REMEDIAL MATERIAL FOR SLOW LEARNER
Q 1Ruby ltd.issued 30000 equity share of Rs 10 each at a premium of Rs 3 per share
Payable as Rs. 3 on app. Rs. 6 on allotment including premium’s. 2on first call
And Rs, 2 on second call. Application received 40000 share.4000 application rejected and
balance were subscribed on pro-rata basis.Mr A holder of 600 share, failed to pay allotment and
subsequent failure to pay first call, his share were forfeited..Mr B holder of 400 share failed to
pay two calls. His share were forfeited. Later on. 800 share(including A all share), were re –
issued To Mr.C, as fully paid at Rs 11 per share. Pass necessary entries.
ANS
Capital reserves 3360, Amount not received on allotment 3240,
2. Babba Company purchased a machine from Gabba ltd for Rs.400000 at 10% trade
Discount. Half amount paid by bank and the remaining amount by share of RS.10 each
At 10% discount. Record above transaction.
ANS a) Dr. Machine a/c & Cr.Baba by 360000
b) Dr.Baba a/c & Cr.Bank 180000
c) Dr.Baba a/c and discount on share a/c by 18000, 20000
And Cr.equity share capital by 200000
3. Pass necessary entries
I Convert 100, 12% deb.of Rs.100 each into 10% Preference share of Rs.100 each at
25%
Premium.
II Redeemed Rs.100000, 12% deb. At a premium of 10% by draw a lots.
ANS a) Dr.12% Deb a/c by 10000 and Cr.10% Pref share & share premium By 8000
and 2000
b) Dr.12% Deb and Premium on red. Of deb by 100000 and 10000 & Cr.Bank by
110000
.4 Poonam company Ltd. Issued 10000 equity share at Rs.100 each on 10% Premium.
Amount called as Rs.20 on application, RS.40 on allotment (including premium), and
Balance on call,
Application was received for 20500 shares. Director rejects 500 shares and allots other
Application on pro-rata basis. All money received except call on 50 shares which was
later on forfeited .After due notice forfeited share re-issued at Rs 90.Pass necessary
entries.
6
ANS Amount Recd on application 410000
Amount Recd on allotment 200000
Amount Recd on call 497500
Amount in capital reserve 2000
5.
A. Ltd. Invited application from public for issue of 2,00,000 equity shares of
Rs.10 each, payable on application Rs. 3, on allotment Rs.5 and Rs. 2 on first & final call.
Company received applications for 3, 00,000 shares and decided to allot the share on pro-
rata basis. Excess of application amounts to be utilized towards allotment and calls. B,
who was allotted 2,000 shares failed to pay allotment and his shares were forfeited after
Working :
ANS a. Excess application amount
(3,00,000 -2,00,000)x 3=3,00,000
b. Calls in arrear:
on allotment 7,000 & 1st call 4,000
Forfeiture amount 3,000x3=9,000
6 Ankit Ltd. Company purchased a machine worth Rs. 1,05,000 from M/s India
Traders. Payment was made by issue of equity share of Rs. 10 fully paid at
issue price of Rs. 10.50 each. Pass journal entries in the books’ of the company.
ANS
No. of shares to be issued = 1,05,000/10.50=10,000
Share premium 10,000 x .50 =5,000
a. Machinery a/c
- Dr. 1,05,000
To M/s India Trader a/c
1,05,000
b. M/s India trader a/c -Dr. 1,05,000
To Sh. Cap. a/c
1,00,000
To Sh. Prem. a/c
5,000
7
M/s M. Ltd. Purchased Machinery for Rs. 3,30,000 from M/s N.Ltd. Payment
was
made by issue of 9% debenture of Rs. 100. Pass journal entries for purchase of
machinery and issue of debenture whena.
Debentures are issued at par
b.
Debentures are issued at premium of 10%
c.
ANS
No. of debenture when issued at par 3,300
No. of debenture when issued at premium 3,000
Machinery a/c
-Dr.3,30,000
To M/s N. Ltd.
3,30,000
N. Ltd.
–Dr. 3,30,000
To 9% Debenture a/c
3,30,000
b. N. Ltd.
–Dr. 3,30,000
To 9% Debenture a/c
3,00,000
To Debenture premium a/c
30,000
8. Pass journal entries for issue of debentures in the books of M/s
Gupta Ltd.:a.
Issued 10,000, 12% debentures of Rs. 100 each at discount of 6%
repayable at premium of 6%.
b.
Issued 15,000 10% debentures of Rs. 100 at premium of 20%
Repayable at par.
. Pass journal entries in the books of the company.
ANS
a. Bank a/c
- Dr 9,40,000
Loss on issue of deb. –Dr 1,20,000
To 12% Deb. a/c
10,00,000
To Prem. on red. of deb. a/c
60,000
b. Bank a/c
- Dr 18,00,000
To 12% Deb. a/c
15,00,000
.9
Lakshmi Ltd., issued a prospectus inviting applications for 30,000
shares of Rs.10 each payable as under.
On application Rs.3
On allotment
Rs.2
On first call
Rs.2
On final call
Rs.3
Applications were received for 40,000 shares, and pro-rata allotment
was made on application for 34,000 shares. Excess money paid on
application was utilized towards allotment money. Mr. Rao whom 500
shares were allotted failed to pay the allotment money and on his
subsequent failure to pay the first call money, his shares were forfeited
ANS 1. Bank A/c
-Dr.
1,20,000
To Share Application A/c
1,20,000
2. Share application A/c -Dr.
90,000
To Sh. Cap. A/c
90,000
. 3. Share Application a/c
18,000
To Bank a/c
18,000
4. Sh. Allot. A/c
-Dr.
60,000
To Sh.Cap. A/c
60,000
5. Bank A/C
- Dr.
47,000
S.Appl.a/c
Dr
12,000
Calls in arrear A/c
- Dr.
1,000
To Sh. Allot A/c
60,000
6. Sh. 1st Call A/c
-Dr.
60,000
To Sh. Cap. A/C
60,000
7. Bank A/C
- Dr.
59,000
Calls in arrear A/C
- Dr .
1,000
To Sh 1st call A/C
60,000
8. Sh. Cap. A/c
-Dr.
3,500
To Sh. Forfeiture A/c
1,701
To S. Allot. A/c
799
To S. first call a/c
1,000
9. Sh. Final Call A/c -Dr.
88,500
To Sh. Cap. A/
88,500
10. Bank A/C
- Dr.
88,500
To Sh 1st call A/C
88,500
10. Swapna Ltd., issued 2,00,000 equity shares of Rs.10 each at a discount
of 10%. On these shares, payments are to be made as follows.
Rs.3 on application, Rs.2 on allotment and Rs.5 on first and final call.
Balu who is allotted 6,000 shares has not paid the first and final call.
Hence his shares have been forfeited and shave been reissued at a
discount of 5%. Pass necessary journal entries for forfeiture and re-issue only
in company books
ANS
1. S. Cap. a/c Dr. 60,000 (6000X10)
To Share forfeited a/
To Discount of issue of shares a/c
To S. First and final call A/c
2. Bank a/c Dr.
57,000
Disc.on issue of shares a/c 3,000
To S.Cap. a/c
3. Share forfeited a/c Dr
27,000
To Capital Reserve a/c
24,000
6,000
30,000
60,000
27,000
.
11
DIFFERENCE BETWEEN SHARE & DEBENTURE
DEBENTURE
SHARE
A debenture holder is creditor of co.
A debenture holder gets interest.
A shareholder is joint owner of
co.
.
A shareholder gets dividend.
A debenture holder gets interest
the co. gets profit or loss
A shareholder gets profit when co.
gets profit. Only.
The rate of interest is fixed for all
the time
The rate of dividend change every
year
Debenture holder had no voting
Right
Shareholder have voting right.
Debenture may be converted into
Share.
All debentures are secured in India.
Share are never convertible.
Shareholders do not have any
Security
On winding up the debenture
Paid before shareholder
12
On winding up the shareholder paid
after Debenture
A ltd X ltd convert 200 12% debenture of rs. 100 each issued at 10% discount
into convert 1000 12% debentureof Rs. 100 each issued at 5% discount into
equity shareof Rs. 10 each at par before maturity period.
ANS
(1) BANK A/C DR. 95000
DISCOUNT A/C DR. 5000
TO 12% DEBENTURE 100000
(2) 12% DEBENTURE A/C DR. 95000
TO EQUITY SHARE.
95000
13
(BEING 9500 SHARE ISSUED TO DEBENTURE HODER)
Ltd. forfeited 300 shares of Rs. 10 each fully called up held by Ramesh for
non-payment of allotment money of Rs. 3 per share and final call money of Rs.
4 per share. Out of these 250 shares were reissued to Rishi for a total payment
of Rs.2, 000. Pass necessary journal entries.
Journal
Date
Particular
Shares capital A/c (300 x Rs. 10)
To share forfeited A/c (300 x 3)
To share allotment A/c (300 x 3)
To share final call A/c (300 x 4)
( Being forfeiture of 300 share for nonpayment of
allotment and final call money)
Bank A/c
Share forfeited A/c
To share capital A/c
( being re issue of 250 forfeited shares for Rs 8
per share fully paid)
Share forfeited A/c
To capital reserve A/c
(Being profit on re issue of 250 shares transferred
to capital reserve)
L.
F.
Debit
Rs.
3,000
Credit
Rs.
900
900
1,200
2,000
500
2,500
250
250
Note:
Total amount forfeited on 300 shares @ Rs. 3 per share = Rs. 900
Amount forfeited on 250 shares re issued @ Rs 3 per share = Rs 750
Less: Discount allowed on reissue of forfeited shares
=
500 Profit on
reissue of forfeited shares transfer to capital reserve = 250
14. How will you show share capital in the balance sheet?
Ans:
SCHEDULE VI PART I
FORM OF BALANCE SHEET
(Disclosure of Share capital only)
Liabilities
(1)
Share Capital
Authorized Capital
Issued Capital
Subscribed Capital
***
Less: Calls Unpaid
***
Add: Forfeited Shares
***
(2)
Reserves and Surplus
Amount
***
***
***
A. Capital Reserve
B. capital redemption reserve
C. Securities Premium
D. Other reserve
Less: Debit balance in P&L A/C(if any)
E. Surplus
F. Sinking fund
Example:
A company was formed with an authorized capital of
Rs.20,00,000 divided into 20,000 shares of Rs.100 each. It issued
to the public 15,000 shares, payable as Rs.30 on application,
Rs.30 on allotment and the balance on first and final call.
Applications were received for Rs.12,000 shares. The amount of
allotment was duly received except from Mahesh, who held 1,000
shares did not pay allotment. The company did not make call.
How will you show share capital in the Balance Sheet?
Solution:
BALANCE SHEET OF A COMPANY
(As On…………..)
Liabilities
Share Capital
Authorized :
20,000 shares of
Rs.100 each
Issued :
15,000 shares of
Rs.100 each
Subscribed:
12,000 shares of
Rs.100, each Rs. 60
per shares
call up
7,20,000
Less:
30,000
Total
Amount
Assets
Current Assets
Cash at Bank
Amount
Total
6,90,000
6,90,000
20,00,000
15,00,000
6,90,000
6,90,000
15. Bharath Tyres Ltd. Invited application for 1,00,000 shares of
Rs. 10 each issued at a premium of Rs. 4 per share. The amount
was payable as under :
On Application
Rs. 6 ( including premium Rs. 2)
On Allotment
Rs. 6 ( including premium Rs. 2)
Balance on first and final call.
Application for 1,50,000 shares were received. Allotment was
made to all applicants on pro-rata basis.
Subodh, to whom 200 shares were allotted, failed to pay
allotment money. Vikram, to whom 100 shares were allotted,
failed to pay the call money. Their shares were forfeited and
afterwards reissued @ Rs. 8 per share fully paid up.
Pass necessary Journal entries.
Solution :
Journal
Date
Particulars
L.F.
Debit
I Bank A/c
9,00,000
Share Application A/c
(Being application received for 1,50,000
shares of Rs. 6 including premium Rs. 6)
II Share Application A/c
9,00,000
To Share Capital A/c
To Securities Premium A/c
To Share Allotment A/c
(Being adjustment of share application
money)
III Share Allotment A/c
6,00,000
To Share Capital A/c
To Securities Premium A/c
(Being allotment money due on 1,00,000
shares)
IV Bank A/c
2,99,400
To Share Allotment A/c
(Being allotment money received on
Credit
9,00,000
4,00,000
2,00,000
3,00,000
4,00,000
2,00,000
2,99,400
99,800)
V Share First and Final call A/c
To Share Capital A/c
(Being the first and final call money due
on 1,00,000 shares)
VI Bank A/c
To Share First and Final call A/c
(Being first and final call money
received on 99,700 share of Rs. 2 per
share)
VII Share Capital A/c
Securities Premium A/c
To Share Forfeiture A/c
To Share Allotment A/c
To Share First and Final Call A/c
(Being 200 share forfeited for nonpayment of allotment and first call)
VIII Share Capital A/c
To Share Forfeited A/c
To Share First and Final Call A/c
(Being 100 share forfeited for the nonpayment of call money)
IX Bank A/c
Share Forfeited A/c
To Share Capital A/c
(Being the re-issue of 300 shares @ Rs. 8
per share, fully paid)
X Forfeited Share A/c
To Capita Reserve A/c
(Being the transfer of profit on re-issue
of shares to capital reserve A/c)
2,00,000
2,00,000
1,99,400
1,99,400
2,000
400
1,400
600
400
1,000
800
200
2,400
600
3,000
1,600
1,600
16. K ltd has been registered with an authorized capital of
Rs. 2,00,000 divided into 2,000 shares of Rs. 100 each of which
1,000 shares were offered for public subscription at a premium of
Rs. 5 per share payable as under :
Rs.
On Application
10
On Allotment
25 ( including premium)
On First Call
40
On Final Call
30
Application were received for 1,800 shares of which
applications for 300 shares were rejected outright, the rest of the
applications were allotted 1,000 shares on pro-rata basis. Excess
application money was transferred to allotment.
All the money were duly received except from Sunder, holder
of 100 shares, who failed to pay allotment and first call money.
His shares were later on forfeited, and reissued to Shyam at Rs.
60 per share, Rs. 70 paid up final call has not been made.
Pass necessary journal entries in the books of K ltd.
Solution :
Journal
Date
Particulars
I Bank A/c
To Share Application A/c
(Being application money on 1,800
shares @ Rs. 10 each received)
II
Share Application A/c
To Share Capital A/c
To Bank A/c
To Share Allotment A/c
(Being share application money
transferred to share capital A/c on
1,000 shares @ 10 each on the pro-
L.F.
Debit
18,000
Credit
18,000
18,000
10,000
3,000
5,000
rata basis)
III
Share Allotment A/c
To Share Capital A/c
To Securities Premium A/c
(Being share allotment made due
with premium)
IV
Bank A/c
To Share Allotment A/c
(Being share allotment money
received with exception of Rs. 2,000)
V
Share First Call A/c
To Share Capital A/c
(Being share first call money made
due)
VI
Bank A/c
Calls-in-Arrears A/c
To Share First Call A/c
(Being share first call money
received)
VII Share Capital A/c (70 × 100)
Securities Premium A/c (5 × 100)
To Share Forfeited A/c
To Share Call-in-Arrears
(Being 100 share forfeited for the
non-payment of allotment and share
first call)
VIII Bank A/c
Share Forfeited A/c
To Share Capital A/c
(Being reissue of forfeited shares @
Rs. 60 per share, Rs. 70 Paid up)
IX
Share Forfeited A/c
To Capital Reserve A/c
(Being transfer of share forfeited
A/c to capital reserve A/c)
25,000
20,000
5,000
18,000
18,000
40,000
40,000
36,000
4,000
40,000
7,000
500
1,500
6,000
6,000
1,000
7,000
500
500
Working Note :
(i) Calculation of amount received on allotment :
Total amount due on allotment (1,000 × 25)
25,000
Less: Allotment money received in advance
(5,000)
Less: Amount of allotment not received from Sunder (2,000)
Amount received on allotment
18,000
(ii) Shares Applied by Sunder = 1,500/1,000 × 100 = 150
(iii) Money paid by Sunder on application (150 × 10)
1,500
Money utilized as application money (100 × 10)
1,000
Surplus money transferred to allotment
500
(iv) Allotment money due from Sunder (100 × 25)
2,500
Less : Allotment money received in advance from
Sunder
500
Amount of allotment not received form Sunder
2,000
(iv) While forfeiting shares, Share Capital Account will be
debited @ Rs. 70 per share because the final call has been
made.
17 .X Ltd. Issued 2,00,000 10% debentures of Rs 100 each at par to be
redeemed at par after 12 years. Debentures are callable after four
years at an exercise price of Rs 104. After six years company invoked
the call option and holders of 10.000 debentures responded to the call
option. Record necessary entries at the time of issue of debentures and
at the time of cancellation of debentures.
Journal
Date
Particular
On issue of debentures
Bank A/c
To 10% Debentures application
A/c
(money received on application)
10% Debenture application A/c
To 10% debenture A/c
( debenture application money
transferred to 10% debentures
account on allotment)
At the time of cancellation of
debentures
10% debentures A/c
Loss on redemption A/c
To Bank A/c
(debenture redeemed under
transferred call option at Rs. 104)
Profit & Loss A/c
To Loss on Redemption A/c
(Loss on redemption of debentures
transferred to profit and Loss A/c)
l. Debit
f Rs
Credit
Rs
2,00,00,000
2,00,00,000
2,00,00,000
2,00,00,000
10,00,000
40,000
10,40,000
40,000
40,000
18
X Ltd., issued 2, 00,000 10% Debentures of Rs.100 each at par to be redeemed
at par after12 years. Debentures are callable after four years at an exercise price of
Rs.104. After six years company invoked the call option and holders of
10,000debentures responded to the call option. Record necessary entries at the time
of issue of debentures and at the time of cancellation of debentures.
Solution:
Date
Particular
l. Debit
f Rs
Credit
Rs
On issue of debentures
Bank A/c
To 10% Debentures application
A/c
(money received on application)
10% Debenture application A/c
To 10% debenture A/c
( debenture application money
transferred to 10% debentures
account on allotment)
At the time of cancellation of
debentures
10% debentures A/c
Loss on redemption A/c
To Bank A/c
(debenture redeemed under
transferred call option at Rs. 104)
Profit & Loss A/c
To Loss on Redemption A/c
(Loss on redemption of debentures
transferred to profit and Loss A/c)
2,00,00,000
2,00,00,000
2,00,00,000
2,00,00,000
10,00,000
40,000
10,40,000
40,000
40,000
19 . Pass journal entries in the books of a limited company in connection with
the issue and redemption of debentures with reference to the following
transactions:
1. 10% Debentures of Rs 5, 00,000 issued at par and redeemable at par.
2. 10% Debentures of Rs 5, 00,000 issued at a premium of 5% but
redeemable at par.
3. 10% Debentures of Rs 5, 00,000 issued at a discount of 5 per cent but
redeemable at par.
4. 10% Debentures of Rs 5, 00,000 issued at par but redeemable at a
premium of 5 percent.
5. 10% Debentures of Rs 5, 00,000 issued a discount of 5% and redeemable
at 5 per cent premium.
Date Particular
1.
(a) On issue
(i) Bank A/c
To 10% Debentures
Application & allotment A/c
l.f
Debit
Rs
Credit
Rs
5,00,000
5,00,000
(Amount received on issue)
(ii)10% Debentures Application
& allotment A/c
To 10% debentures A/c
5,00,000
5,00,000
(Allotment of debentures)
(b) On redemption
(i) 10% Debentures A/c
To debentures holders A/c
5,00,000
5,00,000
(amount due to debenture holders on
redemption)
(ii) Debentures A/c
To bank A/c
5,00,000
5,00,000
(Final payment made to debenture
holders)
2.
(a) On issue
(i) Bank A/c
To 10% Debentures
Application A/c
5,25,000
5,25,000
(amount received on issue)
(ii)10 % Debenture Application &
allotment A/c
To 10% debenture A/c
To Debe3nture holders A/c
5,25,000
5,00,000
25,000
(allotment on debentures and premium
in issue brought into account)
(b) On redemption
(i) 10% Debentures A/c
To debentures holders A/c
5,00,000
5,00,000
(amount due to debenture holders on
redemption)
(ii) Debenture holders A/c
To Bank A/c
(final payment made to debentures
holders)
5,25,000
5,25,000
3.
(a) On issue
(i) Bank A/c
To 10% debentures
Application & allotment A/c
4,75,000
4,75,000
(Amount received on issue)
(ii) 10% Debentures application
& Allotment A/c
Discount on issue of debentures
A/c
To 10% Debenture A/c
4,75,000
25,000
5,00,000
(allotment of debentures and discount
on issue brought into account )
(b) On redemption
(i) 10% Debentures A/c
To debenture holders A/c
5,00,000
5,00,000
(amount due to debentures holders on
redemption )
(ii) debenture holders A/c
To bank A/c
5,00,000
5,00,000
(final payment made to debenture
holders)
4.
(a) On issue
(i) Bank A/c
To 10% debentures
Application & allotment A/c
5,00,000
5,00,000
(Amount received on issue)
(ii) 10% debentures Application
& allotment A/c
Loss on issue of debentures
A/c
To 10% debentures A/c
To premium of
redemption of debentures A/c
5,00,000
25,000
5,00,000
25,000
(allotment of debentures and premium
on redemption brought into account)
(b)On redemption
(i) 10% debentures A/c
premium on redemption of
debenture A/c
To debenture holders
A/c
5,00,000
25,000
5,25,000
(amount due to debenture holders on
redemption including premium )
(ii) Debenture holders A/c
To bank A/c
5,25,000
5,25,000
(final payment made to debentures)
5.
(a) On issue
(i) Bank A/c
To 10%bentures
application & allotment A/c
4,75,000
4,75,000
(amount received in issue)
(ii) 10% debentures Application
& allotment A/c
Loss on issue of debentures
A/c
To 10 debenture A/c
To premium or
redemption of debenture A/c
4,75,000
50,000
5,00,000
25,000
(allotment of debentures and discount
on issue and premium on redemption
brought into account as loss on issue)
(b) On redemption
(i) 10% debentures A/c
Premium on redemption of
debenture A/c
To debenture holders A/c
5,00,000
25,000
5,25,000
(amount due to debenture holders on
redemption including premium)
(ii) Debentureholders A/c
To bank A/c
5,25,000
5,25,000
(final payment made to debenture
holders)
*************************************************************