Chapter 8 • Company

Accounts—Accounting for Share Capital 8.31

entries for issue of shares under
TassJournal each of the following cases:
(d) Allotted 1,00,000shares in full to selected applicants and
the applications for the remaining
3,00,000shares were rejected.
(b) prorata allotment of 25 per cent of the shares applied to
of applicationmoney towards amount due on every applicant; to apply the balance
allotment;and to refund the balance amount.
(c) Rejectapplications for 2,00,000shares, accept full applications
a prorata allotment of 20,000shares to remaining for 80,000shares and make
applicants. Excess application money to
be adjusted towards allotment and calls.
solution: (a) JOURNAL OF CRYSTA HOSPITALITY
LTD.
Particulars
ate L.F.
020 Bank A/c
1
an. To Equity Shares Application A/c
(Application money received for shares @ 10 per share)
1 Equity Shares Application A/c
eb To Equity Share Capital A/c 10)
To BankA/c 10)
(Applicationmoney adjusted and surplus refunded)
1 Equity Shares Allotment A/c
To Equity Share Capital A/c
(Allotmentmoney due on shares @ 15 per share)
Bank A/c
To Equity Shares Allotment A/c
(Allotment money received)
1 Equity Shares First Call A/c
April
To Equity Share Capital A/c
(First call money due on shares @ 15 per share)
Bank A/c
To Equity Shares First Call A/c
(First call money received)
1 Equity Shares Second and Final Call A/c
June
To Equity Share Capital A/c
(Second and final call money due on shares @ 10 per share)
Bank A/c ...Dr.
To Equity Shares Second and Final Call A/c
(Secondand final call money received)

(b) JOURNAL OF CRYSTA HOSPITALITY LTD.

Date Particulars L.F.

2020
Jan. 1 Bank A/c
To Equity Shares Application A/c
(Applicationmoney received for shares @ 10 per share)
Feb. I Equity Shares Application A/c
To Equity Share Capital A/c x 10)
To Equity Shares Allotment A/c x 15)
To BankA/c (t -
(Applicationand allotment money adjusted and surplus refunded)
Feb 1 EquityShares Allotment A/c
To Equity Share Capital A/c
(Allotmentmoney due on shares @ 15 per share)
Note:The entries regarding the two calls would be the same as given in case (a).
8.32 Double Entry Book Keeping —CBSE
LTD.
JOURNAL OF CRYSTA HOSPITALITY

Date Particulars

2020
...Dr.
Jan. 1 Bank A/c
To Equity Shares Application A/c 40,00
shares @ 10 per share)
(Application money received on
...Dr.
Feb. 1 Equity Shares Application A/c
10)
To Equity Share Capital A/c
To Equity Shares Allotment A/c (20,000 x 15)
x 25)
To Calls-in-Advance A/c (20,000
To Bank A/c (WN)
surplus refunded)
(Application money adjusted and
...Dr.
Feb. 1 Equity Shares Allotment A/c
A/c
To Equity Share Capital
shares @ 15 per share)
(Allotment money due on
...Dr.
Bank A/c
A/c
To Equity Shares Allotment
(Allotment money received)
A/c
April 1 Equity Shares First Call
To Equity Share Capital A/c
shares @ 15 per share)
(First call money due on
...Dr.
Bank A/c
...Dr.
Calls-in-Advance A/c
To Equity Shares First Call A/c
received)
(Calls-in-Advanceadjusted and the balance first call money
A/c ...Dr.
June 1 Equity Shares Second and Final Call
To Equity Share Capital A/c
(final call money due on shares @ 10 per share)

Bank A/c ...Dr.

Calls-in-AdvanceA/c ...Dr.

To Equity Shares Second and Final Call A/c

(Calls-in-Advance adjusted and the balance second and final
call money received)

Working Note: Excess application money as a result of pro rata allotment is adequate to meet the allotment
money and two calls. Besides, it leaves amount to be refunded along with that on the rejected
applications.

Excess Application Money

x 10= - (1 x 10=
Less: Transfer to Equity Shares Allotment (20,000 x 15)
Transfer to Calls-in-Advance (20,000 x 25)
Total Amount Refunded
 Chapter 8 • Company Accounts—Accounting for Share Capital 8.33

14.
Vlostration
rovideemployment to the youth and to develop Baramula district of Jammu and Kashmir,
power Ltd. decided to set up a power plant. For raising funds the company decided
Jyoti
issue equityshares of 10 each at a premium of 3 per share. The whole amount
payable on application. Applications for 20,00,000shares were received. Applications
for shares were rejected and shares were allotted to the remaining applicants on
basis.
re rata
entries for the above transactions in the books of the company.
PassnecessaryJournal
(OD 2016, Modified)
In the Books of Jyoti Power Ltd.
solution:
JOURNAL
Particulars CF. Dr.(?) cr.(R)
ate
Bank A/c
To Equity Shares Application and Allotment A/c
(Applicationand allotment money received on shares of
10 each 13 per share)

Equity Shares Application and Allotment A/c

To EquityShareCapitalA/c x t 10)
To Securities Premium Reserve A/c x 3)
To 13)
(Application and allotment money adjusted for shares
and the balance refunded)

llustration 15 (Issue of Shares at Par, Oversubscription and Pro rata Allotment).

KirloskarLtd. issued 20,000 shares of 10 each, payable 4 on application, 3 on allotment
pnd 3 on first and final call. Applications were received for 25,000 shares. The company
'decidedto allot 20,000shares on pro rata basis and surplus of application money was adjusted
forallotmentmoney due.
passJournalentries if amounts due were received. Also, show share capital in the Balance
Sheetof the company.
Solution: JOURNAL OF KIRLOSKAR LTD.

ate Particulars cr. (t)

Bank A/c ...Dr.

To SharesApplication A/c
(Applicationmoney received on 25,000 shares @ 4 per share)

Shares Application A/c

To Share Capital A/c (20,000 x t 4) 80,000
To Shares Allotment A/c (5,000 x 4) 20,000
(Applicationmoney transferred to Share Capital Account on 20,000
sharesand excess money adjusted towards Shares Allotment)
8.34 Double Entry Book Keeping—CBSE Xll
...Dr. 60,000
Shares Allotment A/c
To Share Capital A/c 60
per share)
(Allotment money due on 20,000 shares @ 3
40,000
Bank A/c
To Shares Allotment A/c
40

(WN I)
(Amount received for allotment)
...Dr. 60,000
Shares First and Final Call A/c
To Share Capital A/c
60,
@ 3 per share)
and final call money due on 20,000 shares
(First
...Dr. 60,000
Bank A/c
Call A/c
To Shares First and Final
60,

final call)
(Amount received on first and
BALANCE SHEET OF KIRLOSKAR LTD.
as at ...
Note No.
Particulars

l. EQUITY AND LIABILITIES

Shareholders' Funds
Share Capital

Note to Accounts
1. Share Capital
Authorised Capital
Equity Shares oft 10 each
Issued Capital
20,000 Equity Shares oft 10 each
Subscribed Capital
Subscribed and fully paid-up
20,000 Equity Shares oft 10 each zoom

Working Notes:
1. Amount due for Allotment 60,000
Less: Excess Application Money Adjusted (WN 2) 20,000

Net Amount Received 40,000

2. ANALYSIS TABLE

Shares Issued Shares Applied Shares Allotted Shares Shares Excess Remarks
for Application Application Application
Money Received Money Due Money

20,000 25,000 20,000 25,000 x 4 20,000x 20,000 Excess adjusted

= 80,000 towards
Shares Allotment
 Chapter 8 • Company Accounts—Accounting for Share Capital 8.35

Alternative —Combination of above Two Alternatives

(iii) T]tird
the company can makefull allotment to someapplicants, partial allotment
case of oversubscription,
to and no allotmentto the rest. In such a situation, application money is refunded to the
successfulapplicants, surplus application money on partially allotted shares is retained to
due on allotment and future calls.
utilisedagainst amount
If the question is silent, the Surplus Application Money over and above that is due on allotment should be
Note:
refunded to the allottees.
(Shares Issued at Par, Oversubscribed—fullallotment to some applicants, partial
Illustration 16
others and no allotment to the rest).
allotmentto
av Ltd. was registered with an authorised capital of 1(),()0,()()() shares of
divided into 1,()0,0()0
Ragh
10 each. The company offered 60,000 shares to public on which amounts were payable
3 per share on application, 3 per share on allotment and the balance when required.
Åpp1icationsfor 92,000 shares were received on which the Directors allotted as follows:
Applicants for 40,000 shares Full,
Applicants for 50,000 shares 40%,
Applicants for 2,000 shares Nil.
application
84,000were received as allotment money (excluding the amount carried from
money).
Journal entries recording the above.
Showthe
In the Books of Raghav Ltd.
Solution: JOURNAL
Cr.(t)
Particulars
Date

Bank A/c (92,000 x 3)

To Shares Application A/c
(Application money received for 92,000 shares)

Shares Application A/c 130,000

To Share capital A/c (60,000 3)
36,000
To Bank A/c (2,000 xo + 10,000
60,000
To Shares Allotment A/c (20,000 x 3)
(Application money adjusted and surplus refunded)
1so,ooo
Shares Allotment A/c
To Share Capital A/c
share)
(Allotment money due on 60,000 shares @ 3 per
...Dr. 84,000
Bank A/c 84,000
To Shares Allotment A/c
12,000 shares)
(Amount received on allotment except on
WorkingNotes:
received on 50,000 shares @ 3 per share
I, Application money
shares allotted
Less: Application money due on 60,000
[20,000 shares (40% of 50,000) x 31 (30,000 x 3) 90,000
shares Applied but Allotted 20,000 shares
Excessapplication money on 50,000 60,000
on allotted 20,000 shares
Less: Amount receivable on allotment 30,000
Excessapplication money to be refunded
b.38 Double Entry Book Keeping—CBSE Xll

Example 4.
at par and company received applications
X Ltd. issued 50,000shares of 100 each f
application 30, on allotment 50
on
1,00,000shares, fie amount is payable as follows:
as under:
balance on call. The company made allotment SharesAllotted
Shares Applied
Category 30,000
30,000
20,000
50,000
(b) NIL
20,000
money.
allotted 1,500 shares failed to pay allotment
Mohan of Category (b) who was
money due but not paid by Mohan.
Calculate: (i) Allotment
received by the company on Allotment.
(ii) Amount
Solution: 50, 000 x 1,500 = 3,750 shares.
by Mohan =
Shares Applied
Step 1: Number of

of Allotment money due but not paid by Mohan:

(i) step 2: Calculation
Particulars
= 1,500 x 50)
Allotted x Allotment Money 75,oq
Amount due on Allotment (Shares 301
—1,500) x
Excess Application Money Adjusted on Allotment [(3,750
Less:
Allotment Money due but not paid

company on Allotment:
(ii) Calculation of Amount Received by the
Particulars

Total Amount due on Allotment (50,000 x 50)

Less: Excess Application Money Adjusted (30,000 x 30) 9,oom
16,00m

Less: Amount due but not Received on Allotment [as per

Amount Received on Allotment

Illustration 18.
MCS Ltd. issued 40,000shares of 10 each payable as 2 per share on application, 4 per shark
on allotment and the balance in two equal instalments.
Applications were received for 80,000 shares and the allotment was made as follows:
(a) Applicants of 50,000 shares were allotted 30,000 shares.
(b) Applicants of 30,000 shares were allotted 10,000 shares.
Neeraj, to whom 600 shares were allotted from Category (a), failed to pay the allotment money
Pass necessary Journal entries up to allotment only. (Delhi, C
Al2009
 Chapter 8 • Company Accounts—Accounting for Share Capital 8.37

Applicants
ries of
ion
shares applicat received by a is d into d categories.
etirnes, appropriate to prepare a statement showing details of shares application
h a case, it is
receis,edand its appropriations or adjustment towards share capital, shares allotment,
011 dvance and refund, if any, to applicants or shareholders.
statement can be as follows:
titlineof the
o
STATEMENTSHOWING DETAILS OF SHARES APPLICATION MONEY
Shares Application Disposal of Shares Application Money Received
Shares
ategories Allotted Money Received Share Shares Calls-in- Refund or
Applied
Capital Allotment Advance Bank

Money, on allotment, is transferred to Share Capital Account for the allotted

haresApplication
application money, if any, is adjusted as follows:
Thebalance
•shares.
•on money is refunded to applicants to whom no allotment is made.
Applicatl
is made, surplus of application money is adjusted towards 'shares
If partialallotment
allotmentmoney' or 'call money' due, if the question so requires. The balance, if any, is
the applicants.
refundedto
of Amount Due but not Received on Allotment in Case of Pro rata
alculation
the shares are allotted on pro rata basis and one or some of the shareholders of pro rata
en
category may not pay the allotment money, then it is necessary to compute the amount due
on allotment. We should take the following steps:
ut notreceived
Number of Shares Applied/Shares Allotted to defaulting shareholders:
Step1: Calculate
When Shares Allotted are Given When Shares Applied are Given

as: Calculate Number of Shares Allotted as:

Numberof Shares Applied
Calculate
Applied x No. of Shares Allotted Total Shares Allotted
TotalShares x No. of Shares Applied
Allotted Total Shares Applied
TotalShares
as follows:
Step2: Calculatethe Amount due but not paid by defaulting shareholders on Allotment

dueon Allotment (Shares Allotted x Allotment Money per share)

Amount
ExcessApplication Money Adjusted on Allotment
[(SharesApplied - Shares Allotted) x Application Money per share)
duebut not paid by defaulting Shareholders on Allotment
Amount
 Entry Book Keeping—CBSE Xll
8.36 Double
of Shares on which Allotment money not received:
2. calculation
Totalallotment money due
Less: Allotment money received on application stage (WN 1)

less: Allotment Amount Received Later

Allotmentmoney not received
Allotmentmoney not received on shares (t 36,000 + 3) = 12,000 shares.

Illustration 17.
on 1stApril, 2019,Prarthana Ltd. was formed with an authorised capital
of
into 90,000Equity Shares of 100 each. The company invited
applications for
80,000
On application 30 per share,
On allotment 40 per share,
On first and final call Balance amount.
Applications for shares were received. Applications for 20,000
shares were rejected
the application money was refunded. All calls were made. A shareholder
holding 600

Show 'Share Capital' in the Balance Sheet of the company as per Schedule
111,Part 1 of
(Al 2013 C,

Solution: BALANCE SHEET OF PRARTHANA LTD. (An Extract)

as at 31st March, 2020
Particulars
Note No.
1. EQUITY AND LIABILITIES
Shareholders' Funds
Share Capital

Note to Accounts
Particulars
1. Share Capital
Authorised Capital
90,000 Equity Shares of 00 each
Issued Capital
80,000 Equity Shares oft 100 each 80,00,
SubscribedCapital
Subscribed and Fully paid-up
79,400 Equity Shares of R 100 each
Subscribed but not fully paid-up
600 Equity Shares of 100 each 60,000
4
Less:Calls-in-Arrears (600 x 30) 18,000
7982/
 Chapter 8 • Company Accounts—Accounting for Share Capital 8.39

In the Books of MCS Ltd.

JOURNAL

Particulars L.F.
opte
Bank A/c
Application A/c
To Shares 160000
received on 80,000 shares)
(Applicationmoney
A/c
SharesApplication ...Dr.
A/c
To Share Capital 80,000
A/c
To Shares Allotment 80,000
(Applicationmoney adjusted)
A/c
Shares Allotment ...Dr.
To Share Capital A/c
(Allotmentmoney due on 40,000 shares @ 4 per share)

Bank A/c ...Dr. 78,400

To Shares Allotment A/c 78,400
(Allotmentmoney received except on 600 shares) (WN 2)

Notes:
Working
due but not paid by Neeraj on Allotment:
1. Amount
applied by Neeraj = 50,000/30,000 x 600 = 1,000.
(a) Numberof shares
money received from Neeraj = 1,000 2 2,000.
(b) Application
(c) Applicationmoney required as per shares allotted to Neeraj = 600 x 2 1,200.
(d) Surplusapplication money (R 2,000 — 1,200) to be adjusted on allotment = 800.
(e) Allotmentmoney due from Neeraj = 600 x < 4 = 2,400.
(f) Allotmentmoney due but not paid by Neeraj = 2,400 —æ800 = < 1,600.
Received on Allotment:
2. Amount
Totalamountdue to allotment
Less:Excessapplication money adjusted 80,000
80,000
Less:AllotmentMoneydue but not paid by Neeraj (WN 1) 1,600
AmountReceived on Allotment 78,400

Illustration19 (Comprehensive Illustration).

Acompany invited applications for 50,000Equity Shares of 10 each payable as follows:
Onapplication 3; on allotment 3; on first and final call 4.
Applications were received for 1,10,000shares. It was decided
(i) to refuseallotment to the applicants for 10,000shares,
(ii)to allot50%to X who has applied for 20,000shares,
(iii)to allotin full to Y who has applied for 10,000shares,
 Double Entry Book keeping—CBSE Xll

to allot balance of the available shares on pm rata basis among the other applicants
v) to utilise excess application money in part payment of allotment and final call.
amount due on allotment is received
Journal entries till the stage of allotment if total

JOURNAL
»oiution•.
)ate Particulars
Bank A/c
A/C
To Equity Shares Application shares)
3 per share on
(Application money received
3.30000
Alc
Equity Shares Application
To Equity Share
Capital Alc Isom
Allotment A/c
To Equity Shares
A/c
To Calls-in-Advance
30m,
To Bank A/c refunded) (WN)
money adjusted and surplus
(Application
A/c
Equity Shares Allotment
A/c 1son
To Equity Share Capital
@ 3 per share)
money due on 50,000 equity shares
(Allotment
30,000
Bank A/c
Allotment A/c 30m
To Equity Shares of Y who
on 10,000 equity shares
(Allotrnentmoneyreceived
was allotted in full)

Working Note: OF SHARES APPLICATION MONEY

STATEMENTSHOWINGDETAILS
Application Disposal of Shares Application Money Received
Categories Shares Shares
Money Share Shares Calls-in- Refund
Applied Allotted
Received Capital Allotment Advance

I (Rejected) 10000 NIL 30,000 30,Ø

XO)
(10,000
11x 20,000 10,000 60,000 30,000 30,000

(20,000 x 3) (10,000x 0)
10,000 10,000 30,000 30,000

XO)
(10,000 (10,000 3)
IV (Pro rata) 70,000 30,000 2,10000 90,000 90,000 30,000
(Bal. Fig.) (Bal. Fig.) (70,000 x 3) (30,000 3) (30,000 x 3)
- 90,000- 90,000)
Total 50,000 30,000
 Chapter 8 • Company Accounter—Accounting for Share Capital

IMPORTANT NOTE
rataa//otmentwhen shares are issued at a premium, excess application money received
Share Capital Amount left after adjustment to share capital, if any, is
adjusted towards
is towards t
djvsted
20 (Shares issued at Premium, Oversubscribed—Prorata Allotment to some and no
Rest).
to the
shares of 10 each at a premium of 2 per share payable as 3 on
Ltd.issued 60,000 premium) on
5 (including allotment and the balance on first and final call.
Ja%ication, received for 82,000 shares. The Directors resolved to allot as follows:
applicationswere
30,000 shares 20,000shares,
Applicants of
(a) 50,000 shares 40,000 shares,
Applicantsof
(b) 2,000 shares Nil.
Applicants of
(c)
whohad applied for 900 shares in Category (a) and Suresh, who was allotted
in Category (b) failed to pay the allotment money.
600shares (Delhi 2009)
amount received on allotment.
calculate
solution:
Amount Received on Allotment:
calculationof
on allotment (60,000 x 5)
Amountdue
application money adjusted towards allotment:
Excess
Less: + 30,000[Category 60,000
30,000[Category

unpaid by Ramesh (WN 1) 2,100

IBS.'Amount
2,550
Amount unpaid by Suresh (WN 2)
Less:
Allotment
AmountReceived on
Notes:
Working
Ramesh—Category (a):
I, Amountunpaid by
Sharesapplied= 30,000, Shares allotted = 20,000
Excessapplicationmoney received = 10,000 x 3 = 30,000
Sharesallottedto Ramesh = 20,000/30,000 x 900 = 600 shares
Therefore,shares applied = 900, Shares allotted = 600
Excessapplicationmoney received adjusted towards allotment = 300 x 3= 900
Amountdue on allotment = 600 x 5 = 3,000
Amountunpaid by Ramesh = 3,000 - 900 = 2,100.
2. Amountunpaid by Suresh—Categöry (b):
Sharesapplied= 50,000,Shares allotted = 40,000
Excessapplicationmoney received = 10,000 x 3 = 30,000
Sureshappliedfor shares = 50,000/40,000 x 600 = 750 shares
Therefore,
sharesapplied = 750, Shares allotted = 600
Excessapplicationmoney received adjusted towards allotment = 150 x 3= 450
Amountdue on allotment = 600 x 5 = 3,000
Amountunpaid by Suresh = 3,000 -- 450 = 2,550.
 Double Entry Book
Keeping—CBSE Xll

JNDERSUBSCÄIPTION OF SHARES
Shares are said to be undersubscribed if the number of shares applied are
less than the
of shares issued for subscription. For example, a company has offered
50,000shares to
for subscription and applications received are for 45,000shares it is a case of
undersubscriph
Minimum Subscription
According to SEBIGuidelines, if a company does not receive minimum subscription, i.e.
does not receive subscription for at least 90%of the shares issued, it cannot allot the sh
As a result, it will have to refund the application money to the subscribers.
Accounting frcatment: In case of undersubscription, accounting entries are passed on the b
asis
of shares applied because allotment is made in full to all the applicants.
illustration21 (Issue of Shares at Par, Undersubscription).
Sarvottam Ltd. invited applications for 40,000Equity Shares of 10 each. The amount Waspayable
as follows: on application 3 per share; on allotment 4 per share and on first and final call
3 per share. Applications were received for 37,500shares. Ashok to whom 1,000shares were
allotted did not pay the allotment money and also first and final call. Sohan who had applied
for 500 shares did not pay the first and final call.
Pass necessary Journal entries to record the above transactions.
Solution: In the Books of Sarvottam Ltd.
JOURNAL

Date Particulars
Bank A/c
To Equity Shares Application A/c
(Application money received on 37,500 Equity Shares @ 3 per share)
Equity Shares Application A/c
To Equity Share Capital A/c
(Application money transferredto Equity Share Capital Account)
Equity Shares Allotment A/c
To Equity Share Capital A/c
(Allotment money due on 37,500Equity Shares @ 4 per share)
Bank A/c
To Equity Shares AllotmentA/c
(Allotment money received) (WN 1)
Equity Shares First and Final Call A/c ...Dr.
To Equity Share Capital A/c
(First and final call money due on 37,500 Equity Shares @ 3 per share)
Bank A/c ...Dr.
To Equity Shares First and Final Call A/c
(First and final call money received except on 1,500shares)(WN 2)
 Chapter 8 • Company Accounts—Accounting for Share Capital 8.43

Notes:
working
mount due on allotment 4,000
A Allotmentmoney not paid by Ashok (I ,OOOx 4)
receivedon allotment
Amount final call 1,12,500
due on first and
Amount not paid by Ashok and Sohan on 1,500 shares
2. first call money 4,500
Less: 3 per share
(1,000+ 500) @R
received on first and final call
Amount
(Share Capital in Balance Sheet in case of Undersubscription).
Illustration22
.sed capital of Suhas Ltd. is divided into 25,000 shares of 200 each. Out
Illeauthorl
the company issued 12,000shares of 200 each at a premium of 10%.The amount per
of these, payable as follows:
sharewas 60 on application,
60 on allotment (including premium),
30 on first call, and
balance on final call.
for 11,000shares. All the money was duly received.
publicapplied
of Suhas Ltd. as per Schedule Ill, Part I of the Companies
preparean extract of Balance Sheet
showing share capital. (Al2013,Modified)
Act,2013
BALANCE SHEET OF SUHAS LTD. (An Extract) as at
Solution:
Note No.
particulars
AND LIABILITIES
l. EQUITY
Shareholders'Funds
ShareCapital

Noteto Accounts
Particulars

1. ShareCapital
AuthorisedCapital
50,00.ooo
25,000EquityShares oft 200 each
IssuedCapital
12P00EquityShares oft 200 each
SubscribedCapital
Subscribedand fully paid-up
11,000Equity Shares of « 200 each

Illustration23 (Issue of Shares at Premium, undersubscribed,Issue Price Payable in Instalments).

Newbie Ltd. was registered with an authorised capital of 5,00,000divided into 50,000equity
sharesof 10each. Since, the economy was in robust shape, the company decided to offer to
thepublicfor subscription 30,000equity shares of 10 each at a premium of 20 per share.
Applicationsfor 28,000shares were received and allotment was made to all the applicants. All
callsweremade and duly received except the final call of 2 per share on 200 shares. Show
the'ShareCapital'in the BalanceSheet of Newbie Ltd. as per Schedule Ill of the Companies
Act,2013.Also, prepare Note to Accounts for the same. (SamplePaper2015,Modified)
 Keeping —CBSE
8.44 Double Entry Book
Newbie Ltd.
as at ...
solution: BALANCE SHEET

Particulars
LIABILITIES
1. EQUITY AND
Shareholders' Funds
Share Capital

Note to Accounts
Particulars
1. Share Capital
Authorised Capital
oft 10 each
50,000 Equity Shares
Issued Capital
oft 10 each
30,000 Equity Shares
Subscribed Capital
Paid-up
Subscribed and Fully
oft 10 each
27,800 Equity Shares
Paid-up
Subscribed but not Fully
10 each
200 Equity Shares oft 2,000
(200 x 2)
Less: Calls-in-Arrears

DifferencebetweenOversubscription and Undersubscription of Shares

2,790

Basis Oversubscription of Shares

Undersubscription of
Number of shares applied is more than the Number Shares
1. SharesApplied of shares applied
shares offered for is less than th
subscription.
All applicationsare not accepted.Some are All the
2. Acceptance applicationsfor shares
rejected. Alternatively, shares are allotted on
and allotment is areacc
made to all the
applicants

3. Refund Excess application money is refunded or As all

the applicationsare
accepted,
therf
no excess application
money to be refund
4. MinimumSubscription A company does not face such a problem. A company may face the
problem
'Minimum Subscription'.

Preparationof Cash Book

Cash Book is a Special Journal which is used for recording cash transactions. When shares
issued for cash, Cash Book may have to be prepared. Thus:
(i) cash transactions are recorded in a Cash Book, and
(ii) non-cash transactions are recorded in Journal.
Illustration 24 (Issue of Shares at Par and Preparation of Cash Book).
Grand Ltd. offered 1,00,000 shares of 10 each for subscription on following terms:
3 to be paid on application, 3 to be paid on allotment, 4 to be paid in two months a
allotment.
2020.All
Applications were received for 90,000 shares and allotment was made on 1st May,a sharehol
but
money due on allotment was received by 15th May, 2020. Call was duly made
of 1,500shares did not pay the call. Also,prepare
Pass entries in the Cash Book, Journal and Ledger of the Company.
Balance Sheet of the company showing Share Capital.
 Chapter 8 • Company Accounts—Accounting for Share Caprtal 8.45

In the Books of Grand Ltd.

CASH BOOK (BANK COLUMN ONLY) Cr.

Date Particulars
particulars
2020
Application A/c By Balance c/d
To Shares
3020 Allotment A/c
Shares
TO and Final Call A/c 354,000
Shares First
TO 894,000

JOURNAL

particulars
cr.m
pate

2020 Application A/c 2/70,000

Shares
Capital A/c
May To Share
on 90,000 shares transferred to Share Capital Account)
(Applicationmoney
Allotment A/c
Shares
Capital A/c
May To Share
due on 90,000 shares)
(Allotment money
and Final Call A/c
Shares First
Capital A/c
July To Share
shares@t4per share on the first and final call)
(Amountdue on 90,000

Ledger
SHARES APPLICATION ACCOUNT

Particulars Date Particulars

pate
2020
2020 Capital A/c 2/70,000 By Bank A/c 2.70.ooo
To Share
May
2.70,ooo

SHARES ALLOTMENT ACCOUNT

Dr.
Particulars Date Particulars
Date
2020
2020 May
May
1 To Share Capital A/c 15 By BankA/c 270,000
2170.000

SHARES FIRST AND FINAL CALL ACCOUNT Cr.

particulars Date Particulars

Date

2020
2020
July To Share Capital A/c By Bank A/c
By Balance Ud (Calls-in-Arrears) 6,000
8.46 Double Entry Book
Keeptng
• —CBSE XO

SHARE CAP(TAL ACCOUNT

Date Particulars Date Particulars

2020 2020
May By Shares Application A/c
To Balance c/d
May I By Shares Allotment A/c
July By Shares First and Final Call A/c
3'60,9

Grand Ltd.
BALANCE SHEET as at ...
Note No.
Particulars

1. EQUITY AND LIABILITIES

Shareholders' Funds
Share Capital

Note to Accounts

1. Share Capital
Authorised Capital
n.Equity Shares oft 10 each
IssuedCapital
Equity Shares oft 10 each
SubscribedCapital
Subscribed and fully paid-up
88,500 Equity Shares of æ 10 each
Subscribed but not fully paid-up
15,000
1,500 Equity Shares of e 10 each
Less: Calls-in-Arrears* 6,000

8,940m

*Calls-in-Arrears 6,000is the amount not received by the company on First and Final Call.

Notes:
1. If Cash Book entries are asked, cash and bank transactions are recorded in the Cash Book and non-cash transactionsin
the Journal.
2. This is a case of undersubscription, that is, applications have been received for 90,000 shares as against the offerfor
shares to the public. Therefore, Share Capital Account will be credited every time with 90,000 shares multiplied
by the amount due on each instalment.
 Chapter 8 • Company Accounts—Accounting for Share Capital 8.47

of Two Classes of Shares

19ge company issues both classes of shares, i.e., Preference Shares and Equity Shares, the
a
of each share is prefixed by the term 'Preference Shares' or 'Equity Shares' as the case
Shares Application Account, Equity Shares Application Account, Preference
Allotment Account, Equity Shares Allotment Account, Preference Share Capital Account,
Account, etc.
Share Capital
Equity
25 (Issue of Two Classes of Shares).
Iustration
Equity Shares and 50,000Preference Shares of 10 each
Ltd. offered to public
2020 payable as under:
In 1stApril,
EquityShares(O Preference Shares

3 3
Application
on
3 4
(1st May)
On Allotment
September) 4 3
and Final Call (1st
On first

subscriptionwas received for Equity Shares and 45,000Preference Shares. out of

Shares, applications for 10,000shares were rejected; applications for
plicationsfor Equity
in full and 15,000shares were allotted to the remaining applicants.
5000sharesaccepted
for Preference Shares were accepted in full.
Applications
500 Preference
due were received except call amount on 1,000Equity Shares and
Amounts
and Journal.
Passentries in the Cash Book
In the Books of Shakti Ltd.
•Solution: CASH BOOK (BANK COLUMN ONLY) Cr.

Date Particulars
Particulars

2020
2020
A/c May 1 By Equity Shares Application A/c 30,000
1 To Equity Shares Application
shares) (Refund on 10,000 shares)
(Z 3 on
sept. 1 By Balanceed 1444500
1 To PreferenceSharesApplicationA/c
3 on 45,000 shares)
May I To EquityShares Allotment A/c
(t - 30,000)
1 To PreferenceShares Allotment A/c
(t 4 on 45,000 shares)
Sept 1 To EquityShares First and Final
Call A/c (t 400,000 - 4,000)
*pt. I To PreferenceSharesFirst and Final
CallA/c - e 1,500)

Sept 1 To Balanceb/d 1444,500

 2020
May Equity Shares App'ication A/c
...Dr.
To Equity Share Capital A/c (l ,OOrOOO
x 3)
To Equvty Shares Allotment A/c
(Application money adjusted)

May 1 Preference Shares Application A/c

To Preference Share Capital A/c 135,000
(Application money on 45,000 Preference Shares
transferred to Preference Share Capital Account)

May 1 , Equity Shares Allotment A/c x 3)

To Equity Share Capital A/c
(Allotment money due on Equity Shares)
May 1 Preference Shares Allotment A/c
To Preference Share Capital A/c
(Allotment money due on 45,000 Preference Shares)

Sept. 1 Equity Shares first and Final Call A/c

To Equity Share Capital A/c
(first and final call due on Equity Shares @ 4 per share)

Sept. 1 Preference Shares First and Final Call A/c ...Dr.

To PreferenceShare Capital A/c
(First and final call due on 45,000 Preference Shares @ 3 per share)

Note: When two types of shares are issued, the types of shares, i.e., Equity and Preference
Shares,

CALLS-IN-ARREARS
If a shareholder does not pay the call amount due on allotment or on any calls according
terms, the amount not so received is called Calls-in-Arrears. The unpaid or arrear
account of allotment or calls may or may not be transferred to Calls-in-ArrearsAccount.

If the question requiresthat the amount of calls not received be transferredto Calls-in-Arrears
Account, the amount not received should be transferred to Calls-in-Arrears Account.
Interest on Calls-in-Arrears
The company if authorised by its Articles of Association may charge interest at the specifie:
rate on Calls-in-Arrearsfrom the due date to the date of payment. In case,the Articlese.
Association of the Company is silent or it does not have clause to this effect,Table Fofh
Companies Act, 2013 shall apply which provides for interest on Calls-in-Arrears@10% p.a

However, the company has the right to waive the interest on Calls-in-Arrears.
Interest on Calls-in-Arrears is not in syllabus.
 Chapter 8 • Company Accounts—Accounting for Share Capitat 8.49

of Calls-in-Arrears
methods of accounting of Calls-in-Arrears:
t OpeningCalls-in-Arrears Account
method, amount not received from the shareholders is not transferred to
this ars Account. Total of balances in different Call Accounts is the unpaid amount on
in-Arre
a subsequent date, when the amount is received, Bank Account is debited and relevant
is credited. suppose, if first call money 2 per share on 10,000 shares is called
f this, first call money on 9,500 shares is received, entries will be passed as follows:
particulars
pate Call A/c 20,000
Shares First 20,000
Capital A/c
To Share
money due on 10,000 shares @ 2 per share)
(first call
...Dr. 19,000
Bank A/c 19,000
First Call A/c
To Shares
money received only on 9,500 shares)
(Firstcall
SHARES FIRST CALL ACCOUNT Cr.

Date Particulars
particulars
tate Capital A/c 20,000 By Bank A/c 19,000
To Share By Balance c/d (Calls-in-Arrears) 1,000
20,000 20,000

of Shares First Call Account shows the amount receivable, i.e., Calls-in-Arrears.
fie,abovebalance
Account
By Opening Calls-in-Arrears
(ii) unpaid amount is transferred to Calls-in-Arrears Account. As a
Underthis method, Account and different Call Accounts will not show balance. The
result,SharesAllotmentwill show a debit balance equal to the total unpaid amount on allotrnent
Account
calls-in-Arrears
receipt of arrear amount, it is credited to the Calls-in-Arrears Account.
andcalls.Later,on
if Calls-in-Arrears Account is opened, entries will be passed as follows:
Inthe aboveexample,
cr.R)
Particulars
Date
20,000
Shares First Call A/c
20,000
To Share Capital A/c
per share)
(Firstcall money due on 10,000 shares @ 2
...m 19,000
Bank A/c
19,000
To Shares First Call A/c
(Firstcall money received only on 9,500 shares)
Calls-in-Arrears A/c ...Dr. 1,000
To Shares First Call A/c 1,000
(Unpaidamount on First Call transferred to Calls-in-Arrears Account)

Inplaceof above two entries, a combined entry may also be passed as follows:
Particulars L.F. cr. (O
Date
Bank A/c ...Dr. 19,000
Calls-in-Arrears A/c ...Dr. 1,000
To Shares First Call A/c 20,000
(Firstcall money received except on 500 shares and unpaid amount
transferredto Calls-in-Arrears Account)
 Book Keeping —CBSEX!!
, SO Double Entry
in the Balance Sheet
Pieclosurt'ofCalls-in-Arrears
Accountis shown in the Note to Accounts on 'Share Capital' to
of 'Subscribed but not fully paid-up' under the
a deduction from the amount

Accounting Entries of Calls-in-Arrears

ofcall amount:
1. Onnon-receipt
Calls-in-Arrears A/c ...Dr. (With the
To Relevant Call A/c (Say, Shares Allotment A/c) amount
not
ata subsequent date:
2. On receiptofCalls-in-Arrears
Bank A/c ...Dr. (With the
To Calls-in-Arrears A/c Calls-in-Arrears

Illuc,tration 26.
X Ltd. was formed with a capital of divided into shares of
for subscription. payable on application, 25% payable 10 each. It
call. The applicants paid
on allotment
balanceon final on application and
on t
(a) Authorised Capital, (b) Issued Capital,
(c) Subscribed Capital, (d) Called-up Capital,
(e) Paid-up Capital, (f) Calls-in-Arrears.
(Delhi 2012 C,
Modi
Solution: Calculation of various capitals:
(a) Authorised Capital = 10,00,000.
(b) Issued Capital = (i.e., 90% of
(c) Subscribed Capital = 9,00,000.
(d) Called-up Capital = e (i.e., 65% of
(e) Paid-up Capital = e (i.e., +R
(f) Calls-in Arrears 56,000(i.e., -•
Illustration 27 (Calls-in-Arrears).
Ben Tech Ltd. company had an authorised capital of 12,50,000divided into 12,500shares
100 each. The company issued 10,000 shares payable as 25 on application, 25 on allotme
30 on first call and 20 on second and final call. All the shares were subscribed.
was made and the money was duly received except the second and final call on 500 shares, wh
is transferred to Calls-in-Arrears Account. Pass Journal entries, prepare Share Capital Accot
and show how share capital will appear in the Balance Sheet.
Solution: In the Books of Ben Tech Ltd.
JOURNAL
Dr.(t) cr.(i
Date Particulars
...Dr.
Bank A/c (10,000 x 25) 2,50
To Shares Application A/c
25 per share)
(Application money received for 10,000 shares @
...Dr.
Shares Application A/c
To Share Capital A/c
Account)
(Application money transferred to Share Capital
Shares Allotment A/c (10,000 x 25)
To Share Capital A/c
(Allotment mon due)
 Chapter 8 Company Accounts—Accounting for Share Capital 8.51

Bank A/c 250,000

To Shares Allotment A/c 2/50,000
(Allotmentmoney received on 10,000 shares)

shares First call A/c (10,000 x 30) ...Dr.

To Share Capital A/c
(Firstcall money due)

Bank A/c
To Shares First Call A/c
(Firstcall money received)

Shares Second and Final Call A/c (10,000 x 20)

To Share Capital A/c
(Second and final call due)

Bank A/c (9,500 x 20) ...Dr.

Calls-in-Arrears A/c (500 x 20) ...Dr. 10,000
To Shares Second and Final Call A/c
(Second and final call money received on 9,500 shares)

SHARE CAPITAL ACCOUNT Cr.

Particulars
particulars

dd By Shares Application A/c 250,000

Balance
By Shares Allotment A/c
By Shares First Call A/c
By Shares Second and Final Call A/c

BALANCE SHEET (EXTRACT) as at

Note No.
Particulars

L EQUITYAND LIABILITIES
Shareholders'Funds
Share Capital

Noteto Accounts
1. ShareCapital
Authorised Capital
12,500Equity Shares oft 100 each
IssuedCapital
10,000Equity Shares oft 100 each
SubscribedCapital
Subscribedand fully paid-up
9,500Equity Shares of 100 each
Subscribedbut not fully paid-up
500 EquityShares oft 100 each 50,000
10,000 40,000
Less Calls-in-Arrears (500 x 20)
9/90,000
 Double Entry Book Keeping—CBSE Xll

'versubscription and Calls-in-Arrears

the case of oversubscription, pro rata allotment may be made to all or some of the
t means the applicants to whom pro rata allotment is made have paid excess application
me excess application money may be adjusted towards Allotment Money which
Share Capital and Securities Premium, if shares are issued at premium. Adjustment is
first towards Share Capital and thereafter, towards SecuritiesPremium.
The balance may be carried forward and adjusted against calls, if the question specifies.
Illustration 28 (Ovcrsubscription of Shares and Calls-in-Arrears).
Alfa Co. Ltd. issued 50,000Equity Shares of 10 each at a premium of 2 per share payable
as follows:
call and 3 on final
3 on application, 4 on allotment (including premium), 2 on first c
40,000 Equity Shares
Applications were received for 65,000 Equity Shares. Applications for
20,000Equity Shares
accepted in full; 10,000Equity Shares were allotted to applicants of arid,

duly received exc

applications for 5,000Equity Shares were rejected.The amounts due were
Shares.
the first call on 1,000Equity Shares and final call on 1,500Equity
show Share Capital in the
Pass entries in the Cash Book and Journal of the Company Also,
Balance Sheet.
Solution: In the Books of Alfa Co. Ltd.
Dr. CASH BOOK (BANK COLUMN ONLY)

Date Particulars Date Particulars

To Shares Application A/c By Shares Application A/c 15m

3 on 65,000 shares) (R 3 on 5,000 shares refunded)
To Shares Allotment A/c 1,70,000 By Balance c/d
(e - 30,000)
To Shares First Call A/c 98,000
- 2,000)
To Shares Second and final Call A/c
- 4,500)

JOURNAL
Date Particulars

Shares Application A/c ...Dr.

To Share Capital A/c
(Application money on 50,000 shares transferredto Share Capital Account)
Shares Application A/c [(20,000 x 3) - (10,000 x 3)] 30,000
30,000
To Shares Allotment A/c
(Surplus application money on partially accepted applications
transferred to Shares Allotment Account)
Shares Allotment A/c ...Dr.
To Share Capital A/c
To Securities Premium Reserve A/c
(Amount due on allotment: 2 on 50,000 shares for Capital and
2 on 50,000 shares for Premium)
 Chapter 8 • Company Accounts—Accounting for Share Capital 8.53

Shares First Call A/c

To Share Capital A/c
(Amount due on first call @ 2 per share on 50,000 shares)

Calls-in-Arrears A/c 2,000

To Shares First Call A/c 2,000
(Call money not received transferred to Calls-in-Arrears Account)

Shares Second and Final Call A/c ...Dr.

To Share Capital A/c
(Second and Final call due on 50,000 shares)

Calls-in-Arrears A/c 4,500

To Shares Second and Final Call A/c 4,500
(Call money not received transferred to Calls-in-Arrears Account)

BALANCE SHEET
as at ...
Note No.
Particulars

AND LIABILITIES
L EQUITY
Shareholders' Funds
1
Share Capital

Note to Accounts

I. Share Capital
AuthorisedCapital
Equity Shares oft 10 each
IssuedCapital
90,000Equity Shares oft 10 each
SubscribedCapital
Subscribedand fully paid-up
4/85,000
48,500Equity Shares oft 10 each
Subscribed but not fully paid-up
1,500Equity Shares oft 10 each 15,000
2) + (1,500 x e 3)] 6,500 8,500
Less:Calls-in-Arrears[(1,000

Notes:
1, SecuritiesPremium Reserve Account, being capital profit,will be shown in the Equity and Liabilities part of
BalanceSheet under the head 'Reserves and Surplus'.
the
2. Theamount not received on shares may or may not be transferred to Call-in-Arrears Account. But where
questionprescribes so, amount not received is transferred to Calls-in-Arrears Account.
3, Shareson which call or calls are in arrear are shown as 'Shares Subscribed but not fully paid-up'.Hence,
1,500 EquityShares on which calls are not received are shown as shares subscribed but not fully paid-up.
 Double Entry Book Keeping—CBSE

LES-IN-ADVANCE
allows, accept the amount against th
company may, if its Articles of Association is credited to Calls-in-Advan
received in advance
calls not yet made. amount so partial or pro rata allotment
happen in case of
,ccount. As discussed earlier, it may also on application of shares in
amount received
hares when the company retains excess
of allotment money.

Calls-in-Advance in the Balance Sheet

Disclosure of company. It is shown in
is not yet due is a liability of the
The amount received that head Current Liabilities and
sub_he
Sheet under the main
Equity and Liabilitiespart of the Balance
Other Current Liabilities.
is:
entry passed to record Calls-in-Advance
The Journal of calls money received in advant
...Dr. (With the amount
Bank A/c
A/c
To Calls-in-Advance
is:
when the respective call is made due. The entry
It is adjusted ...Dr.
A/c
Calls-in-Advance
first Call A/c)
To RelevantCall A/c (Say,Shares

Interest on Calls-in-Advance
But if
Intereston Calls-in-Advanceis paid if the Articles of Association so provides.
Articlesof Associationis silent or it does not have clause to this effect, provisions of Table
of the Companies Act, 2013 apply and the company is liable to pay interest on Calls-in-Advan
@ 12% p.a.

Interest on Calls-in-Advance and Calls-in-Arrears is not in syllabus.

Illustration 29 (Calls-in-Arrears and Calls Paid in Advance both).

The Kerala Coir Mills Ltd., with an authorised capital of Equity Shares of 10 ea
issued Equity Shares,payable 3 on application, 2 on allotment, 3 on first call
2 on second and final call.
The amount due on allotment was received. On the first call being made, one sharehol
holding6,000EquitySharespaid second and final call along with the first call while
shareholderswith a total holding of 10,000Equity Shares did not pay the first call on t]
Equity Shares.Company has not demanded the second and final call.
I
Pass Journal entries to record the transactions and draw up the company's Balance Sheet.
 Chapter 8 • Company Accounts—Accounting for Share Capital 8.55

'n the Books of Kerala Coir Mills Ltd.

solÜtion:
JOURNAL

Particulars
Date
Bank A/c ...Dr.
To Equity Shares Application A/c
(Application money on shares @ 3 per share received)

Equity Shares Application A/c ...Dr.

To Equity Share Capital A/c
(Application money transferred to Equity Share Capital Account)

Equity Shares Allotment A/c ...Dr

To Equity Share Capital A/c
(Amount due on allotment on shares @ 2 per share)

Bank A/c ...Dr.

To Equity Shares Allotment A/c
(Allotment money received)

Equity Shares First Call A/c ...Dr.

To Equity Share Capital A/c
(Firstcall money due on shares @ 3 per share)

Bank A/c ...Dr.

Calls-in-ArrearsA/c ...Dr. 30,000
To Equity Shares First Call A/c
To Calls-in-Advance A/c 12,000
(Firstcall money received except on 10,000 shares @ 3 per share
and final call of 2 per share on 6,000 shares received in advance)

BALANCE SHEET OF KERALA COIR MILLS LTD.

as at ...

Particulars Note No.

L EQUITYAND LIABILITIES
1. Shareholders'Funds
Share Capital
2. CurrentLiabilities
Other Current Liabilities 2 12,000

f Total
n. ASSETS
CurrentAssets
Cashand Cash Equivalents 3
Total
 .56 Double Entry
Book Keeping—CBSE Xll
otes to Accounts
1. Share Capital
Authorised Capital
Equity Shares of 10 each
Issued Capital
Equity Shares of 10 each
Subscribed Capital
Subscribed but not fully paid-up
Equity Shares of? 10 each; ? 8 called-up
Less: Calls-in-Arrears (10,000 x 3)
2. Other Current Liabilities 30,000
Calls-in-Advance
3. Cash and Cash Equivalents
Cash at Bank
15,82
Illustration 30.
on 1st January, 2020, Bani Ltd. issued 10,000 Equity Shares of 10
each payable
on application 3, on allotment 3, on first and final call 4 (three months
after allotment).
Applications were received for 13,000shares and Directors made
allotment in full
3,000shares. One shareholder, who was allotted 200 shares, paidount to the applicants
first and final for
allotment money and another shareholder did not pay allotment call
money on his With
300 shares
anc
Journalise the transactions in the books of Bani Ltd. includ
Ing cash transactions.
maintains Calls-in-Arrears Account. The company
Solution: In the Books of Bani Ltd.
JOURNAL
Date Particulars
2020 Dr.(t)
Jan. cr.R)
1
To Equity Shares Application A/c ...Dr.
39,000
(Application money received on 13,000
shares) 39m
Equity Shares Application A/c
To Equity Share Capital A/c
(10,000 x 3) 39,000
To
(Application money adjusted and 30m
surplus refunded)
Equity Shares Allotment A/c
To Equity Share Capital A/c 30,000
(Amount due on allotment of
10,000 shares @ 3 per share) 30,n
Bank A/c
Calls-in-Arrears A/c (300 x 3) ...Dr. 29,900
To Equity Shares Allotment
A/c
To Calls-in-Advance A/c (200
x 4) 30m
(Allotment money except on
300 shares and calls-in-advance
received on 200 shares)
Equity Shares First and Final
Call A/c
To Equity Share Capital A/c 40,000
(First and final call money due 40m
on 10,000 shares @ 4 per share)
 Chapter 8 • Company Accounts—Accounting for Share Capital 8.57

40,100
Bank Ajc
First and Final Call A/c
To Equity Shares 39,200
A/c
To Calls-in-Arrears
money received including arrears on 300 shares as
(Firstand final call
allotmentmoney)

Calls-in-Advance A/c
First and Final Call A/c
To Equity Shares
(Calls-in-Advanceadjusted)

31.
ustration
I
the first call of e 3 per share became due on
on 1stJanuary,2016 equity shares issued by
Ltd. Karan a holder of 500 shares did not pay the first call money. Arjun a shareholder
Karninl
1 000 shares paid the second and final call of 5 per share along with the first call.
bolding
the necessaryJournal entry for the amount received by opening 'Calls-in-Arrears' and
Tass
Account in the books of the company. (CBSE 2016)
ucalls-in-Advance'
JOURNAL OF KAMINILTD.
solution:
Particulars cr. (0
te

1.16 3.03500
Calls-in-Arrears A/c (500 x 3) 1,500
To Equity Shares First Call A/c
To Calls-in-Advance A/c (1,000 x 5) 5,000
(Firstcall money received except on 500 shares and received second
and final call in advance on 1,000 shares)

Note:The question requires a Journal entry for the transaction. Therefore, a single entry has been passed.

betweenCalls-in-Arrears and Calls-in-Advance

Difference
Basis Calls-in-Arrears Calls-in-Advance

Meaning Calls-in-Arrears is the amount called-up by the Cailsqn-Advance is the amount not called-up
company, but not paid by the shareholders. by the company, but paid by the shareholders.

Interest Interest is charged on Calls-in-Arrears. Interest is allowed on Calls-in-Advance.

•3.Rateoflnterest As per TableF of the Companies Act, 2013 As per TableF of the Companies Act, 20B,
interest is charged @ 10% p.a. interest is paid @ 12% p.a.
4, Authority under Articles of Association does not have any clause A company may accept Calls-in-Advance only
Articlesof to this effect as non-paymentis beyond the if its Articles of Association authorises it to
Association company's control. do so.
5. Disclosure It is shown by way of deduction from It is shown in the BalanceSheet as Other
Subscribed Capital (subscribed but not fully Current Liabilities under the main head
paid-up) in the Note to Accounts on Share Current Liabilities.
Capital.
8.58 Double Entry Book Keeping—CBSE Xll

ll. SHARES ISSUED FOR CONSIDERATIONOTHER THAN CASH

A company may issue shares for consideration other than cash such as against Purchase
asset or purchase of business or services taken, etc. Purchase of an asset or purchase of bu Of
and issue of shares are two separate transactions. Thus, entry is passed for each transacti
The Journal entries passed are:
I. (a) On Purchaseof Assets
(With the amount of purcha•4
Sundry Asset A/cs (Individually)
[With purchase consid
To Vendor's A/c
(b) On Purchase of Business (Agreed value of
Sundry Asset A/cs (Individually)
Goodwill A/c* [Agreed value of liabi
To Sundry Liabilities A/c (Individually) [With purchase consideraty
To Vendor's A/c
*
To Capital Reserve A/c*
in consideration for purchase of as
Purchase consideration is the amount paid by purchasing company
otherwise it will be equal to net
business from other enterprise.It may be given in the question,
i.e., sundry assets minus sundry liabilities.
difference is debited to GoodwillAccount. It is a
If purchase consideration given is more than net assets,then
of Purchased Goodwill hence, will be recorded in the books.
then the difference is credited to Capital Reserve.
If purchase consideration given is less than net assets,
Either Goodwill or Capital Reserve will appear at a time.
ll. On Issue of Shares
(a) /fshares are issued to vendor at par:
Vendor's A/c ...Dr. [With the nominal value of shares allOtts
To Share Capital A/c
(b) If shares are issued to vendor ata premium:
Vendor'sA/c ..Dr. [With the purchase
To Share Capital A/c [With the nominal value of shares allotte
To Securities Premium Reserve A/c [With the amount of premiu•t

Note: Beforepassing the Journal entry,calculate the number of shares to be issued against purchase
consideration as follows:
Purchase Consideration
Number of Shares to be Issued = shares.
Issue Price of a Share

Example 5.
Newton Ltd. purchased machinery for 6,0(),000from Royal Ltd. Payment is to be made by
issue of equity shares of 10 each. Calculate number of shares to be issued to Royal Ltd. i}

shares are to be issued at: (i) Par; (ii) Premium of 20%.

Ans. The number of shares to be issued in each of the alternative cases will be:
(i) Issued at Par = 10 = 60,000shares.
(ii) Issued at Premium of 20% = 12 —50,000 shares.
Issue of Shares to Promoters
Sometimes, companies issue shares to promoters for their services rendered to the company,
From the accounting point of view, it is 'incorporation costs' or 'formation expenses'. Hence,
the amount is debited to 'Incorporation Expenses Account' or 'Preliminary Expenses Account
 Chapter 8 • Company Accounts—Accounting for Share Capital 8.59

passed are:
ntrics Expenses or Preliminary Expenses A/c ...Dr.
Incorporation
A/c
To Promoters'
to promoters)
(Amountdue
...Dr.
promoters'A/c
Capital A/c
To Share
...sharesof ...each as fully paid to the promoters)
(Issueof
Expenses are written off in the year they are incurred from Securities Premium
Iiminary ement of Profit and Loss.
Stat
or
cserve
Shares to Underwriters
Of
means a contract by which a person, known as underwriter, agrees usually for
densrriting
shares not subscribed by public. The company may issue shares to the
missionto take the
com •ters,instead of paying the commission in cash.
Updervsrrl
entries in this case are:
Journal
The Underwriting Commission A/c ...Dr.
To Underwriters' A/c
(Underwriting commission due)

Underwriters'A/c ...Dr.
To Share Capital A/c
...each issued to the underwriters)
(o.shares
commission is written off in the year shares are issued from Securities Premium
Underwriting
and Loss.
or Statement of Profit
Reserve
of Shares Issued for Consideration other than Cash in the Balance Sheet
Disclosure
sharesissuedfor consideration other than cash are disclosed, i.e., shown in the Balance Sheet
undersubscribedCapital (either as Subscribed and fully paid-up or Subscribed but not fully
paid-up,as the case is) in the Note to Accounts on 'Share Capital'
Exantple 6.
WatchesLtd. issued 1,00,000fully paid Equity Shares of 10 each towards consideration
Citizen
forpurchaseof machinery. It is shown in the Note to Accounts on Share Capital as follows:
Noteto Accounts

particulars

ShareCapital
Capital
Authorised
.„EquityShares oft 10 each
IssuedCapital
ÆquityShares oft 10 each
Capital
Subscribed
and fully paid-up
Subscribed
90,000EquityShares oft 10 each
(Outofthe above, Equity Shares have been issued pursuant to a
contract
for consideration other than cash)
8.60 Double Entry Book Keeping—CBSE Xll
of Business).
Illustration (Issue of Shares for Purchase payable in fully paid E
the business of Ram Bros. for Tiny
Tiny Toys Ltd. purchased entries in the books of Toys Ltd. if the qui
the Journal issue
Shares of 10 each. Pass of 20%.
(i) at par and (ii) at a premium
LTD.
JOURNAL OF TINY TOYS
Solution:
Date Particulars

Sundry Assets A/c

To Ram Bros. 1,80
Ram Bros.)
(Business purchased from

(i) When shares are issued at par:

Ram Bros.
To Equity Share Capital A/c
par to Ram Bros.) (WN I)
(Issue of 18,000shares oft 10 each at
When shares are issued at a premium:
Ram Bros.
To Equity Share Capital A/c
To Securities Premium Reserve A/c
of 20%) (WN 2)
(Issue of 15,000shares oft 10 each at a premium
PurchaseConsideration
=
WorkingNotes: Number of Equity Shares to be issued Issue Price of a Share
1,80,000 18,000 shares; 2. No. 1,80,000
1. No. of Equity Shares = e 10
= of Equity Shares = = 15,000 sharq

Illustration 33 (Issue of Shares for Purchase of Business).

Rajan Ltd. purchased a running business from Vikas Ltd. for a sum of 2,50,000payable
in fully paid equity shares of 10 each and balance by a bank draft. The assetsanc
liabilities consisted of the following:
Plant and Machinery 90,000;Building 90,000;Sundry Debtors 30,000;Stock 50,000
Cash 20,000;Sundry Creditors 20,000.
Journalise the above transactions. (Delhi2004

Solution: JOURNAL
Date Particulars L.F. Dr.(t) cr.(0
Plant and Machinery A/c ...Dr. 90,000
Building A/c 90,000
Sundry Debtors A/c ...Dr. 30,000
Stock A/c 50,000
Cash A/c 20,000
To Sundry CreditorsA/c 20,ü
To Vikas Ltd.
To Capital ReserveA/c (Balancing Figure) ION
(Business of Vikas Ltd. purchased)
Vikas Ltd. ...Dr. 250,000
To Equity Share Capital A/c 220,oa
To BankA/c 30,N

(Purchase consideration paid to Vikas Ltd. by issue of 22,000 Equity Shares

oft 10 each and balance by bank draft)