
When the total number of applications received for shares exceeds the number of shares offered by the company to the public, the situation of oversubscription arises. A company can opt for any of the three alternatives to allot shares in ease of oversubscription of shares.

• Excess applications are refused and money received on excess applications is returned to the applicants.
• The company can allot shares on pro-rata basis to all the share applicants. The excess amount received in the application is adjusted on the allotment.
• In this case, the company follows a combination of both the method. It may reject some share applications and may allot some applications on the pro rata.basis.

Under-subscription: When the number of shares applied by the public is lesser than the number of shares issued by the company, then the situation of Under- subscription arises. As per the Company Act, the Minimum Subscription is 90% of the shares issued by the company. This implies that the company can allot shares to the applicants provided if applications for 90% of the issued shares are received. Otherwise, the company should refund the entire application amount received. In this regard, necessary Journal entry is passed only after receiving and refunding of the application money.

Question 8.
Describe the purposes for which a company can use ‘Securities Premium Account’. Ans. As per the Section 78 of the Companies Act of 1956, the amount of securities premium can
be used by the company for the foilowing activities:

• For paying up unissued shares of the company to be issued to members of the company as fully paid bonus share.
• For writing off the preliminary expenses of the company.
• For writing off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company.
• For paying up the premium that is to be payable on redemption of preference shares or debentures of the company.
• Further, as per the Section 77A, the securities premium amount can also be utilised by the company to Buy-back its own shares.

Question 9.
State clearly the conditions under which a company can issue shares at a discount.
As per the Section 79 of the Company Act of 1956, following are the conditions under which a company can issue shares at a discount.

• A company can issue shares at discount provided it has previously issued such type of shares.
• The issue of shares at a discount is authorised by a resolution passed by the company in the General Meeting and sanction obtained from the Company Law Tribunal.
• The resolution specifies that the maximum rate of discount is 10% of the face value of the shares, unless higher percentage of discount allowed by the Company Law Tribunal.
• A company can issue shares at discount at least after one year from the date of commencing business.
• If a company wants to issue shares at discount, then it must issue them within two months of obtaining sanction from the Company Law Tribunal.
• Every prospectus related to the issue of the shares should explicitly and clearly contain particulars of the discount allowed on the issue of shares.

Question 10.
Explain the term ‘Forfeiture of Shares’ and give the accounting treatment on forfeiture.
If a shareholder fails to pay the allotment money and/or any subsequent calls, then the company has the right to forfeit shares by giving a proper notice to the shareholder.

Accounting Treatment for Forfeiture of Shares:

i) Forfeiture of Shares that were issued at Par
Share Capital A/c Dr. (Amount called up)
To Share Allotment A/c (amount not received)
To Share Calls A/c(amount not received)
To Share Forfeiture A/c (amount received)
(Being Shares forfeited)

ii) Forfeiture of Shares that were issued at Premium
a) If premium is received, then the premium is not shown.
Share Capital A/c Dr (Amount called up)
To Share Allotment A/c (Amount not received)
To Share Calls A/c(Amount not received) .
To Share forfeiture A/c(Amount received) (Being Shares forfeited)

b) If premium is not received, then the premium is shown. ,
Share Capital A/c Dr (Amount called up excluding premium)
Share Premium A/c Dr (Amount not received)
To Share Allotment A/c (Amount not received including premium)
To Share Calls A/c (Amount not received)
To Share Forfeiture A/c (Amount received including premium)
(Being Shares forfeited)

iii) Forfeiture of Shares that were issued at Discount
Share Capital A/c Dr(Amount called up, plus discount)
To Discount on Issue of Shares A/c (Amount of discount)
To Share Allotment A/c (Amount not received)
To Share Calls A/c (Amount not received)
To Share Forfeiture A/c (Amount received)

2nd PUC Accountancy Accounting for Share Capital Numerical Questions and Answers

Question 1.
Anish Limited issued 30,000 equity shares of ₹ 100 each’ payable at ₹ 30 on application, ₹ 50 on allotment and ₹ 10 on 1st and final call. All money was duly received.
Record these transactions in-the journal of the company.

Question 2.
The Adersh Control Device Ltd was registered with the authorised capital of ₹ 3,00,000 divided into 30,000 shares of ₹ 10 each, which were offered to the public Amount payable as ₹ 3 per share on application, ₹ 4 per share on allotment and ₹ 3 per share on first and final call. These share were fully subscribed and all money was dully received. Prepare journal and Cash Book.

Question 3.
Software‘solution India Ltd inviting application for 20,000 equity share of ₹ 100 etch, payable ₹ 40 on application, ₹ 30 on allotment and ₹ 30 on call. The company received applications for 32,000 shares. Application for 2,000 shares were rejected and money. returned to Applicants. Applications for 10,000 shares were accepted in full and applicants for 20,000 share allotted half of the number of share applied and excess application money adjusted into allotment. All money received due on allotment and call. Prepare journal and cash book.

Question 4.
Rupak Ltd. issued 10,000 shares of ₹ 100 each payable ₹ 20 per share on application, ₹ 30 per share on allotment and balance in two calls of ₹ 25 per share. The application and allotment money were duly received. On first cal( all member pays their dues except ‘ one member holding 200 shares, while another member holding 500 shares paid for the balance due in full. Final call was not made. Give journal entries and prepare cash book.

Question 5.
Mohit Glass Ltd. issued 20,000 shares of ₹ 100 each at ₹ 110 per share, payable ₹ 30 on application, ₹ 40 on allotment (including Premium), ₹ 20 on first and ₹ 20 on final call. The applications were received for 24,000 shares and allotted 20,000 shares and reject 4,000 shares and amount returned thereon. The money was duly received.
Give journal entries

Question 6.
A limited company offered for subscription of 1,00,000 equity shares of ₹ 10 each at a premium of ₹ 2 per share. 2,00,000.10% Preference shares of ₹ 10 each at par.
The amount on share was payable as under:

All the shares were fully subscribe called-up and paid.
Record these transactions in the journal and cash book of the company:

Question 7.
Eastern Company Limited, with an authorised capital of ₹ 10,00,000 is divided into shares of ₹ 10 each, issued 50,000 shares at a premium of ₹ 3 per share payable as follows:
On Application – ₹ 3 per share
On Allotment (including premium) – ₹ 5 per share
Oh first call (due three months after allotment)  – ₹ 3 per share
and the balance as and then required.
Applications were received for 60,000 shares and the directors allotted the shares as follows:
(a) Applicants for 40,000 shares received in full.
(b) Applicants for 15,000 shares received an allotment of 8,000 shares.
(c) Applicants for 500 shares received 200 shares on allotment, excess money being returned. All amounts due on allotment were received.
The first call was duly made and the money was received with the exception of the call due on 100 shares. .
Give journal and cash book entries to record these transactions of the company. Also prepare the Balance Sheet of the company.

Question 8.
Sumit Machine Ltd. issued 50,000 shares of ₹ 100 each at discount of 5%. The shares were payable ₹ 25 on application, ₹ 40 on allotment and ₹ 30 on first and final call. The issue was fully subscribed and money was duly received except the final call on 400 shares. The discount was adjusted on allotment.
Give journal entries and prepare the balance sheet.

Question 9.
Kumar Ltd. purchased assets of ₹ 6,30,000 from Bhanu Oil Ltd. Kumar Ltd. Issued equity share of ₹ 100 each fully paid in consideration. What journal entries will be made, if the shares are issued, (a) at par (b) at discount of 10%, and (c) at premium of 20%. ‘

Case (b).

Case (c)

Question 10.
Bansal Heavy Machine Ltd. purchased machine worth ₹ 3,20,000 from Handa Trader. Payment was made as ₹ 50,000 cash and remaining amount by issue of equity shares of the face value of ₹ 100 each fully paid at an issue price of ₹ 90 each.
Give journal entries to record the above transaction.

Question 11.
Naman Ltd. issued 20,000 shares of ₹ 100 each, payable ₹ 25 on application, ₹ 30 on allotment, ₹ 25 on first call and the balance on final call. All money duly received except Anubha, who holding 200 shares did not pay allotment and calls money and Kumkum, who holding 100 shares did not pay both the calls. The directors forfeited the shares of Anubha and Kumkum.
Give journal entries.

Question 12.
Kishna Ltd. issued 15,000 shares of₹ 100 each at a premium of ₹ 1 per share payable as follows
On application ₹ 30
On allotment ₹ 50 [including premium]
On. first and final call ₹ 30
All the shares subscribed and the company received all the money due, with the ‘ exception of the allotment ahd call money on 150 shares. These shares were forfeited and reissued to Neha as fully paid share of ₹ 12 each.
Give journal entries in the books of the company.

Note: In the Solution, the reissued price of ₹ 12 has been assumed as ₹ 120 per share.

Question 13.
Arushi computers Ltd. issued 10,000 equity shares of ₹ 100 each at 10% discount, amount payable as follows:
The net amount payable as follows:
On application ₹ 20
On allotment ₹ 30 (₹ 40 – discount ₹ 10)
On first call ₹ 30
On final call ₹ 10
A share holder holding 200 shares did not pay final call. His shares wer forfeited. Out of these 150 shares were reissued to Ms. Sonia at ₹ 75 per share.
Give journal entries in the books of the company.

Working note:
Amount transferred to Capital Reserve A/c
Amount credited to Share forfeiture ₹ 80 per share
Less: Amount debited to Share Forfeiture ₹ 15 per share
Balance after adjustment ₹ 65 per share
Amount transferred to Capital Reserve Account = Balance per share after adjustment . x Number of shares reissued
₹ 9,750 = ₹ 65 x ₹ 150 per share

Question 14.
Raunak Cotton Ltd. issued a prospectus inviting applications for 6,000 equity shares of ₹ 100 each at a premium of₹ 20 per shares, payable as follows:
On application ₹ 20
On allotment ₹ 50 (including premium)
On first call ₹ 30
On final call ₹ 20
Applications were received for 10,000 shares and allotment was made pro-rata to the applicants of 8,000 shares, the remaining applications being refused. 2017 – Money -received in excess on the application was adjusted toward the amount due on allotment. Rohit to whom 300 shares were allotted failed to pay allotment and calls money, his shares were forfeited. Itika, who, applied for 600 shares, failed to pay the two calls and her shares were also forfeited. All these shares were sold to Kartika as fully paid for ₹ 80 per share. , .
Give journal entries in the books of the company.

Working Note:
1. Number of shares applied by Rohit

2. Call in arrears by Rohit on allotment

3.Number of share allloted to Itika

4: Share forfeiture amount

Question 15.
Himalaya Company Limited issued for public subscription of 1,20,000 equity shares of ₹10 each at a premium of ₹2 per share payable as under
With Application ₹ 3 per share
On allotment (including premium) ₹ 5 per share
On First call ₹ 2 per share
On Second and Final call ₹ 2 per share
Applications were received for 1,60,000 shares. Allotment was made on prorata basis. Excess money on application was adjusted against the amount due on allotment. Rohan, whom 4,800 shares were allotted, failed to pay for the two calls. These shares were subsequently forfeited after the second call was made. All the shares forfeited were reissued to Teena as fully paid at ₹ 7 per share.
Record journal entries and show the transactions relating to share capital in the company’s balance sheet.

Question 16.
Prince Limited issued a prospectus inviting applications for 20,000 equity shares of₹ 10 each at a premium of ₹ 3 per share payable as follows:
With Application ₹ 2
On Allotment (including premium) ₹ 5
On First Call ₹ 3
On Second Call ₹ 3.
Applications were received for 30,000 shares and allotment was made on prorata basis. Money overpaid on applications was adjusted to the amount due on allotment. Mr. Mihit whom 400 shares were allotted, failed to pay the allotment money and the first call, and his shares were forfeited after the first call. Mr. Joly, whom 600 shares were allotted, failed to pay for the two calls and-hence, his shares were forfeited. Of the sharis forfeited were reissued to Supriya as fully paid for ₹ 9 per share, the whole of Mr. Mohit’s shares being included. Record journal entries in the books of the Company and prepare the Balance Sheet.

As per the Revised Schedule VI, the Balance Sheet of Prince Limited is as follows:

2.

Question 17.
Life Machine Tool’s Limited issued 50,000 equity shares of₹ 10 each at ₹ 12 per share, payable at to ₹ 5 on application (including premium, ₹ 4 on allotment and the balance on the first and final call.
Applications for 70,000 shares had been received. Of the cash received, ₹ 40,000 was returned and ₹ 60,000 was applied to the amount due on allotment. All shareholders paid the call due, with the exception of one shareholder of 500 shares. These shares were forfeited and reissued as fully paid at ₹ 8 per share. Journalise the transactions.

Question 18.
The Orient Company Limited offered for public subscription 20,000 equity shares of ₹ 10 each at a premium of 10% payable at ₹ 2 on application; ₹ 4 on allotment including premium; ₹ 3 on First Call and ₹ 2 on Second and Final call. Applications for 26,000 shares were received. Applications for 4,000 shares were rejected. Prorata allotment was made to the remaining applicants. Both the calls were made and all the money were received except tile final call on 500 shares which were forfeited. 300 of the forfeited shares were later reissued as fully paid at ₹ 9 per share. Give journal entries and prepare the balance sheet.

Question 19.
Alfa Limited invited applications for 4,00,000 of its equity shares of ₹ 10 each on the following terms :
Payable on application ₹5 per share
Payable on allotment ₹-3 per share
Payable on first and final call ₹2 per share.
Applications for 5,00,000 shares were received. It was decided:
(a) to refuse allotment to the applicants for 20,000 shares;
(b) to allot in full to applicants for 80,000 shares;
(c) to allot the balance of the available shares’ pro-rata among the other applicants; and –
(d) to utilise excess application money in part as payment of allotment money. One applicant, whom shares had been allotted on pro-rata basis, did not pay the amount due on allotment and on the call, and his 400 shares were forfeited. The shares were reissued ₹ 9 per share. Show the journal and prepare Cash book to record the above.

Working Note: –

1. Number of shares applied by Applicant

2. Call in arrears by applicant on allotment .

3.

Question 20.
Ashoka Limited Company which had issued equity shares of ₹ 20 each at a discount of ₹ 4 per share, forfeited 1,000 shares for non-payment of final call of-₹ 2 per share. 400 of the forfeited shares were reissued at ₹ 14 per share out of till remaining shares of 200 shares reissued at ₹ 20 per share. Give journal entries for the forfeiture and reissue of shares and show the amount transferred to capital reserve and the balance in Share Forfeiture Account. .

Balance in Share Forfeiture Account (12,000 – 800 -.6,400) ₹ 4,800
Working Note:
For 400 Shares

Amount of 200 shares transferred to Capital Reserve Account, after reissue
= 200 shares ₹ 12 per share = ₹ 2,400
Total amount transferred to Capital Reserve = Capital Reserve for 200 shares + Capital Reserve for 200 shares
= 4,000 + 2,400 = ₹ 6,400

Question 21.
Amit holds 100 shares of ₹ 10 each on which he has paid Re. 1 per share as application money. Bimal holds 200 shares of ₹ 10 each on which he has paid Re. 1 and ₹ 2 per share as application and allotment money, respectively. Chetan holds 300 shares of ₹ 10 each and has paid Re. 1 on application, ₹ 2 on allotment and ₹ 3 for the first call. They all failed to pay their arrears and the second call of ₹ 2 per share and the directors, therefore, forfeited their shares. The shares are reissued subsequently for ₹ 11 per share as fully paid. Journalise the transactions.

Working Note:

Question 22.
Ajanta Company Limited having a normal capital of ₹ 3,00,000, divided into shares of ₹ 10 each offered for public subscription of 20,000 shares payable at ₹ 2 on application; ₹ 3 on allotment and the balance in two calls of₹ 2.50 each. Applications were received by the company for 24,000 shares. Applications for 20,000 shares were accepted in full and the shares allotted. Applications for the remaining shares were rejected and the application money was refunded. All moneys due were received with the exception of the final call on 600 shares which were forfeited after legal formalities were fulfilled. 400 shares of the forfeited shares were reissued at ₹ 9 per share. Record necessary journal entries and prepare the balance sheet showing the amount transferred to capital reserve and the balance h share forfeiture account.

Amount of 400 shares transferred to capital Reserve Account, after reissue = 400 Shares @ ₹ 6.5 per share -₹ 2,600

Question 23.
Journalise the following transactions in the books Bhushan Oil Ltd:
(a) 200 shares of ₹ 100 each issued at a discount of ₹ 10 were forfeited for the nonpayment of allotment money of ₹ 50 per share. The first and final call of ₹ 20 per share on these shares were not made. The forfeited shares were reissued at ₹70 per share as fully paid-up.
(b) 150 shares of ₹10 each issued at a premium of ₹ 4 per share payable with allotment >. were forfeited for non-payment of allotment money of ₹ 8 per share including
premium. The first and final calls of ₹ 4 per share were not made. The forfeited shares were reissued at ₹ 15 per share fully paid-up.
(c) 400 shares of₹ 50 each issued at par were forfeited for non-payment of final call of ₹10 per share. These shares were reissued at ₹ 45 per share fully paid-up.
Case (a)

Case (b)

Case (c)

Question 24.
Amisha Ltd. invited applications for 40,000 share of ₹ 100 each at a premium of ₹ 20 per share payable on application ₹ 40 ; on allotment ₹ 40 (Including premium): on first call ₹ 25 and second and final call ₹ 15. Applications were received for 50,000 shares and allotment was made on prorata basis. Excess money on application was adjusted against the sums due on allotment. Rohit to whom 600 shares were allotted failed to pay the allotment money and his shares were forfeited after allotment. Ashmita, who applied for 1,000 shares failed to pay the two calls and her shares were forfeited after the second call. Of the shares forfeited, 1,200 shares were sold to Kapil for ₹ 85 per sh&re as fully paid, the whole of Rohit’s shares being included.
Record necessary journal entries

Working Note

3. Number of shares allotted to Ashmita

4. Profit on the forfeiture of 600 share of Rohit  = ₹ 30.000 (18,000 x $$\frac{600}{800}$$ x 36,000)
Profit on the forfeiture of 600 share of Ashmita = 36,000
Profit on forfeiture of 1200 shares (30,600 + 36,000) = 66,000
Less: Loss on reissue of shares = 18,000
Transfer to Capital Reserve = 48,000
Balance in Share forfeiture Account (48,000 – 36,000) = ₹ 12,000

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