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2nd Puc Accountancy Chapter 6 Notes
2nd Puc Accountancy Chapter 6 Notes
Short Questions
Q1. What is private limited company?
As per Section 2(68) of Companies Act, 2013, Private limited companies are defined as companies that have following characteristics:
1. Companies whose article of association restricts transfer of shares
2. No minimum paid up capital
3. Minimum 2 members and maximum of 200 members (Only one in case of One Person Company)
4. Must include “private limited” or “Pvt Ltd” in their names
5. Shares of a private company are not traded in stock exchanges
Q2. What is public company?
A Public company as per section Sec 2(71) and Sec.3 (1) (a) of Company Act, 2013 means a company which
a. Is not a private company
b. Has a minimum paid-up share capital of five lakh rupees or such higher paid-up capital, as may be prescribed
c. Is a private company, being a subsidiary of a company which is not a private company.
The stock of a public company can be acquired by any individual and it may be through IPO or through trading on stock market.
Q3. Write a brief note on ‘Minimum Subscription’.
It refers to the minimum amount of shares that must be subscribed by the public, so that the share allotting company can allot shares to the applicants, is termed as Minimum Subscription. If Minimum Subscription is not attained, the company cannot allot shares to its applicants and it should refund the amount received to the public. Minimum Subscription should not be less than 90% of the amount issued
Q4. What are the uses of securities premium?
Securities premium can be used for these activities:
1. Issuing fully paid up bonus shares to existing shareholders.
2. Writing off expense of issue of shares and debentures, such as discount given on issue of shares.
3. Writing off preliminary expenses
4. Buying back shares
5. For paying premium payable on redemption of debentures
Q5. What is meant by Calls-in-Advance?
When the shareholder pays the whole amount before the share payment date becomes due i.e. before the share issuing company makes a call for it. It is known as Calls-in-advance.
Q6. When can shares be forfeited?
A shareholder has to pay allotment money for holding the shares and has to pay the calls which are part of share allotment. When a shareholder fails to do so, a 14 days’ notice is served to the shareholder, if the shareholder does not pay in these 14 days, the shares will be forfeited.
Q7. What is meant by Calls-in-Arrears?
When an investor (shareholder) fails to pay all the instalments for the allotted shares in the due time, the company expects the investor to pay the amount on subsequent calls or stages. The amount of money that is paid at later stages is called as Call-in-Arrears.
Q8. What do you mean by a listed company?
Public companies whose shares are listed in recognised stock exchanges for public trading are called as Listed Company. Such companies are also known as Quota Companies. Once the securities are listed it helps the investors in knowing the value of their investment in a listed company. It provides the potential investors an idea about the goodwill of the company and helps them on taking future investment decisions and evaluate the viability of investing in the company.
Long Questions And Practical Problems With Solutions
Q1. Explain in brief the main categories in which the share capital of a company is divided.
Following categories of share capital are there:
1. Authorised Capital: This is the maximum amount a company can raise by issuing of shares. It is the amount mentioned during the formation of Memorandum of Association.
2. Issued Capital: A portion of authorised share capital that is offered by the company to general public for subscription.
3. Unissued Capital: A part of authorised capital that is not yet offered to general public for subscription but can be offered in near future.
4. Subscribed Capital: A part of issued capital which is subscribed by the general public.
5. Unsubscribed Capital: Referred to as that part of issued capital that has not been subscribed by the people (public).
6. Called up Capital: It is a portion of the subscribed capital for which the shareholders are called to pay
7. Uncalled up capital: It is that part of a subscribed capital that is not yet called up, but can be called up as per requirement.
8. Paid Up Capital: It is part of called up share capital that is received by the shareholders
9. Reserve Capital: A company may call up certain part of uncalled share capital when a company is winding up. This cannot be used for any other purpose other than paying back creditors, hence it is called reserve capital.
Q2. What do you mean by the term ‘share’? Discuss the type of shares, which can be issued under the Companies Act, 2013 as amended to date.
In a company the capital is split into small denominations which are known as shares. Shares can be easily transferred from one person to another and this transfer is bound by certain terms and conditions. Shareholder is that person who is contributing capital in form of shares. Ownership is limited to the value of shares possessed by the shareholder. There are two types of shares:
1) Preference Shares and 2) Equity Shares
1)Preference Share: Section 43 of the Company Act, 2013 defines preference shares as which entitles the holder to receive dividend and also the right to receive capital invested in order of preference before equity share holders when the company is wind up.
2) Equity Shares: Equity shareholders manage the affairs of the company and also have a voting right. These type of share do not possess any preferential right for dividend payment or capital repayment. The dividend rate is not fixed and varies year on year which is dependent on available profit left after distributing to preference shareholders.
Q3. What is meant by the word ‘Company’? Describe its characteristics.
Section 2(20) of the Companies Act 2013, defines the term “company” to mean “a company incorporated under the Companies Act, 2013 or any previous company law. In general parlance, a company is an artificial person, created by law and having a separate legal entity, common seal, perpetual succession and limited liability. It is a voluntary association of persons who come together and contribute capital for doing business. Capital of a company is available in form of shares and the ownership of shares is subject to certain terms and conditions. Public and private are two forms of company.
Characteristics of a Company
1. A company is an association formed voluntarily by a group of persons having a common business goal. Minimum number of members required for a private company is two and that for a public company is seven.
2. Company is a juristic and artificial person created by law.
3. Company is a separate legal entity from shareholders and directors. It has the authority to open a bank account, sign contracts and own property in its name.
4. The liability of the members of a company is limited to the unpaid value of the shares they are holding.
5. The company is having perpetual existence which means the existence of the company is not affected by death, insolvency or retirement of any of its members
6. The company being an artificial person has no individual signature, hence it carries a common seal for validating the official documents.
7. Shares of a public company is transferrable while private companies do not allow transfer of shares without member’s consent.
Q4. What is a ‘Preference Share’? Describe the different types of preference shares.
Preference Share: Section 43 of the Company Act, 2013 defines preference shares as shares which entitles the holder to receive dividend and also the right to receive capital invested in order of preference before equity share holders when the company is wind up.
The different types are:
1. Cumulative Preference Share: When arrears of a dividend are cumulative and such arrears are paid before paying any dividend to equity shareholders, such shares are known as cumulative shares.
2. Non-Cumulative Preference Share: Shares where the dividend is paid from the net profits earned each year are known as non-cumulative preference share. If the company does not earn profits in any of the year, the arrears of dividend cannot be claimed.
3. Participating preference share: In these type of shares the preference shareholder has the luxury of participating in the surplus profit (i.e. apart from fixed rate of dividend) which is remaining after paying equity shareholders.
4. Non-participating Preference Share: The condition in which the shareholder is entitled only to a fix dividend pay-out and no share in surplus profits is known as non-participating preference share.
5. Convertible Preference Share: Type of shares which can be converted to equity shares within a period of time.
6. Non-Convertible Preference Share: Type of shares which do not have the right to convert into equity shares.
7. Redeemable Preference Shares: Those shares that can be repaid to the shareholders after a certain period as per provisions mentioned in Companies Act, 1956
8. Guaranteed Preference Shares: These shares have the provision of getting fixed dividend, even if the company is making no profits
Q5. Discuss the process for the allotment of shares of a company in case of over subscription.
Over-subscription: It is referred to as the situation where the total number of applications received for share allotment exceeds the available number of shares that are issued by the company for public.
In case of over subscription there are 3 ways to deal with it:
Q6. Describe the provision of law relating to ‘Calls-in-Arrears’ and ‘Calls-in-Advance’.
When an investor (shareholder) fails to pay all the instalments for the allotted shares in the due time, the company expects the investor to pay the amount on subsequent calls or stages. The amount of money that is paid at later stages is called as Call-in-Arrears. The company is authorized by its Article of Association for charging a interest at a specified rate on the call in arrears amount from due date till the date of payment. If Article of Association does not mention or is silent about such a case, then a 5% charge is levied.
The amount is deducted from called up share capital on the liabilities side of Balance Sheet. If the due amount is not paid the shares can forfeited with proper notice to shareholders.
When the shareholder pays the whole amount before the share payment date becomes due i.e. before the share issuing company makes a call for it. It is known as Calls-in-advance. In case of advance payment the company has provision in their article of association to pay interest to shareholders from date of payment till date of call. If the article of association is silent in this regard, then a default 6% interest is provided.
It is shown on liabilities side of Balance Sheet under the heading of current liabilities.
Q7. Explain the terms ‘Over-subscription’ and ‘Under-subscription’. How are they dealt with in accounting records?
Over-subscription: It is referred to as the situation where the total number of applications received for share allotment exceeds the available number of shares that are issued by the company for public.
Under-subscription: This is the situation when the number of applications for share allotment are less than the number of shares issued by the company. A 90% subscription of the shares is called as Mini Subscription. If 90% subscription does not take place, the company should refund the money back to applicants.
In case of over subscription there are 3 ways to deal with it:
Q8. Explain the term ‘Forfeiture of Shares’ and give the accounting treatment on forfeiture.
A shareholder has to pay allotment money for holding the shares and has to pay the calls which are part of share allotment. When a shareholder fails to do so, a 14 days’ notice is served to the shareholder, if the shareholder does not pay in these 14 days, the shares will be forfeited.
Table A of the Company Act, 2013 deals with Memorandum of Association for a company limited by shares. It has the following procedure for forfeiting of shares:
1. Notice sent to shareholder for making payment related to call arrears and interest on outstanding call money within a period of 14 days of receipt of the notice.
2. On non-payment of dues, the company can forfeit the share by passing a resolution
3. Forfeit notice resolution sent to the shareholder and a statement published in daily newspaper
4. Name of shareholder removed from registered shareholders list.
Accounting Treatment for Forfeiture of Shares:
Q9. Describe the purposes for which a company can use ‘Securities Premium Account’.
Securities premium account can be used for these activities:
1. Issuing fully paid up bonus shares to existing shareholders.
2. Writing off expense of issue of shares and debentures, such as discount given on issue of shares.
3. Writing off preliminary expenses
4. Buying back shares
5. For paying premium payable on redemption of debentures
Q10. State clearly the conditions under which a company can issue shares at a discount.
Under the following conditions a company can issue shares at a discount:
1. The shares issued must belong to a class of shares that are already issued.
2. Shares can be issued at discount after a minimum time frame of 1 year from the date business has started
3. The issue of shares at discount is authorised by a resolution that is passed by the company in general meeting and approved by Company law board.
4. Shares can be issued at discount within two months of obtaining sanction company law board.
5. Maximum rate of discount must not cross 10% of face value or as decided by company law board.
Q11. Anish Limited issued 30,000 equity shares of ₹ 100 each payable at ₹ 30 on application, ₹ 50 on allotment and ₹ 20 on Iast and final call. All money was duly received.
Record these transactions in the journal of the company.
Books of Anish Limited
| Date | Particulars | L.F. | DebitAmount₹ | CreditAmount ₹ |
| Bank A/c Dr. | 9,00,000 | |||
| To Equity Share Application A/c | 9,00,000 | |||
| (Application money received on application for 30,000 equity shares @ ₹ 30 per share) | ||||
| Equity Share Application A/c Dr. | 9,00,000 | |||
| To Equity Share Capital A/c | 9,00,000 | |||
| (Share Application money transferred to Share CapitalAccount) | ||||
| Equity Share Allotment A/c Dr. | 15,00,000 | |||
| To Equity Share Capital A/c | 15,00,000 | |||
| (Allotment money due on 30,000 @ ₹ 50 per share) | ||||
| Bank A/c Dr | 15,00,000 | |||
| To Equity Share Allotment A/c | 15,00,000 | |||
| (Share Allotment money received for 30,000 shares @₹ 50 per share) | ||||
| Equity Share First and Final Call A/c Dr. | 6,00,000 | |||
| To Equity Share Capital A/c | 6,00,000 | |||
| Share First and Final call due on 30,000 shares @ ₹ 20per share) | ||||
| Bank A/c Dr. | 6,00,000 | |||
| To Equity Share First and Final Call A/c | 6,00,000 | |||
| (Share First and Final Call money received for 30,000shares @ ₹20 per share) |
Q12. 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.
Books of Adersh Control Device Ltd Journal
| Date | Particulars | L.F. | DebitAmount₹ | CreditAmount₹ | |
| Equity Share Application A/c | Dr. | 90,000 | |||
| To Equity Share Capital A/c | 90,000 | ||||
| (Share Application money for 30,000 shares @ ₹ 3 per sharetransferred to Share Capital Account) | |||||
| Equity Share Allotment A/c | Dr. | 1,20,000 | |||
| To Equity Share Capital A/c | 1,20,000 | ||||
| (Share Allotment money due on 30,000 @ ₹ 4 per share) | |||||
| Equity Share First and Final Call A/c | Dr. | 90,000 | |||
| To Equity Share Capital A/c | 90,000 | ||||
| (Share First and Final Call due on 30,000 @ ₹ 3 per share) |
Cash Book (Bank Column)
Dr. Cr.
| Date | Particulars | J.F. | Amount₹ | Date | Particulars | J.F. | Amount₹ |
| Equity Share Application | 90,000 | ||||||
| Equity Share Allotment | 1,20,000 | ||||||
| Equity Share First and Final Call | 90,000 | By Balance c/d | 3,00,000 | ||||
| 3,00,000 | 3,00,000 |
Q13. Software solution India Ltd inviting application for 20,000 equity share of ₹ 100 each, 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.
Books of Software Solution India Ltd.Journal
| Date | Particulars | L.F. | DebitAmount₹ | CreditAmount₹ | |
| Equity Share Application A/c | Dr. | 12,00,000 | |||
| To Equity Share Capital A/c | 8,00,000 | ||||
| To Equity Share Allotment A/c | 4,00,000 | ||||
| (Application money transferred to Equity Share Capital for 20,000 shares @ ₹ 40 and ₹ 4,00,000 is adjusted towards allotment) | |||||
| Equity Share Allotment A/c | Dr. | 6,00,000 | |||
| To Equity Share Capital A/c | 6,00,000 | ||||
| (Equity Share Allotment money due on 20,000 @ ₹ 30per share) | |||||
| Equity Share First and Final call A/c | Dr. | 6,00,000 | |||
| To Equity Share Capital A/c | 6,00,000 | ||||
| (Equity share on First and Final call due on 20,000 @₹ 30 per share) |
Cash Book (Bank Column)
Dr. Cr.
| Date | Particulars | J.F. | Amount₹ | Date | Particulars | J.F. | Amount₹ |
| Equity Share Application | 12,80,000 | Equity Share Application | 80,000 | ||||
| Equity Share Allotment | 2,00,000 | Balance c/d | 20,00,000 | ||||
| Equity Share First and Final Call | 6,00,000 | ||||||
| 20,80,000 | 20,80,000 |
Working Note:
| Amount due on Allotment for 20,000 shares @ ₹ 30 per share | 6,00,000 |
| Money adjusted on application 10,000 shares @ ₹ 40 each | 4,00,000 |
| Money to be received on Allotment | 2,00,000 |
Q14. 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 call 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.
Books of Rupak Ltd. Journal
| Date | Particulars | L.F. | DebitAmount₹ | CreditAmount₹ | |
| Share Application A/c | Dr. | 2,00,000 | |||
| To Share Capital A/c | 2,00,000 | ||||
| (Application money for 10,000 shares transferred to Share CapitalAccount) | |||||
| Share Allotment A/c | Dr. | 3,00,000 | |||
| To Share Capital A/c | 3,00,000 | ||||
| (Allotment money due on 10,000 shares @ ₹ 30 per share) | |||||
| Share First Call A/c | Dr. | 2,50,000 | |||
| To Share Capital A/c | 2,50,000 | ||||
| (Share First Call due on 10,000 shares @ ₹ 25 per share) | |||||
| Calls in Arrears A/c | Dr. | 5,000 | |||
| To Share First Call A/c | 5,000 | ||||
| (Call in arrears on 200 shares @ ₹ 25 per share) |
Cash Book (Bank Column)
Dr. Cr.
| Date | Particulars | J.F. | Amount₹ | Date | Particulars | J.F. | Amount₹ |
| Share Application | 2,00,000 | ||||||
| Share Allotment | 3,00,000 | ||||||
| Share first call | 2,45,000 | By Balance c/d | 7,57,500 | ||||
| Calls in Advance | 12,500 | ||||||
| 7,57,500 | 7,57,500 |
Working Note:
| Money due on First Call for 10,000 shares @ 25 each | 2,50,000 |
| Less: Calls in Arrear for 200 shares @ ₹ 25 per Share | (5,000) |
| Money Received on First Call | 2,45,000 |
| Add: Calls received in advance on 500 shares @ ₹25 per share | 12,500 |
| 2,57,500 |
Q15. 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 call 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.
Books of Mohit Glass Ltd. Journal
| Date | Particulars | L.F. | DebitAmount₹ | CreditAmount₹ | |
| Bank A/c | Dr. | 7,20,000 | |||
| To Share Application A/c | 7,20,000 | ||||
| (Application money received on application for 24,000 shares @ ₹ 30 per share) | |||||
| Share Application A/c | Dr. | 7,20,000 | |||
| To Share Capital A/c (Bank Column) | 6,00,000 | ||||
| To Bank A/c | 1,20,000 | ||||
| (Share Application of 20,000 shares @ ₹ 30 transferred to ShareCapital Account and the balance returned) | |||||
| Share Allotment A/c | Dr. | 8,00,000 | |||
| To Share Capital A/c | 6,00,000 | ||||
| To Share Premium A/c | 2,00,000 | ||||
| (Allotment money due on 20,000 shares @ 40 per share including₹ 10 for premium) | |||||
| Bank A/c | Dr. | 8,00,000 | |||
| To Share Allotment A/c | 8,00,000 | ||||
| (Allotment money received on 20,000 shares @ ₹ 40 per share) | |||||
| Share First Call A/c | Dr. | 4,00,000 | |||
| To Share Capital A/c | 4,00,000 | ||||
| (Share First Call money due on 20,000 shares @ ₹ 20 per share) | |||||
| Bank A/c | Dr. | 4,00,000 | |||
| To Share First Call A/c | 4,00,000 | ||||
| (Share First Call money received on 20,000 shares @ ₹ 20 pershare) | |||||
| Share Final Call A/c | Dr. | 4,00,000 | |||
| To Share Capital A/c | 4,00,000 | ||||
| (Share Final Call money due on 20,000 shares @ ₹ 20 per share) | |||||
| Bank A/c | Dr. | 4,00,000 | |||
| To Share Final Call A/c | 4,00,000 | ||||
| (Share Final Call money received on 20,000 shares @ ₹ 20 per share) |
Q16. 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:
| Equity Shares | Preference Shares | |
| On Application | ₹ 3 per share | ₹ 3 per share |
| On Allotment | ₹ 5 per share | ₹ 4 per share |
| (including a premium) | ||
| On First Call | ₹ 4 per share | ₹ 3 per share |
All the shares were fully subscribed, called-up and paid.
Record these transactions in the journal and cash book of the company:
Books of A Ltd. Journal
| Date | Particulars | L.F. | DebitAmount₹ | CreditAmount₹ | |
| Equity Share Application A/c | Dr. | 3,00,000 | |||
| 10% Preference Share Application A/c | Dr. | 6,00,000 | |||
| To Equity Share Capital A/c | 3,00,000 | ||||
| To 10% Preference Share Capital A/c | 6,00,000 | ||||
| (Application money transferred to Equity Share Capital ) | |||||
| Equity Share Allotment A/c | Dr. | 5,00,000 | |||
| 10% Preference Share Allotment A/c | Dr. | 8,00,000 | |||
| To Equity Share Capital A/c | 3,00,000 | ||||
| To Securities Premium A/c | 2,00,000 | ||||
| To 10% Preference Share Allotment A/c | 8,00,000 | ||||
| (Amount due on allotment) | |||||
| Equity Share First and Final Call A/c | Dr. | 4,00,000 | |||
| 10% Preference Share First and Final Call A/c | Dr. | 6,00,000 | |||
| To Equity Share Capital A/c | 4,00,000 | ||||
| To 10% Preference Share Capital A/c | 6,00,000 | ||||
| (Amount on First and Final call due) |
Cash Book( Bank Column)
Dr. Cr.
| Date | Particulars | J.F. | Amount₹ | Date | Particulars | J.F. | Amount₹ |
| Equity Share Application | 3,00,000 | ||||||
| 10% Preference Share Application | 6,00,000 | ||||||
| Equity Share Allotment | 5,00,000 | ||||||
| 10% Preference Share Allotment | 8,00,000 | ||||||
| Equity Share First and Final Call | 4,00,000 | Balance c/d | 32,00,000 | ||||
| 10% Preference Share First & Final Call | 6,00,000 | ||||||
| 32,00,000 | 32,00,000 |
Q17. Eastern Company limited, having an authorised capital of ₹ 10, 00,000 in 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 |
| On first call (due three months after allotment) and the balance as and when required. | ₹ 3 per share |
Applications were received for 60,000 shares and the directors allotted the shares as follows:
(a) Applicants for 40,000 shares received shares, 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.
Note: In order to solve this question, applicants of category C has been assumed as 5000 instead of 500 and allotment to the applicants of this category has been taken as 2000 in place of 200.
Books of Eastern Company Limited
| Date | Particulars | L.F. | DebitAmount₹ | CreditAmount₹ | |
| Share Application A/c | Dr. | 1,80,000 | |||
| To Share Capital A/c | 1,50,000 | ||||
| To Share Allotment A/c | 30,000 | ||||
| (Share Application money for 50,000 shares transferred to Share Capital Account and the excess money transferred to Share Allotment Account) | |||||
| Share Allotment A/c | Dr. | 2,50,000 | |||
| To Share Capital A/c | 1,00,000 | ||||
| To Share Premium A/c | 1,50,000 | ||||
| (Allotment money due on 50,000 share @ ₹ 5 per share including ₹ 3 security premium) | |||||
| Share First Call A/c | Dr. | 1,50,000 | |||
| To Share Capital A/c | 1,50,000 | ||||
| (First call due on 50,000 share @ ₹ 3 per share) |
Cash Book (Bank Column)
Dr. Cr.
| Date | Particulars | J.F. | Amount₹ | Date | Particulars | J.F. | Amount₹ |
| Share Application | 1,80,000 | ||||||
| Share Allotment | 2,20,000 | Balance c/d | 5,49,700 | ||||
| Share First Call | 1,49,700 | ||||||
| 5,49,700 | 5,49,700 |
Eastern Company Limited
Balance Sheet
| Particulars | Note No. | Amount (₹) |
| I. Equity and Liabilities | ||
| 1.Shareholders’ Funds | ||
| a. Share Capital | 1 | 3,99,700 |
| b. Reserves and Surplus | 2 | 1,50,000 |
| 2.Non-Current Liabilities | ||
| 3.Current Liabilities | ||
| Total | 5,49,700 | |
| II. Assets | ||
| 1.Non-Current Assets | ||
| 2.Current Assets | ||
| a. Cash and Cash Equivalents | 3 | 5,49,700 |
| Total | 5,49,700 |
NOTES TO ACCOUNTS
| Note No. | Particulars | Amount (₹) |
| 1 | Share Capital | |
| Authorised Share Capital | ||
| 1,00,000 shares of ₹ 10 each | 10,00,000 | |
| Issued Share Capital | ||
| 50,000 shares of ₹ 10 each | 5,00,000 | |
| Subscribed, Called up and Paid up Share Capital | ||
| 50,000 shares of ₹ 10 each, ₹ 8 called-up 4,00,000 | ||
| Less: Calls-in-Arrears (300) | 3,99,700 | |
| 2 | Reserves and Surplus | |
| Securities Premium | 1,50,000 | |
| 3 | Cash and Cash Equivalents | |
| Cash at Bank | 5,49,700 |
Q18. Sumit Machine Ltd. issued 50,000 shares of ₹. 100 each at premium of 5%. The shares were payable ₹. 25 on application, ₹. 50 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 premium was adjusted on allotment.
Give journal entries and prepare balance sheet.
Books of Sumit Machine Ltd.
| Date | Particulars | L.F. | DebitAmount(₹) | CreditAmount(₹) | |
| Bank A/c | Dr. | 12,50,000 | |||
| To Share Application A/c | 12,50,000 | ||||
| (Share Application money received on application for 50,000 shares @ ₹25 per share) | |||||
| Share Application A/c | Dr. | 12,50,000 | |||
| To Share Capital A/c | 12,50,000 | ||||
| (Share Application money of 50,000 shares transferred to Share Capital Account) | |||||
| Share Allotment A/c | Dr. | 25,00,000 | |||
| To Share Capital A/c | 22,50,000 | ||||
| To Securities Premium A/c | 2,50,000 | ||||
| (Share Allotment money due on 50,000 shares @ ₹45 each at a premium of ₹5) | |||||
| Bank A/c | Dr. | 25,00,000 | |||
| To Share Allotment A/c | 25,00,000 | ||||
| (Allotment money received for 50,000 shares @ ₹50 per share) | |||||
| Share First and Final Call A/c | Dr. | 15,00,000 | |||
| To Share Capital A/c | 15,00,000 | ||||
| (Share First and Final call due on 50,000 shares @ ₹30 per share) | |||||
| Bank A/c | Dr. | 14,88,000 | |||
| Calls in Arrears A/c | Dr. | 12,000 | |||
| To Share First and Final Call A/c | 15,00,000 | ||||
| (Share First and Final Call received except 400 shares) |
Sumit Machine Ltd.Balance Sheet Particulars Note No.Amount (₹)I. Equity and Liabilities1. Shareholders’ Funds a. Share Capital149,88,000b. Reserves and Surplus22,50,0002. Non-Current Liabilities3. Current LiabilitiesTotal52,38,000II. AssetsNon-Current Assets Current Assetsa. Cash and Cash Equivalents352,38,000Total52,38,000NOTES TO ACCOUNTSNote
No.ParticularsAmount (₹)1Share CapitalAuthorised Share Capital…….. shares of ₹ 100 each–Issued Share Capital 50,000 shares of ₹ 100 each50,00,000Subscribed, Called-up and Paid-up Share Capital50,000 shares of ₹ 100 each50,00,000Less: Calls-in-Arrears (12,000)49,88,0002 Reserves and Surplus Securities Premium Reserve2,50,0003 Cash and Cash EquivalentsCash at Bank52,38,000
Q19. 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, and (b) at premium of 20%?
Case (a)
Books of Kumar Ltd
| Date | Particulars | L.F | DebitAmount(₹) | CreditAmount(₹) | |
| Sundry Assets A/c | Dr. | 6,30,000 | |||
| To Bhanu Oil Ltd | 6,30,000 | ||||
| (Assets purchased from Bhanu Oil Ltd.) | |||||
| (a) | Bhanu Oil Ltd | Dr. | 6,30,000 | ||
| To Share Capital A/c | 6,30,000 | ||||
| (6,300 shares issued at par to Bhanu Ltd.) |
Case (b)
| Date | Particulars | L.F. | DebitAmount(₹) | CreditAmount(₹) | |
| Sundry Assets A/c | Dr. | 6,30,000 | |||
| To Bhanu Oil Ltd | 6,30,000 | ||||
| (Assets purchased from Bhanu Oil Ltd.) | |||||
| Bhanu Oil Ltd | Dr. | 6,30,000 | |||
| To Share Capital A/c | 5,25,000 | ||||
| To Securities Premium A/c | 1,05,000 | ||||
| (5,250 share are issued at 20% premium to Bhanu Ltd. in consideration of assets purchased) |
Q20. 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 share of the face value of ₹ 100 each fully paid at an issue price of ₹ 90 each.
Give journal entries to record the above transaction.
Book of Bansal Heavy Machine Ltd
| Date | Particulars | L.F. | DebitAmount₹ | CreditAmount₹ | |
| Machinery A/c | Dr. | 3,20,000 | |||
| To Cash A/c | 50,000 | ||||
| To Handa Traders | 2,70,000 | ||||
| (Machine purchased from Handa Traders paid ₹ 50,000 incash immediately) | |||||
| Handa Trader | Dr. | 2,79,000 | |||
| Discount on Issue of Shares A/c | Dr. | 30,000 | |||
| To Share Capital A/c | 3,00,000 | ||||
| (3,000 share issued at ₹ 90 face value of ₹ 100 each toHanda Traders in consideration of amount due to him formachinery purchased) |
Working Notes:-
1. Number of share issued
Q21. 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 shares of Anubha and Kumkum.
Give journal entries.
Books of Naman Ltd
| Date | Particulars | L.F. | DebitAmount₹ | CreditAmount₹ | |
| Bank A/c | Dr. | 5,00,000 | |||
| To Share Application A/c | 5,00,000 | ||||
| (Shares Application money received for 20,000 shares @ ₹ 25 each) | |||||
| Share Application A/c | Dr. | 5,00,000 | |||
| To Share Capital | 5,00,000 | ||||
| (Share Application money of 20,000 shares @ ₹ 25 eachtransferred to Share Capital Account) | |||||
| Share Allotment A/c | Dr. | 6,00,000 | |||
| To Share Capital A/c | 6,00,000 | ||||
| (Share Allotment due on 20,000 shares @ ₹ 30 each) | |||||
| Bank A/c | Dr. | 5,94,000 | |||
| To Share Allotment A/c | 5,94,000 | ||||
| (Allotment money received for 19,800 shares @ ₹ 30 per share) | |||||
| Share First Call A/c | Dr. | 5,00,000 | |||
| To Share Capital A/c | 5,00,000 | ||||
| (Share First Call money due on 20,000 @ ₹ 25 per share) | |||||
| Bank A/c | Dr. | 4,92,500 | |||
| To Share First Call A/c | 4,92,500 | ||||
| (Share First Call received @ ₹ 25 per share for 19,700 shares) | |||||
| Share Final Call A/c | Dr. | 4,00,000 | |||
| To Share Capital A/c | 4,00,000 | ||||
| (Share Final Call money due on 20,000 shares @ 20 per share) | |||||
| Bank A/c | Dr. | 3,94,000 | |||
| To Share final call A/c | 3,94,000 | ||||
| (Share Final Call received @ ₹ 20 per Share for 19,700shares and 300 shares failed to pay the call) | |||||
| Share Capital A/c | Dr. | 30,000 | |||
| To Share Forfeiture A/c (200×25+100×55) | 10,500 | ||||
| To Share Allotment (200×30) | 6,000 | ||||
| To Share First Call A/c (300×25) | 7,500 | ||||
| To Share Final Call A/c (300×20) | 6,000 | ||||
| (300 Shares forfeited) |
It can also be solved by debiting Calls in Arrears Account
Books of Naman Ltd
| Date | Particulars | L.F. | DebitAmount₹ | CreditAmount₹ | |
| Bank A/c | Dr. | 5,00,000 | |||
| To Share Application A/c | 5,00,000 | ||||
| (Share Application money received on application for 20,000 shares @ ₹ 25 per share) | |||||
| Share Application A/c | Dr. | 5,00,000 | |||
| To Share Capital A/c | 5,00,000 | ||||
| (Share Application money for 20,000 shares @ ₹ 25 per sharetransferred to Share Capital Account) | |||||
| Share Allotment A/c | Dr. | 6,00,000 | |||
| To Share Capital A/c | 6,00,000 | ||||
| (Share Allotment money due on 20,000 shares @ ₹ 30 per share) | |||||
| Bank A/c | Dr. | 5,94,000 | |||
| Calls in Arrears A/c | Dr. | 6,000 | |||
| To Share Allotment A/c | 6,00,000 | ||||
| (Allotment money received for 19,800 shares @ ₹ 30 pershare and 200 shares failed to pay the Allotment) | |||||
| Share First Call A/c | Dr. | 5,00,000 | |||
| To Share Capital A/c | 5,00,000 | ||||
| (Share First Call money due on 20,000 shares @ ₹ 25 per share) | |||||
| Bank A/c | Dr. | 4,92,500 | |||
| Calls in Arrears A/c | Dr. | 7,500 | |||
| To Share First Call A/c | 5,00,000 | ||||
| (Share First Call money for 19,700 shares @ ₹ 25each received except 300 shares) | |||||
| Share Final Call A/c | Dr. | 4,00,000 | |||
| To Share Capital A/c | 4,00,000 | ||||
| (Share Final Call money due on 20,000 shares @ ₹ 20 per share) | |||||
| Bank A/c | Dr. | 3,94,000 | |||
| Calls in Arreras A/c | Dr. | 6,000 | |||
| To Share final call A/c | 4,00,000 | ||||
| (Share Final Call money received for 19,700 shares @ ₹ 20 per shareexcept 300 shares) | |||||
| Share Capital A/c | Dr. | 30,000 | |||
| To Share Forfeiture A/c (200×25+100×55) | 10,500 | ||||
| To Calls in Arrears A/c | 19,500 | ||||
| (300 Shares forfeited on account failed to pay the money due) |
Working Note:
1. Forfeited Amount
| Amount on application | (300 shares @ ₹ 25 each) | = | 7,500 |
| Amount on allotment | (100 Shares @ ₹ 30 each) | = | 3,000 |
| 10,500 |
22. Kishna Ltd issued 15,000 shares of ₹ 100 each at a premium of ₹ 10 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 and 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.
Books of Krishna Ltd
| Date | Particulars | L.F | DebitAmount₹ | CreditAmount₹ | |
| Bank A/c | Dr. | 4,50,000 | |||
| To Share Application A/c | 4,50,000 | ||||
| (Share Application money received for 15,000 shares @ ₹ 30 per share) | |||||
| Share Application A/c | Dr. | 4,50,000 | |||
| To Share Capital A/c | 4,50,000 | ||||
| (Share Application money of 15,000 shares transferred to ShareCapital Account) | |||||
| Share Allotment A/c | Dr. | 7,50,000 | |||
| To Share Capital A/c | 6,00,000 | ||||
| To Securities Premium A/c | 1,50,000 | ||||
| (Share Allotment money on 15,000 shares @ ₹ 50 per shareincluding ₹ 10 securities premium due) | |||||
| Bank A/c | Dr. | 7,42,500 | |||
| To Share Allotment A/c | 7,42,500 | ||||
| (Share Allotment received on 14,850 shares and 150 sharesfailed to pay the money due) | |||||
| Share First and Final Call A/c | Dr. | 4,50,000 | |||
| To Share Capital A/c | 4,50,000 | ||||
| (Share First and Final Call for 15,000 shares @ ₹ 30 per share due) | |||||
| Bank A/c | Dr. | 4,45,500 | |||
| To Share First and Final Call A/c | 4,45,500 | ||||
| (Share First and Final Call received for 14,850 shares @ ₹ 30 per share and 150 shares failed to pay amount due) | |||||
| Share Capital A/c (150×100) | Dr. | 15,000 | |||
| Share Premium A/c (150×10) | Dr. | 1,500 | |||
| To Share Allotment A/c (150×50) | 7,500 | ||||
| To Share First and Final Call A/c (150×30) | 4,500 | ||||
| To Share Forfeiture A/c (150×30) | 4,500 | ||||
| (150 shares forfeited for non-payment of Share Allotment and ShareFirst and Final Call ) | |||||
| Bank A/c | Dr. | 18,000 | |||
| To Share Capital A/c | 15,000 | ||||
| To Securities Premium A/c | 3,000 | ||||
| (150 shares of ₹ 100 each reissued @ ₹ 120 to Neha) | |||||
| Share Forfeiture A/c | Dr. | 4,500 | |||
| To Capital Reserve A/c | 4,500 | ||||
| (Balance of Share Forfeiture Account transferred to Capital ReserveAccount) |
Note: In the solution, the reissued price of ₹ 12 has been assumed as ₹ 120 per share.
FAQ:
When the shareholder pays the whole amount before the share payment date becomes due i.e. before the share issuing company makes a call for it. It is known as Calls-in-advance.
A shareholder has to pay allotment money for holding the shares and has to pay the calls which are part of share allotment. When a shareholder fails to do so, a 14 days’ notice is served to the shareholder, if the shareholder does not pay in these 14 days, the shares will be forfeited.
When an investor (shareholder) fails to pay all the instalments for the allotted shares in the due time, the company expects the investor to pay the amount on subsequent calls or stages. The amount of money that is paid at later stages is called as Call-in-Arrears.
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