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Topic1: Definition - A Company

A. Terminological Meaning: The word company is derived from
two latin words, “Com” and “Panis”
 “Com”-------Means Together.
 “Panis” -----Bread
Therefore we can say that the word company is based on such phenomenon wherein two or
more individuals come together to earn the bread or share the bread.

B. General Definition:
• A Company is an association of many persons, who contribute money or money’s
worth to a common
stock, and employ it in some common trade or business, and who share the profit
or loss (as the case
may be) arising therefrom.
• The Common Stock so contributed is denoted in money, & is the Capital of the
Company.
• The Persons who contribute it, or to whom it belongs, are Members.
• The Proportion of Capital to which each Member is entitled is his Share.
• Shares are always transferable although the right to transfer them is often more or
less restricted.
C. Legal Definition:
Compani A Company mean company which is formed and incorporated under
es Act, the Companies Act, 2013 or an existing company formed and
2013 registered under any of the previous company laws.
Hanay A Company is an Artificial Person created by law, having a
Separate Entity, with a Perpetual Succession and a Common Seal.

Topic 2: Characteristics of Company:

Feature Explanation
Artificial Person  A Company comes into existence by the operation of law.
(Incorporated  A Company is granted certain rights & obligations as that of a
Association) person. Thus, company is an artificial person, incorporated under
law.
Separate  A Company is a separate legal entity & artificial person known by
Legal its own name. It is distinct and separate from the members who
Entity constitute it.
 A Company can contract, sue & be sued in its incorporated name
& capacity.
Person, not  A Company is not a citizen either under — (a) the Constitution of
Citizen India or
(b) the Citizenship Act
 The Constitution provides certain fundamental rights to its citizens.
A Company cannot enjoy the citizenship rights and duties as are
enjoyed by natural citizens
Perpetual  The shares of Company being transferable, members may change
Succession during the lifetime of the company. However, that does not change
the status of the Company.
 The Company goes on forever and continues to exist, till it is wound
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up and dissolved.
Common  Common Seal is the official signature of a Company. The
Seal Company's name is engraved on the Seal.
 The Articles of Association may provide for the documents that
require the signature of the Company, i.e. the Common Seal.
 Now, use of common seal has been made optional. All such
documents which required affixing the common seal may now
instead be signed by
two directors or one director and a company secretary of the
company.
Ownership  The Board of Directors is the elected representative body of the
Vs Shareholders of the Company, and manages the affairs of the
Management Company.
 Generally, every Shareholder / Member does not participate in the
day- to-day affairs of working and administration of the Company.
Hence,
Ownership of Company is different from that of its Management.
Right of The right of the shareholders of a company to inspect its books of
Access account, with the exception of books open for inspection under the
Statute, is governed by the Articles of Association. The shareholders
have a right to seek information from the directors by participating in
the meetings of the company and through the periodic reports.

1. SHARE CAPITAL
Total capital of the company is divided into a number of small indivisible units
of a fixed amount and each such unit is called a Share. The fixed value of a share,
printed on the share certificate is called nominal/par/face value of a share. However
a company can issue shares at a price different from the face value of shares. The
liability of holder of shares (called shareholders) is limited to the issue price of
shares acquired by them.

Authorised Share Capital: A company estimates its maximum capital

requirements. Registrar of Companies puts a limit on the amount of capital,
which a company is authorised to raise during its lifetime and is called ‘Authorised
Capital’. It is also referred to as ‘Registered Capital or Nominal Capital’

Issued Share Capital: Portion of the share capital issued by the company is called
‘Issued Capital’. Issued capital means and includes the nominal values of shares
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issued by the company for: Cash, and Consideration other than cash to Promoters
of a company and Others. The remaining portion of the authorised capital may be
termed as ‘Un-issued Capital’

Subscribed Share Capital: It is that part of the issued share capital, which is
subscribed by the public. It includes the face value of shares issued by the
company for consideration other than cash.

Called-up Share Capital: The portion of the issue price of shares which a
company has demanded or called from shareholders is known as ‘Called –up
Capital. The balance which the company has decided to demand in future may be
referred to as Uncalled Capital.
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Paid up Share Capital: It is the portion of called up capital which is paid by the
shareholders. Whenever a particular amount is called by the company and the
shareholder(s) fails to pay the amount fully or partially, it is known as ‘Unpaid calls or
installments or call in arrears’ To calculate paid up capital, the amount of installment in
arrears is deducted from called up capital. In balance sheet called- up and paid capital
are shown together.

Reserve Share Capital: A company may decide by passing a special resolution that a
certain portion of its subscribed uncalled capital shall not be called up except in the
event of winding up of the company. Portion of the uncalled capital which a
company has decided to call only in case of liquidation of the company is called
Reserve Liability/ Reserve Capital.
Reserve Capital is different from Capital Reserve, Capital reserve are part of ‘Reserve and
surplus’ and refer to those reserves which are not available for declaration of dividend.
These reserves may be used to write off capital losses such as discount on issue
of shares. These can also be used to issue bonus shares, subject to the
condition, that reserve is realized in cash. Thus, reserve capital which is portion
of the uncalled capital to be called up in the event of winding up of the
company is entirely different in nature from capital reserve which is created
out of profits only.

Preference Shares:
Persons holding preference shares, called preference shareholders. They enjoy preferential
rights in the matter of Payment of dividend at a fixed rate. Repayment of capital in case
of holding up of the company.

2. TYPES OF PREFERENCE SHARES:

Cumulative Preference Shares: A cumulative preference share is one that carries the
right to a fixed amount of dividend or dividend at a fixed rate. Such a dividend is
payable even out of future profit if current year’s profits are insufficient for the purpose.

Non-Cumulative Preference Shares: A non Cumulative preference share carries with it

the right to a fixed amount dividend. In case no dividend is declared in a year due to
any reason, the right to receive such dividend for that year expires.

Participating Preference Shares: This category of preference share confers on the

holder
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the right to participate in the surplus profits, if any, after the equity shareholders
have been paid dividend at a stipulated rate.

Non- Participating Preference Shares: A share on which only a fixed rate of

dividend is paid every year, without any accompanying additional rights in profits and in
the surplus on winding up is called ‘Non Participating Preference Shares’

Redeemable Preference Shares: These are shares that a company may issue on the
condition that the company will repay after the fixed period or even earlier at company’s
discretion. The repayment on these shares is called redemption and is governed by
Section 55 of the Companies Act, 2013.

Non-Redeemable Preference Shares: The preference shares, which do not carry with
them the arrangement regarding redemption, are called Non-redeemable Preference
Shares. According to Section 55, no company limited by shares shall issue
irredeemable preference shares or preference shares redeemable after the
expiry of 20 years from the date of issue. However a Company may issue
preference shares redeemable after 20 years for such infrastructure projects as may be
specified, under the Companies Act, 2013.

Convertible Preference Shares: Shares give the right to the holder to get them
converted into equity shares at their option according to the terms and conditions of
their issue.

Non-Convertible Preference Shares: When the holder of a preference share has not
been conferred the right to get his holding converted into equity share, it is called
Non- convertible Preference Shares.

Equity Shares:
Equity shares are those shares, which are not preference shares. It means that they do
not enjoy any preferential rights in the matter of payment of dividend or repayment of
capital. The rate of dividend on equity shares is recommended by the Board of Directors
and may vary from year to year. Companies Act 2013 permits issue of equity share
capital with differential rights as to dividend, voting or otherwise.
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3. ISSUE OF SHARES FOR CASH:

A public company issues a prospectus inviting general public to subscribe for its shares. On
the basis of prospectus, applications are deposited in a scheduled bank by the interested
parties along with the amount payable at the time of application, in cash. First installment
paid along with application is called ‘Application Money’ Application money cannot be less
than 5% of the face value of shares. A company cannot proceed to allot shares unless
minimum subscription is received by the company.

4. SHARES ISSUED AT PAR

No Particulars LF Dr. Rs Cr. Rs.
1 For application money received
Bank / Cash A/c
To Equity Share application A/c
2 At the time of Allotment of shares
Equity Share Application A/c
To Equity Share Capital
A/c
3 To record amount due on allotment
Equity share Allotment A/c
To Equity Share Capital A/c
4 For Allotment money received
Bank A/c
To Equity Share allotment A/c
5 When First & Final call is made
Equity share First & Final call A/c
To Equity Share Capital A/c
6 On receiving the call money
Bank A/c
To Equity share First & Final Call A/c

5. SHARES ISSUED AT PREMIUM

When a company issues its securities at a price more than the face value, it is said to be
an issue at a premium. i.e. at an amount more than the nominal or par value of
shares. Thus, where a share of the nominal value of ` 100 is issued at ` 105, it is said to
have been issued at a premium of 5 per cent.
When the issue is at a premium, the amount of premium may technically be called at any
stage of share capital transactions. However, premium is generally called with the
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amount
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due on allotment, sometimes with the application of money and rarely with the call money.

Securities Premium Account may be used by the company

To issue bonus shares

To write off To write off the expenses of or To pay premium on the
commission
preliminary expenses paid, or discount allowed
of the company redemption
on any ofofthe
reference
securities
securities
or debentu
or d

When shares are issued at a premium, the journal entries are as follows
No Particulars LF Dr.Rs. Cr.Rs.
a) Premium amount called with Application money
I. Bank A/c Dr.
To Share Application A/c
[ Money received on application for shares@
Rs.per Shares including premium]
II. Share Application A/c Dr.
To Security Premium A/c
To Share Capital A/c
b) Premium amount called with Allotment money
I. Share Allotment A/c Dr.
To Share Capital A/c
To Securities Premium A/c
[Amount due on allotment of Shares@Rs.
Per share including premium]
II. BankA/c Dr.
To Share Allotment A/c
[Money received including premium consequent
upon allotment]
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6. SHARESISSUED AT DISCOUNT
If shares are issue at an amount less than the nominal or par value of shares. The excess
of the nominal value over the issue price represents discount on the issue of shares. For
example, when a share of the nominal value of ` 100 is issued at ` 98, it is said to
have been issued at a discount of 2 per cent.
According to Section 53 of the Companies Act, 2013, a Company cannot issue
shares at a
discount except in the case of issue of sweat equity shares (issued to
employees and directors). Thus any issue of shares at discount shall be
void.

7. SUBSCRIPTION OF
SHARES Minimum
Subscription
A public limited company cannot make any allotment of shares unless the amount of
minimum subscription stated in the prospectus has been subscribed and the sum
payable as application money for such shares has been paid to and received by the
company.
As per guidelines of the Securities Exchange Board of India (SEBI) a company must receive
a minimum of 90% subscription against the entire issue., the subscription
shall be refunded to the applicants within 42 days from the date of closure of
issue.

Full Subscription
Issue is fully subscribed if the number of shares offered for subscription and the number
of shares actually subscribed by the public are same.

Under Subscription
It means the number of shares offered for subscription is more than the number of
shares subscribed by the public. It must be remembered that shares can be allotted, in
this case, only when the minimum subscription is received.

Over Subscription
Over subscription is the application money received for more than the number of shares
offered to the public by a company.
Shares can be allotted to the applicants by a company in any manner it thinks proper.
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 The company may reject some applicants in full i.e. no shares are allotted to some
applicants and application money is refunded.
 Usually multiple applications by the same persons are not considered.
 A third alternative is that a company may allot shares to the applicants on pro-rata
basis. Pro-rata allotment means allotment in proportion of shares applied
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Under pro-rata allotment, the excess application money received is adjusted against the
amount due on allotment or calls.The entries are

9. CALLS IN ADVANCE and CALLS IN

ARREARS Calls-in-Arrears
Sometimes shareholders fail to pay the amount due on allotment or calls. The total
unpaid amount on one or more installments is known as Calls-in-Arrears or Unpaid Calls.
hence, it is shown by way of deduction from ‘called-up capital’ to arrive at paid-up value
of the share capital. For recording ‘Calls-in-Arrears’, the following journal entry is
recorded :

Calls-in-Advance
Some shareholders may sometimes pay a part, or whole, of the amount not yet called
up, such amount is known as Calls-in-advance. According to Table F, interest at a
rate not exceeding 12 per cent p.a. is to be paid on such advance call money.
This amount is credited in Calls-in-Advance Account. The following entry is recorded:

When calls become actually due, calls-in-advance account is adjusted at the time of the
call. For this the following journal entry is recorded:
Calls-in-Advance A/c Dr. [Call amount received in advance]
Bank A/c Dr. [Remaining call money received, if any]
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N Particulars LF Dr. Rs. Cr. Rs.

o
1 On refund of application money to applicants to who
shares have not been allotted.
Share application A/c Dr.
To Bank A/c

2. When only part of shares applied for are allowed

Share application A/c Dr.
To Share Allotment A/c Dr.
To share calls in advance A/c

Calls-in-Arrears A/c Dr. [Amount of Unpaid Calls]

Bank A/c Dr. [Amount received]
To Share Allotment A/c [Total allotment money due]
To Share Calls A/c [Total Call money due]

Bank A/c Dr. [Call amount received in advance]

To Call-in-Advance A/c
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To Particular Call A/c [Call money due]

(Being call in advance adjusted and call money due received)

10. INTEREST ON CALLS-IN-ARREARS AND CALLS-IN-ADVANCE

Interest on calls in arrears is recoverable and that in respect of calls in advance is
payable, according to provisions in this regard in the articles of the company, at the rates
mentioned therein or those to be fixed by the directors, within the limits prescribed by
the Articles. Table F prescribes 10% and 12% p.a. as the maximum rates respectively for
calls in arrears and those in advance.
Interest on Calls in Arrears Interest on Calls in Advance
 It is payable by shareholders to  It is payable by the Company to
company on the calls due but remaining Shareholders on the call money
unpaid. received in advance but not yet due.

 As per Table F maximum prescribed rate  As per Table F maximum prescribed

is 10%. rate is 12%.

 Period considered : From the date call  Period considered: From the date
money was due to the date money is money was received to the day call was
finally received. finally made due.

 Directors have a right to waive off such  Shareholders are not entitled for any
interest in individual cases at their own dividend on calls in advance.
discretion.

 It is a nominal account in nature and is  It is a nominal account in nature

credited to statement of profit and loss with interest being an expense for
as an income. the company.
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The journal entries for calls-in-arrears are as follows :

N Particulars LF Dr. Rs. Cr. Rs.
o
1 For interest receivable on calls-in-arrears
Shareholders’A/c Dr.
To Interest on calls-in-arrears A/c
(Being interest on calls in arrears at the rate of ...%
made
due)

2. For receipt of interest

Bank A/c Dr.
To Shareholders’A/c

The accounting treatment of interest on Calls-in-Advance is as follows

N Particulars LF Dr. Rs. Cr. Rs.
o
1 For Interest Due
Interest on Calls-in-AdvanceA/c Dr.
To Shareholders’A/c c
(Being interest on calls in advance made due)

2. For payment of interest

Shareholders’A/c Dr.
To Bank A/c
(Being interest paid on calls-in-advance)

11.FORFEITURE OF SHARES
Failure to pay call money results in forfeiture of shares. Forfeiture of shares is the action
taken by a company to cancel the shares on account of non-payment of a call or interest
thereon after serving him a prior notice as prescribed by the Articles.
Forfeiture of Shares Which Were Issued At Par
No Particulars LF Dr.Rs. Cr. Rs.
1 Share Capital Account Dr.
To Forfeited Shares A/c
To Share Allotment A/c
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To Share First Call A/c

To Share Final Call A/c
Where all amounts due on allotment, first call and final call have been transferred to Calls-
in- Arrears Account, the entry will be:
No Particulars LF Dr.Rs. Cr. Rs.
1 Share Capital Account Dr.
To Calls-in-Arrear A/c
To Forfeited Shares A/c

Forfeiture of Shares Which Were Issued At A Premium

In this case, Share Capital Account will be debited with the called-up value of shares
forfeited. If the premium on such shares has not been paid by the shareholders, the
Securities Premium Account will be debited to cancel it. (if it was credited earlier).
Allotment, Calls and Forfeited Accounts will be credited in the usual manner. If the
premium has already received by the company, it cannot be cancelled even if the shares
are forfeited in the future.

Forfeiture of Fully Paid-Up Shares

Fully paid up shares may be forfeited for realisation of debts of the shareholder if the
Articles specifically provide it.

12.RE-ISSUE OF FORFEITED SHARES

A forfeited share is merely a share available to the company for sale and remains vested
in the company for that purpose only. Reissue of forfeited shares is not allotment of
shares but only a sale. Forfeited shares can be issued at any price so long as the total
amount received (from the original allotted and the second purchaser)
Reissue of forfeited shares is not allotment of shares but only
a sale.
N Particulars LF Dr. Cr.
o
a) Bank A/c Dr.
Forfeited Shares A/c
To Share Capital A/c
(Being the re-issue of ………… Shares @ Rs…………
each as per Board's Resolution No…....Dated)
b) Forfeited Shares A/c Dr.
To Capital Reserve A/c
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(Being the profit on re-issue, transferred to capital

reserve)

Calculation Of Profit On Re-issue Of Forfeited Shares

The credit balance of forfeited shares account cannot be considered a surplus until the
shares forfeited have been re-issued, because the company may, on re-issue allow the
discount to the new purchaser equivalent to the amount held in credit in this regard in the
forfeited shares account.

Points for Consideration:

In connection with re-issue the following points are important
1. Loss on re-issue should not exceed the forfeited amount
2. If the loss on re-issue is less than the amount forfeited, the surplus should be
transferred to Capital Reserve.
3. The forfeited amount on shares not yet reissued should be shown in the Balance Sheet
as an addition to the share capital
4. When only a portion of the forfeited shares are re-issued then the profit made
on reissue of such shares must be transferred to Capital Reserve.
5. When the shares are re-issued at a loss, such loss is to be debited to “Forfeited Shares
Account”
6. If the shares are re-issued at a price which is more than the face value of the
shares, the excess amount will be credited to Securities Premium Account.
7. If the re-issued amount and forfeited amount (taken together) exceeds the face
value of the shares re-issued, it is not necessary to transfer such amount to
Securities Premium Account.

13.ISSUE OF SHARES FOR CONSIDERATION OTHER THAN CASH

Sometimes a company may issue shares in a direct exchange for land, buildings or other
assets. Shares may also be issued in payment for services rendered by promoters,
lawyers in the formation of the company. In the Balance Sheet, these shares should be
shown separately.
No Particulars LF Dr. Cr.
Rs. Rs.
a) When assets are purchased in exchange of
shares
Assets A/c Dr.
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To Share Capital A/c

b) When shares are issued to promoters
Goodwill A/c Dr.
To Share Capital A/c

14.ALTERATION OF SHARE CAPITAL BY SUB-DIVISION OR CONSOLIDATION OF

SHARES
If authorised by its Articles a company may, in a general meeting, decide to sub divide or
consolidate the shares into those of a smaller or higher denomination than that fixed
by the Memorandum of Association.
Example: of Sub - Division2, 00,000 Equity Shares of Rs. 100 each be sub-divided into
20,00,000 Equity Shares of Rs. 10each
Accounting Entry:
No Particulars LF Dr. Rs. Cr. Rs.
Equity Share Capital A/c (Rs.100 each) Dr. 2,00,00,000
2,00,00,000
To Equity Share Capital A/c (Rs. 10 each)
Example of Consolidation 5,00,000 Equity shares of Rs. 10 each be consolidated into
50,000 Equity Shares of Rs. 100each
Accounting Entry:
No Particulars L Dr. Rs. Cr. Rs.
F
Equity Share Capital A/c (Rs.10each) Dr. 50,00,000
To Equity ShareCapitalA/c(Rs. 100 50,00,000
each)

15.DEBENTURES
1. It is a document which evidence a loan made to a company.
2. It is a fixed interest bearing security where itself falls due on specific dates.
3. Interest is payable at a predetermined fixed rate, regardless of the level of profit.
4. The original sum is repaid at a specified future date or it is converted into shares
or other debentures.

* Discount on issue of Debenture A/c

A company issues debentures at a discount when the market rate of interest is higher
than the debenture interest. The difference between the nominal value of debentures
and cash received is transferred to “Discount on Issue of Debentures A/c”.
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16.ISSUE OF DEBENTURES AS COLLATERAL SECURITY
Collateral security means secondary or supporting security for a loan, which can be realised
by the lender in the event of the original loan not being repaid on the due date.
When the loan is repaid on the due date, these debentures are at once released with the
main security. In case, the company cannot repay its loan and the interest thereon on the
due date, the lender becomes the debenture holder who can exercise all the rights of a
debenture holder. The holder of such debentures is entitled to interest only on the
amount of loan, but not on the debentures.
Accounting entries:
There are two methods of showing these types of debentures in the accounts of a company.
Method 1
No entry is made in the books of account of the company at the time of making
issue of such debentures. In the Balance Sheet the fact of the debentures being
issued and outstanding is shown by a note under the liability secured.
Method 2
Under this method, the following entry is made to record the issue of such debentures:
No Particulars LF Dr. Rs. Cr. Rs.
Debentures Suspense A/c Dr.
To % Debentures A/c
(Being the issue of...........debentures collaterally ……
as
per Board’s Resolution No….....Dated)
When the loan is repaid, the entry is reversed in order to cancel it.

17.ISSUE OF DEBENTURES IN CONSIDERATION OTHER THAN FOR CASH

Debentures can also be issued for consideration other than for cash, such as for
purchase of land, machinery etc. In this case, the following entries are passed:
N Particulars LF Dr. Rs. Cr. Rs.
o
1 On purchase of business assets
Sundry Assets A/c (Assets taken over) Dr.
To Sundry Liabilities A/c (Liabilities assumed) To Vendors A/c
(Purchase Consideration)
(Being the assets and liabilities are taken over)
On issue of debentures
2 Vendors A/c Dr.
To % Debentures A/c
(Being the issue of ……debentures to satisfy
purchase consideration)
CLASS WORK
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1. A Ltd. issued 3,50,000, 12% Debentures of `100 each at par payable in full on application by
1st April, Application were received for 3,85,000 Debentures. Debentures were allotted on 7th
April. Excess money refunded on the same date.
You are required to prepare necessary Journal Entries (including cash transactions) in the
books of the company. (RTP Nov 2018)
Solution
In the books of A
Limited Journal
Entries
Date Particulars Dr. CR.
` ` '000
'000
April 1 Bank A/c Dr. 38,500
To 12% Debentures Application A/c 38,500
(Being money received on 3,85,000 debentures)
April 7 12% Debentures Application A/c Dr. 3,500
To Bank A/c 3,500
(Being money on 35,000 debentures refunded as per
Board’s Resolution No…..dated…)
April 7 12% Debentures Application A/c Dr. 35,000
To 12% Debentures A/c 35,000
(Being the allotment of 3,50,000 debentures of `
100 each at par, as per Board’s Resolution
No….dated…)

2. Riya Limited issued 20,000 14% Debentures of the nominal value of `1,00,00,000 as follows:
a) To sundry per sons for cash at 90% of nominal value of ` 50,00,000.
b) To a vendor for purchase of fixed assets worth ` 20,00,000 – ` 25,00,000 nominal value.
c) To the banker as collateral security for a loan of ` 20,00,000 – ` 25,00,000 nominal value.
You are required to prepare necessary journal entries Journal Entries. (RTP May 2018)
Solution
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In the books of Riya Company Ltd.

Journal Entries
Sr.No Particulars Dr. Cr.
` `
(a) Bank A/c Dr. 45,00,000
To Debentures Application A/c 45,00,000
(Being the application money received on 10,000
debentures @ ` 450 each)
Debentures Application A/c Dr. 45,00,000
Discount on issue of Debentures A/c Dr. 5,00,000
To 14% Debentures A/c 50,00,000
(Being the issue of 10,000 14% Debentures @ 90% as
per Board’s Resolution No….dated….)
(b) Fixed Assets A/c Dr. 20,00,000
To Vendor A/c 20,00,000
(Being the purchase of fixed assets from vendor)
Vendor A/c Dr. 20,00,000
Discount on Issue of Debentures A/c Dr. 5,00,000
To 14% Debentures A/c 25,00,000
(Being the issue of debentures of `25,00,000
to vendor to satisfy his claim)
(c) Bank A/c Dr. 20,00,000
To Bank Loan A/c (See Note) 20,00,000
(Being a loan of ` 20,00,000 taken from bank by
issuing debentures of `25,00,000 as collateral security)

Note: No entry is made in the books of account of the company at the time of making issue
of such debentures. In the “Notes to Accounts” of Balance Sheet, the fact that the debentures
being issued as collateral security and outstanding are shown by a note under the liability
secured.
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3. On 1st April, 2017, Pehal Ltd. issued 64,500 shares of ` 100 each payable as follows:
` 30 on application, ` 30 on allotment, ` 20 on 1st October, 2017; and ` 20 on 1st
February, 2018.
By 20th May, 60,000 shares were applied for and all applications were accepted. Allotment
was made on 1st June. All sums due on allotment were received on 15 th July; those on 1st call
were received on 20th October. You are required to prepare the Journal entries to record
the transactions when accounts were closed on 31st March, 2018. (RTP Nov 2018)
Solution
Book of Pehal Ltd.
Journal Entries
Date Particulars Dr. Cr.
2017 ` `
May 20 Bank Account Dr. 18,00,000
To Share Application A/c 18,00,000
(Application money on 60,000 shares at ` 30 per
share received.)
June 1 Share Application A/c Dr. 18,00,000
To Share Capital A/c 18,00,000
(The amount transferred to Capital Account on
60,000 shares ` 30 on application. Directors’
resolution no...........dated…. )
Share Allotment A/c Dr. 18,00,000
To Share Capital A/c 18,00,000
(Being share allotment made due at ` 30 per
share. Directors’ resolution no dated )
July 15 Bank Account Dr. 18,00,000
To Share Application and Allotment 18,00,000
A/c (The sums due on allotment received.)
Oct. 1 Share First Call Account Dr. 12,00,000
To Share Capital Account 12,00,000
(Amount due from members in respect of first
call-on 60,000 shares at ` 20 as per
Directors, resolution no... dated...)
Oct. 20 Bank Account Dr. 12,00,000
To Share First Call Account 12,00,000
C

(Receipt of the amounts due on first call.)

2018
Feb. 1 Share Second and Final Call A/c Dr. 12,00,000
To Share Capital A/c 12,00,000
(Amount due on 60,000 share at ` 20 per share
on second and final call, as per Directors
resolution no... dated...)
Mar. 31 Bank Account Dr. 12,00,000
To Share Second & Final Call A/c 12,00,000
(Amount received against the final call on
60,000 shares at `20 per share.)