Question

Subhash Company Limited issues 2000 Equity shares of ₹ 100 each payable as ₹ 30 on application, ₹ 30 on the allotment, ₹ 40 on first and final call.

All the shares were subscribed and duly allotted. The company made all the calls. All cash was duly received except the first and final call on 100 equity shares. These shares were forfeited by the company and were reissued as fully paid for ₹ 75 per share.

Show the Journal Entries in the books of Subhash Company Ltd.

Answer 1

Journal Entries in the books of Subhash Company Limited

Working Notes:

1. Amount forfeited by the company on 100 shares forfeited = 100 × (30 + 30)

= 100 × 60

= ₹ 6,000

2. Calls-in-Arrears = 100 × 40 = ₹ 4,000.

3. Amount received on re-issue of 100 forfeited shares = 100 × 75 = ₹ 7,500. Balance of ₹ 2,500 (i.e. loss 25 × 100) is transferred to Share Forfeiture A/c.

4. Amount transfer from Share Forfeiture A/c to Capital Reserve is ascertained by preparing Share Forfeiture A/c.