Question

Alexia Limited invited applications for issuing 1,00,000 equity shares of ₹ 10 each at premium of ₹ 10 per share.
The amount was payable as follows:

• On application ₹ 9 per share (Including premium ₹ 6 per share)
• On allotment ₹ 8 per share (Including premium ₹ 4 per share)
• On first and final call ₹ 3 per share.

Applications were received for 1,50,000 equity shares and allotment was made to the applicants as follows:
Category A: Applicants for 90,000 shares were allotted 70,000 shares.
Category B: Applicants for 60,000 shares were allotted 30,000 shares.
Excess money received on application was adjusted towards allotment and first and final call.
Shekhar, who had applied for 1200 shares failed to pay the first and final call. Shekhar belonged to category B.
Pass necessary journal entries for the above transactions in the books of Alexia Limited. Open calls in arrears and calls in advance account, wherever necessary.

Hint:

For Pro-rata Allotment: Carefully track excess application money. Adjust it against allotment first. If excess still remains AND allowed, transfer to Calls in Advance. Calculate arrears considering any advance paid by the defaulter. For Forfeiture: Debit Share Capital with Called-up Face Value, Debit Securities Premium if unpaid, Credit Share Forfeiture with amount paid towards face value, Credit unpaid call accounts. For Reissue: Debit Bank with amount received, Credit Share Capital with paid-up value. Difference is discount (Dr Share Forfeiture) or premium (Cr Securities Premium). Transfer gain [(Forfeited Amt per share - Discount per share) x No. of shares reissued] from Share Forfeiture to Capital Reserve.

Answer 1

Alexia Limited Share Issuance Journal Entries Summary

1. Key Transaction Data:

• Issued Share Count: 1,00,000
• Nominal Value Per Share: Rs. 10
• Premium Per Share: Rs. 10
• Application Amount Per Share: Rs. 9 (includes Rs. 6 premium)
• Allotment Amount Per Share: Rs. 8 (includes Rs. 4 premium)
• Final Call Amount Per Share: Rs. 3
• Total Share Applications Received: 1,50,000 shares
• Share Allotment Breakdown:
  • Category A: Applied for 90,000 shares, Allotted 70,000 shares
  • Category B: Applied for 60,000 shares, Allotted 30,000 shares
• Treatment of Excess Application Funds: Applied towards allotment and subsequent calls.
• Unpaid Final Call: Shekhar (Category B) failed to remit the Final Call on 1200 applied shares.

2. Pre-Journal Entry Calculations:

• Calculation of Excess Application Funds:
  • Category A: (90,000 - 70,000) × Rs. 9 = Rs. 1,80,000
  • Category B: (60,000 - 30,000) × Rs. 9 = Rs. 2,70,000
  • Aggregate Excess Funds = Rs. 1,80,000 + Rs. 2,70,000 = Rs. 4,50,000
• Shekhar's Allotted Shares Calculation: Based on Category B's pro-rata ratio: (30,000 / 60,000) × 1200 = 600 shares.
• Shekhar's Outstanding Final Call Amount: 600 shares × Rs. 3 = Rs. 1800.

3. Journal Entries

Date	Particulars	L.F.	Debit (Rs.)	Credit (Rs.)
1. Receipt of Application Monies
	Bank A/c		13,50,000
	To Equity Share Application A/c			13,50,000
(Being application money received on 1,50,000 shares @ Rs. 9 per share)
2. Application Monies Transferred to Capital and Premium Reserves
	Equity Share Application A/c		13,50,000
	To Equity Share Capital A/c			3,00,000
	To Securities Premium Reserve A/c			6,00,000
	To Equity Share Allotment A/c			4,50,000
(Being application money for 1,00,000 shares transferred to capital and premium accounts; excess funds adjusted to allotment account)
3. Allotment Due Recognition
	Equity Share Allotment A/c		8,00,000
	To Equity Share Capital A/c			4,00,000
	To Securities Premium Reserve A/c			4,00,000
(Being allotment money due on 1,00,000 shares @ Rs. 8 per share)
4. Receipt of Allotment Monies
	Bank A/c		3,50,000
	To Equity Share Allotment A/c			3,50,000
(Being allotment money received post adjustment of excess application funds)
5. First and Final Call Due Recognition
	Equity Share First & Final Call A/c		3,00,000
	To Equity Share Capital A/c			3,00,000
(Being first and final call money due on 1,00,000 shares @ Rs. 3 per share)
6. Receipt of First and Final Call Monies (Net of Arrears)
	Bank A/c		2,98,200
	Calls in Arrears A/c		1,800
	To Equity Share First & Final Call A/c			3,00,000
(Being first and final call money received, excluding that on 600 shares)

Entry Explanations:

• Entry 1: Documents the total inbound application funds.
• Entry 2: Reclassifies application funds to share capital and securities premium accounts. Any excess application funds are transferred to the allotment account for future adjustment.
• Entry 3: Records the total amount owed for share allotment, inclusive of the premium.
• Entry 4: Documents the receipt of allotment payments. The bank debit reflects the aggregate amount received.
• Entry 5: Records the total amount due for the first and final call.
• Entry 6: Documents the collection of the first and final call payments. The debit to the 'Calls in Arrears' account signifies the amount outstanding from Shekhar.