Share
Capital
Funds
raised by company by issue of shares.
Two types:
Equity Share
A
share that provides voting rights to its holders, belong to owners of the
company, carries maximum risk and return, in which dividend is not fixed and
on winding up of the company the holders of these shares receive only what is
left after paying off all the liabilities and obligations of the company including
Preference Shareholder repayment.
Preference Share
A
share which carries a preferential right to get fixed dividend over equity
shares to its holders and repayment of capital before holders of equity share
capital. It does not carry voting right.
Classification
of Share Capital
Authorised or Nominal
Capital
Maximum
amount of share capital that a company can raise as per Memorandum of
Association.
Issued Capital
That
part of authorised capital .which has been issued by company to raise funds
from time to time.
Subscribed capital
That
part of issued capital which has been subscribed by public.
Called Up capital
That
part of Subscribed capital which has been called up by company to be paid by
subscribers.
Paid up capital
That
part of Subscribed capital which has been paid by subscribers.
Note:
Minimum 90 % subscription of issued capital is required as per Indian
Companies Act, 2013. Otherwise, Company has to take back its issue.
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Disclosure of Share Capital in Company’s Position Statement /
Balance Sheet
Extract
of Position Statement / Balance Sheet as on …
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I. Equity &
Liabilities
Shareholders’
Funds
A.
Share capital
B.
Reserve & Surplus
C.
Money received against Share Warrants
II.
Current Liability
Other
Current Liability
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Current Asset
Cash
& Cash Equivalent
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Notes
to Accounts:
A. Share Capital
Authorised capital
…Equity
Shares of Rs.…each
….preference
shares of Rs…..each
Issued Capital
…Equity
Shares of Rs.…each
….preference
shares of Rs…..each
Subscribed Capital
…Equity
Shares of Rs.…each
….preference
shares of Rs…..each
Subscribed
but not Fully Paid up
…Equity
Shares of Rs.…each
Less:
Calls in Arrears
….preference
shares of Rs…..each
Less:
Calls in Arrears
Add:
Forfeited Equity Shares
Add:
Forfeited Preference Share
B.
Other Current Liability
Calls
in Advance
C. Reserve & Surplus
Security Premium Reserve
Capital Reserve
D. Cash & Cash
Equivalent
Cash in hand & Bank
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Accounting of Share Capital
Shares
can be issued either for cash or for consideration other than cash.
Issue of Shares for
cash:
Two methods
Shares Payable in
Lump sum
It
means when payment of shares is received in one instilment.
Shares Payable in
Installments:
Payment
of shares is received in installments.
First
installment comes with application known as application money, Second-
allotment, third -First call, fourth - Second call and so on. Last
installment is also called as Final call.
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Accounting Entries
for issue of Shares Payable in Lump
sum issued at Par
1. On receipt of
application money
Bank A/c
….....................….Dr
To Share Application
A/c
2. on allotment of Shares
Share Application
A/c……….Dr
To Share Capital A/c
Accounting Entries
for issue of Shares Payable in Lump
sum issued at Premium
1. On receipt of
application money
Bank A/c
….....................….Dr (Total Application money including Premium)
To Share Application
A/c
2. on allotment of Shares
Share Application
A/c……….Dr (Total Application money including Premium)
To Share Capital A/c
(with Nominal/ Face value)
To Security Premium
Reserve A/c (with Premium amount)
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Accounting Entries
for issue of Shares Payable in
Installments Issued at Par
1. On receipt of
application money
Bank A/c
….....................….Dr
To Share Application
A/c
2. On allotment of Shares
Share Application
A/c……….Dr
To Share Capital A/c
(with nominal/ face value)
3. Amount due on
allotment
Share
allotment A/c……..Dr
To
Share Capital A/c
4. On receipt of
allotment money
Bank
A/c………………………Dr
To
Share Allotment A/c
5. On First call
being Due
First
Call A/c…………….Dr
To
Share Capital A/c
6. On receipt of
First Call
Bank
A/c ……………….Dr
To
First Call A/c
7. On Second &
Final Call being Due
Second
& Final Call A/c……….Dr
To
Share Capital A/c
8. On receipt of
Second & Final Call
Bank
A/c ……………..Dr
To
Second & Final Call A/c
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Accounting Entries
for issue of Shares Payable in
Installments
Issued
at Premium:
Case I.
When premium is received at the time of application along with application
money:
1. On receipt of
application money
Bank A/c
….....................….Dr (Total Application money including Premium)
To Share Application
A/c
2. on allotment of Shares
Share Application
A/c……….Dr (Total Application money including Premium)
To Share Capital A/c
(with nominal/ face value)
To Security Premium
Reserve A/c (with Premium amount)
Note:
All other Entries for allotment, First call and final call
will remain similar as to the case of Shares issued at Par.
Case II.
When premium is receivable at the time of Allotment:
1. On receipt of
application money
Bank A/c
….....................….Dr
To Share Application
A/c
2. on allotment of Shares
Share Application
A/c……….Dr
To Share Capital A/c
(with nominal/ face value)
3. Amount due on
allotment including Security Premium
Share
allotment A/c……..Dr
To
Share Capital A/c
To Security Premium Reserve A/c
4. On receipt of
allotment money including Security Premium
Bank
A/c………………………Dr
To
Share Allotment A/c
Note:
If question is silent with regard to receipt of Security
Premium, it is assumed that it is due with allotment money.
All other Entries for First call and final call will remain similar
as to the case of Shares issued at Par.
Case III.
When premium is receivable at the time of Application, Allotment and all
Calls:
1. On receipt of
application money
Bank A/c
….....................….Dr (Total Application money including Premium)
To Share Application
A/c
2. on allotment of Shares
Share Application
A/c……….Dr (Total Application money including Premium)
To Share Capital A/c
(with nominal/ face value)
To
Security Premium Reserve A/c (with Premium amount)
3. Amount due on
allotment including Security Premium
Share
allotment A/c……..Dr
To
Share Capital A/c
To Security Premium Reserve A/c
4. On receipt of
allotment money including Security Premium
Bank
A/c………………………Dr
To
Share Allotment A/c
5. On First call
being Due including Security Premium
First
Call A/c…………….Dr
To
Share Capital A/c
To Security Premium Reserve A/c
6. On receipt of
First Call including Security Premium
Bank
A/c ……………….Dr
To
First Call A/c
7. On Second &
Final Call being Due including Security Premium
Second
& Final Call A/c……….Dr
To
Share Capital A/c
To Security Premium Reserve A/c
8. On receipt of
Second & Final Call including Security Premium
Bank
A/c ……………..Dr
To
Second & Final Call A/c
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Over
Subscription of Shares
In
case of Over Subscription of Shares, Company can allot shares under three
alternatives:
I. Rejection of excess applications:
Excess
applications are rejected in full and their application along with Security
Premium if received is refunded.
II. Partial or Pro
rata Allotment
All
applicants are allotted shares in proportion.
III. Combination of
Above two alternatives:
In
this case, some applicants got full allotment, some get partial and some get
nothing.
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Over Subscription of Shares
Alternative I for Allotment of Shares - Rejection of excess applications:
Journal Entries
related to rejection of Excess applications received:
1. On receipt of Application
money
Bank A/c
….....................….Dr (Total Application money including Premium if any)
To Share Application
A/c
2. on Allotment of Shares
Share Application
A/c……….Dr (Total Application money including Premium if any)
To Share Capital A/c
(with nominal/ face value)
To
Security Premium Reserve A/c (with Premium amount if any)
To Bank A/c
(Excess application money with Security Premium received on it, if any
refunded)
Note:
All other Entries for allotment, First call and final call
will remain similar as to the case of Shares issued at Par.
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Over Subscription of Shares
Alternative II for Allotment of Shares - Partial
or Pro rata Allotment
All
applicants are allotted shares in proportion.
Treatment of Surplus Application
Money received on Pro rata Allotment
Case I: If question
is silent or states that excess application money received is to be adjusted
against allotment:
In
this case, Surplus Application money is adjusted against allotment money due
and after that if still surplus application money is left, then remaining
excess application after adjustment of allot money due left will be refunded.
Journal Entries
related to this case:
1. On receipt of Application
money
Bank A/c
….....................….Dr (Total Application money including Premium if any)
To Share Application
A/c
2. on Allotment of Shares
Share Application
A/c……….Dr (Total Application money including Premium if any)
To Share Capital A/c
(with nominal/ face value)
To
Security Premium Reserve A/c (with Premium amount if any)
To Share
Allotment A/c (Excess application money adjusted towards allotment)
To Bank A/c
(Excess application money after adjustment towards allotment if left is
refunded)
Note:
All other Entries for allotment, First call and final call
will remain similar as to the case of Shares issued at Par.
At the time of allotment; allotment due entry will include
total allotment due amount but at the time of receipt of allotment due money,
Bank A/c will be debited with =>
Allotment Due – Excess application money adjusted for allotment.
In case whole of due amount of allotment has been adjusted
through excess application money then there will be no entry for allotment
due money received, which means following entry will not be passed:
Bank A/c……….Dr
To Share Allotment A/c
Note:
Calculation of Number of Shares allotted If number of Shares
applied in the question is given and Issue has been done on Pro Rata Basis.
Example: A Company Issued 10000 Shares. Application received
for 15000 Shares.
Mr. X applied 3000 Shares.
Ratio
of number of Shares Applied to Shares Allotted = 15000 : 10000 or 3 : 2.
It
means For 3 Shares applied, 2 Shares have been allotted
So.
For 1 Share applied, 2 ÷3 Shares have been allotted
So,
For 1500 Shares applied, (2 ÷ 3) × 1500 = 1000 shares allotted.
In the same way if number of Shares allotted has been given,
we can calculate number of Shares Applied:
Example: A Company Issued 10000 Shares. Application received
for 15000 Shares.
Mr. X has been allotted 3000 Shares.
Ratio
of number of Shares Allotted to Shares Applied = 10000: 15000 or 2 : 3.
It
means For 2 Shares allotted , 3 Shares
have been applied
So.
For 1 Share allotted , 3 ÷ 2 Shares
have been applied
So,
For 3000 Shares allotted, (3 ÷ 2) × 3000 = 4500 shares applied.
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Treatment of Surplus Application
Money received on Pro rata Allotment
Case II: If question
specifically requires that surplus application money is to be refunded after
adjustment of Allotment and Call money:
In
this case, Excess application money is transferred to Share Allotment A/c and
Calls in Advance A/c. The balance, if still left will be refunded.
Journal Entries
related to this case:
1. On receipt of Application
money
Bank A/c
….....................….Dr (Total Application money including Premium if any)
To Share Application
A/c
2. on Allotment of Shares
Share Application
A/c……….Dr (Total Application money including Premium if any)
To Share Capital A/c
(with nominal/ face value)
To
Security Premium Reserve A/c (with Premium amount if any)
To Share
Allotment A/c (Excess application money adjusted towards allotment)
To Calls
in Advance A/c
To Bank A/c
(Excess application money after adjustment towards allotment and calls if
left is refunded)
3. Amount due on
allotment including Security Premium
Share
allotment A/c……..Dr
To
Share Capital A/c
To Security Premium Reserve A/c
4. On receipt of
allotment money including Security Premium
Note 1:
At
the time of allotment; allotment due entry will include total allotment due
amount but at the time of receipt of allotment due money, Bank A/c will be
debited with =>
=>Allotment Due – Excess application money adjusted for
allotment.
Note 2 :
In
case whole of due amount of allotment has been adjusted through excess
application money then there will be no entry for allotment due money
received, which means following entry that is entry no. 4 will not be passed:
Bank
A/c………………………Dr
To
Share Allotment A/c
5. On First call
being Due including Security Premium
First
Call A/c…………….Dr
To
Share Capital A/c
To Security Premium Reserve A/c
6. On receipt of
First Call including Security Premium
Calls
in Advance A/c (Excess Application Money adjusted toward First Call)……Dr
Bank
A/c ……………….Dr
To
First Call A/c
Note:
In case whole of First Call Due amount has been adjusted through Excess
Application money that is through Calls in advance A/c, then Journal entry
passed will be:
Calls
in Advance A/c (Excess Application Money adjusted toward First Call)……Dr
To
First Call A/c
7. On Second &
Final Call being Due including Security Premium
Second
& Final Call A/c……….Dr
To
Share Capital A/c
To Security Premium Reserve A/c
8. On receipt of
Second & Final Call including Security Premium
Calls
in Advance A/c (Excess Application Money adjusted toward First Call)…….Dr
Bank
A/c ……………..Dr
To
Second & Final Call A/c
Note: In case whole of Second Call Due amount has been adjusted
through Excess Application money that is through Calls in advance A/c, then
Journal entry passed will be:
Calls
in Advance A/c (Excess Application Money adjusted toward First Call)…….Dr
To
Second & Final Call A/c
Precautionary Note:
In Pro rata allotment when shares
are issued at premium, excess application money received is adjusted towards
allotment money but it is first adjusted towards share capital allotment due
excluding security premium. Any excess thereon is adjusted towards Security
Premium Reserve.
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Over Subscription of Shares
Alternative III for Allotment of Shares - Combination of
Above two alternatives:
In
this case, some applicants got full allotment, some get partial and some get
nothing.
Excess
Application money is refunded to applicants who have not been allotted any
shares. Journal Entries in this case will be same as we did in first method
Surplus
application money on partially allotted shares is retained to be utilised
against allotment and future calls. Journal Entries in this case will be same
as we did in second method. Same rule will apply as in case of second method.
Note: If question
is silent or states that excess application money received is to be adjusted
against allotment; In this case, Surplus Application money is adjusted
against allotment money due and after that if still surplus application money
is left, then remaining excess application after adjustment of allot money
due left will be refunded.
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Under
Subscription of Shares
It
means number of shares applied is less than number of shares issued by the
company.
In
case, Subscription is less than 90 % of Issued Share Capital, then the
company has to reverse its issue and return all money received towards
application. However, from question point of view, we do not consider this
point and write journal entries for the same. All entries remain same as we
did in case of Shares issued at Par or Premium.
Preparation
of Cash Book
In
this case, we record cash transactions entries in Cash Book and non cash
transactions entries in Journal.
Cash
Book (Bank Column Only)
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Calls in
Arrear A/c
Default
in payment due on allotment or on any call by Shareholders. It is unpaid
amount by shareholders due on allotment and/ or Calls.
Two
methods of Accounting of Calls in Arrear
1. Without Opening
Calls in Arrear A/C:
In
this case, we do not write entry for Calls in Arrear A/C and amount unpaid on
allotment or any call will not be recorded.
For
example, Rs. 5 is called on 100 shares as allotment, but money is received
only on 80 shares, then in this case Journal entry will be:
On
allotment Due:
Share
allotment A/C…Dr 500
To
Share Capital A/C 500
On
receipt of Allotment
Bank
A/C ……………Dr (95 ×5) 475
To
Share Allotment A/C 475
2. By Opening Calls
in Arrear A/C
In
this case, we record entries for Calls in Arrear A/C. Taking above example,
Journal entry passed will be
On
allotment Due:
Share
allotment A/C…Dr 500
To
Share Capital A/C 500
On
receipt of Allotment
Bank
A/C ……………Dr (95 ×5) 475
Calls
in Arrear A/C……Dr (5×5) 25
To
Share Allotment A/C 500
If
Calls in arrear is received on subsequent date, entry passed will be:
Bank
A/C…………………….Dr
To
Calls in Arrear A/C
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Calls in
Advance A/C
Amount
received for Calls yet not made is known as Calls in Advance.
Journal
entry passed in this case:
1.
On receipt of Advance call money
Bank
A/C…………………Dr
To
Calls in Advance A/C
On
adjustment of Calls in advance money with respected Calls:
Calls
in Advance A/C…………….Dr
To
Respective Call A/c
Note:
See Journal entries discussed in case of Pro Rata Allotment for
better understanding; Case II: If question specifically requires that surplus
application money is to be refunded after adjustment of Allotment and Call
money.
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Issue of
Shares for Consideration Other than Cash
Case I: Issue of
Shares to Vendors for Purchase of Fixed Asset or Business
On
Purchase of Assets:
Sundry
Asset A/C……Dr
To
Vendor’s A/C
On
Purchase of Business:
Sundry
Assets A/C……………Dr (Agreed Value of Assets)
Goodwill
A/C …………………Dr*
To
Sundry liabilities A/C (Agreed Value of Liabilities)
To
Vendor A/C (With Purchase Consideration)
To
Capital Reserve A/C**
*If
Purchase Consideration > Net Asset Value, then difference is debited to
Goodwill A/C.
**If
Purchase Consideration < Net Asset Value, then difference is credited to
Capital Reserve A/C.
Either
Goodwill A/C or Capital Reserve A/C will be written at a time. Both cannot
come together.
On
issue of Shares:
Vendor
A/C……………………Dr (With Purchase Price)
To
Share Cap A/C (With Nominal or Face Value of Shares)
To
Security Premium Reserve A/C (if shares have been issued at Premium)
Calculation
of Number
of Shares to be issued = Purchase Consideration ÷ Issue Price of
Share.
Note:
Issue price of Share means Nominal value of One Share + Security
Premium Reserve of One Share (If
Shares issued at Premium) or simply Nominal Value of One Share, if not issued
at Premium.
Case II: Issue of
Shares to Promoters
Journal
Entry for Issue of Shares to Promoters:
Incorporation
Expenses A/C……….Dr
To
Share Capital A/C
(Being
issue of……Shares of Rs…..each as fully paid to Promoters)
Case III: Issue of
Shares to Underwriters:
Underwriting
Commission is paid to Underwriters for taking the shares not subscribed by
Public. The company may issue Shares instead of Paying Commission to
Underwriters.
On
Underwriting Commission Due:
Underwriting
Commission A/C ………Dr
To
Underwriters’ A/C
On
issue of Shares to Underwriters for Underwriting Commission:
Underwriters’
A/C…………………..Dr
To
Share Capital A/C
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Forfeiture
of Shares
It
means cancellation of Shares for non payment of money due on those Shares.
Case I: Forfeiture of
Shares issued at Par:
When Calls in Arrear A/C is not Maintained:
Share
Capital A/C………..Dr (Number of Shares Forfeited × Called up Value per Share)
To
forfeited Shares A/C (With Amount received on Forfeited Shares)
To
Share Allotment A/C (Amount unpaid on Allotment)
To
Share Call A/C (Amount unpaid on Calls)
When Calls in Arrear A/C is Maintained:
Equity
Share Capital A/C…….Dr (Number of Shares Forfeited × Called up Value per
Share)
To
Forfeited Shares A/C (With Amount received on Forfeited Shares)
To
Calls in Arrear A/C (Amount unpaid on Allotment and Calls)
Note of Precaution: Always remember,
On Forfeiture, Share Capital A/C is debited with amount that has been Called
Up on Forfeited Shares until and unless shares have been forfeited after
making all Calls.
For example:
Shares
have been forfeited after allotment due to non Payment, then in this case Share Capital A/c will be debited with => Share
Application + Share Allotment and not by Face Value of the Share.
If
Shares have been forfeited after First Call due to non Payment, then in this
case Share Capital A/c will be debited with =>
Share Application + Share Allotment +
First Call; and not by Face Value of the Share.
If
Shares have been forfeited after making all Calls, then in that case, Share
Capital will be debited with Face value.
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Forfeiture of Shares
Case II : Forfeiture Of Shares which were issued at Premium
Three
Cases can exist:
Case I: Security
Premium amount has been received
Security
premium amount is not cancelled that is it is not debited with the amount
relating to forfeited Shares.
Journal Entry passed
in this case:
Share
Capital A/C…………Dr (With amount Called up – Security Premium)
To
Forfeited Shares A/C (Total Amount received on forfeited Shares - Security
Premium)
To
Calls in Arrear A/C (Amount unpaid on Forfeited Shares)
Case II: Security
Premium amount has not been received
The
amount of Security Premium not received will be debited in respect of
Forfeited Shares.
Journal
Entry passed in this case:
Share
Capital A/C…………Dr (With amount Called up – Security Premium)
Security
Premium Reserve A/C ……Dr (Security Premium amount not received)
To
Forfeited Shares A/C (Total Amount received on forfeited Shares)
To
Calls in Arrear A/C (Amount unpaid on Forfeited Shares including Premium)
Case III: Security
Premium has been received Partially:
It
is a combination of above two cases. In this case, Part of Security Premium
amount received will not be recorded and Part of Security premium amount
received will be recorded.
Journal Entry in this
case:
Share
Capital A/C…………Dr (With amount Called up – Security Premium)
Security
Premium Reserve A/C………..Dr (Security Premium
amount not received)
To
Forfeited Shares A/C (Total Amount received on forfeited Shares)
To
Calls in Arrear A/C(Amount unpaid on Forfeited Shares including Unpaid
Security Premium)
For Example:
Shares
having Face Value of Rs. 10 were issued at premium of Rs. 2. Money to be
received Rs. 4 on Application, Rs. 3 on Allotment including Premium and rest
on Final call. Mr. X applied for 1000 shares but he has been allotted 700
shares. He failed to pay allotment money. His Shares Forfeited on failure of
payment of allotment money.
In this case
Amount
Paid by Mr. X on Application is Rs. 4 × 1000 =Rs. 4000
Amount
required to be paid by Mr. X on Application Rs. 4 × 700 = Rs. 2800.
Excess
Application Money of Rs. 1200 (Rs. 4000 – Rs. 2800) will be adjusted towards
allotment as follows:
Amount
due on Allotment including Premium:
Re
1 × 700 = Rs. 700 + Rs. 2 ×700 (For Security Premium) = Rs. 2100
In
this case, Excess Application Money will be first adjusted to Share Capital,
which out of Rs. 1200; First Rs. 700 will be adjusted towards payment of
Share Capital Amount. Remaining Rs. 500 will be adjusted towards Security
Premium Reserve (Due Amount Rs. 1400).
So,
in this case, Security premium reserve of Rs. 500 will not be recorded and Security
Premium Reserve unpaid of Rs. 900 will be recorded.
Journal Entry passé will
be:
Share
Capital A/C…………Dr (700 × 5) 3500
Security
Premium Reserve A/C ….Dr (700 × 2 -
500) 900
To
Forfeited Shares A/C (700 × 4 (application)
+ 700 × 1(allotment) 3500
To
Calls in Arrear A/C (Amount unpaid
on Forfeited Shares) 900
Note of
Precaution:
In case
of Pro Rata Allotment, when Shares are issued at a Premium, Excess
Application Money received is first adjusted towards Share Capital. Balance Excess
Application money after adjustment towards Share Capital, if any, left will
be adjusted towards Security Premium Reserve. Kindly see the above mentioned
Example.
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Reissue of
Forfeited Shares:
Forfeited
Shares can be reissued at Par, Premium and Discount.
Maximum
possible Discount can not exceed amount forfeited on Reissued Shares.
Forfeited Shares
Reissued at Par:
Bank
A/C ………….Dr (With amount received on Reissue)
To
Share Capital A/c (With amount credited as Paid up)
Forfeited Shares
reissued at Discount:
Bank
A/C…………..Dr (With amount received on
Reissue)
Forfeited
Shares A/C ……..Dr (With Discount amount allowed on Reissue)
To
Share Capital A/C (With amount credited as Paid up).
Calculation of Amount Debited to Forfeited Shares A/C:
=
Number of Shares Reissued × (Paid Up Value – Reissue Price)
Forfeited Shares
Reissued at Premium:
Bank
A/C ………….Dr (With amount received on Reissue)
To
Share Capital A/c (With amount credited as Paid up)
To
Security Premium Reserve A/C (With Excess amount received on Reissue over
credited to Paid up Share Capital A/C)
Transfer of
Balance Of Forfeited Shares A/C to Capital Reserve A/C:
Two
Cases Exist:
Case I: When all
Forfeited Shares have been Reissued:
In
case of Forfeited Shares reissued at Par or Premium, whole amount of
Forfeited Share A/C will transferred to Capital Reserve A/C.
In
case of Forfeited Shares Reissued at Discount, amount adjusted for Discount
from Forfeited Shares A/C will be Deducted from Total amount of Forfeited
Shares A/C and Remaining Balance will be transferred to Capital Reserve A/c.
Amount to be transferred to Capital Reserve A/C in case of
Reissue of Shares at Discount
=
Total balance in Forfeited Shares A/c – Amount adjusted towards Discount from
Forfeited Shares A/c.
Journal Entry for
Transfer Of Forfeited Shares A/C to Capital Reserve A/C in all three cases
that is Shares Reissued at Par, Premium or Discount:
Forfeited
Shares A/C…………Dr
To
Capital Reserve A/C.
Case II: When all
Forfeited Shares have not been Reissued:
In
this Case, Forfeiture A/C Balance is divided into two parts:
1.
Balance of Forfeited Shares which has not been reissued.
2.
Balance of Forfeited Shares which has been reissued.
While
doing Calculation and writing Journal Entry, We do not touch First Part
amount that is Balance of Forfeited Shares which has not been reissued.
We
make calculation and write Journal entry for Second part that is Balance of
Forfeited Shares which has been reissued assuming First part does not exist.
Rules
remain same as we did in First Case.
For
Example:
X
Ltd. Forfeited 500 Shares of Rs. 10 each issued at a Premium of Rs. 2 for non
Payment of Allotment money of Rs. 6 (including Premium), First Call of Rs. 2 and
Final Call of Re 1. Later 200 Shares have been reissued at a discount of Rs.
2 .
In
this Case Journal Entry passed will be:
Share
Capital A/C…….Dr (500 × Rs. 10) 5000
Security
Premium Reserve A/C……Dr (500 × Rs. 2)
1000
To
Share Forfeiture A/C (500 × Rs. 3)
1500
To
Calls in Arrear A/C (500 × Rs.6 + 500 × Rs.2 + 500 × Re 1) 4500
Total
Amount in Share Forfeiture A/c = Rs. 1500
This
Rs. 1500 is for 500 shares forfeited. But only 200 shares are being reissued.
So we will break this amount in two parts:
1.
Forfeiture Amount for 300 Shares (This amount will remain untouched, so there
is no need to calculate it).
2.
Forfeiture Amount for 200 Shares.
Calculation
of Forfeiture Amount balance for 200 Shares using Unitary method:
For
500 Shares Forfeiture amount is Rs. 1500
So,
For 1 Share Forfeiture Amount will be Rs. 1500 ÷ 500 = Rs.3.
So, For 200 Shares balance in Forfeiture Amount will be Rs. 3 ×
200 = Rs. 600.
Now,
Since Shares have been reissued at Discount of Rs. 2 each;
Rs.
2 × 200 = Rs. 400, out of Rs. 600 will be adjusted toward Reissue.
Balance
Rs. 600 – Rs. 400 = Rs. 200 will be transferred to Capital Reserve.
Journal Entry For Reissue of 200 Shares at a Discount of Rs.
2:
Bank
A/C…………..Dr 1600
Forfeited
Shares A/C …...........Dr 400
To
Share Capital A/C 2000
For Transfer to capital Reserve:
Forfeited
Shares A/C……........................Dr 200
To
Capital Reserve A/C 200
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