JAHANGIR TUTORIALS

CORPORATE
ACCOUNTS
By Prof. Fatema Kagalwala (CS, LLB, MCom)
CORPORATE ACOOUNTING
CS EXECUTIVE PROF.FATEMA KAGALWALA (CS, LLB, MCOM)

ACCOUNTING FOR SHARE CAPITAL

A – ISSUE OF SHARES

Q.1 P LTD was registered with an authorised nominal capital of Rs. 10,00,000 divided
into 1,00,000 equity shares of Rs 10 each out of which 50,000 equity shares were
offered to the public for subscription. The shares were payable as under:

Rs3 per share on application

Rs 2 per share on allotment
Rs 2 per share on 1st call
Rs 3 per share on 2nd and final call
The shares were fully subscribed and the money was duly received. Show the journal
and book entries.

Q.2 B Ltd. issued 20,000 equity shares of 10 each at a premium of 2 per share payable as
follows: on application 5(including Re.1 premium), on allotment 5 (including Re.1
premium); on final call t2. Applications were received for 24,000 shares. Letters of regret
were issued to applicants for 4,000 shares and were allotted to all the other applicants,
Mr. A, who is the holder of 200 shares, failed to pay the allotment and call money, the
shares were forfeited. Show the Journal Entries and Cash Book in the books of B Ltd.

Q.3 M/s Herbal Tea Plantations Ltd. was registered with a capital of Rs 1 crore divided
into equity shares of Rs 100 each. The company offered to public 50000 shares at a
premium of Rs 20 per share. The amount on shares was payable as:
Rs 25 on application
Rs 50 (including Rs 20 premium) on allotment Rs 20 on first call and Rs 25 on final call.
Applications were received for 75000 shares. Shares were alloted to the applicants on
pro rata basis. Kanti Bhai who was allotted 500 shares did not pay the allotment money.
He also failed to pay the first call. His shares were forfeited. Sheetal was holding 200
shares did not pay the first call. Final call was not made.
Make journal entries in the books of the company.

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CORPORATE ACOOUNTING
CS EXECUTIVE PROF.FATEMA KAGALWALA (CS, LLB, MCOM)

PAST EXAM QUESTIONS

Dec 2024

Campa Ltd. issued 4,00,000 shares of ₹ 50 each at a premium of ₹ 15 per share. Application for
4,50,000 shares was received. The amount was payable as follows:
 On Application ₹ 15
 On Allotment ₹ 16(including premium ₹ 6)
 On First Call ₹ 20 (including premium ₹ 5)
 On Final Call ₹ 14 (including premium ₹ 4)
1) Alpha, who was allotted 6000 shares did not pay allotment and first call and thereafter
his shares were forfeited.
2) Beta, who was allotted 4000 shares did not pay first call and thereafter his shares were
forfeited.
3) Gama, who was allotted 15000 shares did not pay flnal call and thereafter his shares
were forfeited.
Half of the shares of Alpha and Beta were reissued at ₹ 42 You are required to pass journal entries
for the forfeiture and reissue of shares

June 2024

Zedux Ltd. decided to issue 60,000 shares of ₹ 10 each at a premium of ₹ 2 per share. The amount
on shares was payable as follows:
On application ₹ 2.00
On allotment ₹ 5.00
(Including premium)
First Call ₹ 2.00
Final Call ₹ 3.00

Applications were received for 1,00,000 shares. Shares were allotted on a pro rata basis. Walter was
allotted 1,000 shares. Walter did not pay the allotment money and subsequent calls. Walter’s shares
were forfeited.

Pass the necessary journal entries.

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CORPORATE ACOOUNTING
CS EXECUTIVE PROF.FATEMA KAGALWALA (CS, LLB, MCOM)

Dec 2023

1. Technocrats Ltd. invited applications for 1,00,000 equity shares of ₹ 30 each. The shares
were issued at a premium of ₹ 15 per share, payable as follows:

On Application and Allotment: ₹ 24 per share (incl. premium of ₹ 9) On first and final call:
Balance including remaining premium
Applications for 1,50,000 shares were received. Applicants of 10,000 shares were rejected on
allotment, and pro-rata allotment was made to remaining applicants as follows:
Category A — Applicants for 80,000 shares were allotted60,000 shares
Category B — Applicants for 60,000 shares were allotted 40,000 shares

Mr. X, who belonged to A category, was allotted 300 shares. He failed to pay the call money. Mr. Y,
who belonged to B category and applied for 300 shares, also failed to pay the call money.

These shares were forfeited and reissued as fully paid @ ₹ 36 per share. Assume that the excess
received on application is to be adjusted towards share capital account first. You are required:
(a) Pass the necessary journal entries to record the above transactions.
(b) When excess application money utilized for payment of Share Capital
(c) What are the restrictions on use of Securities Premium Account as per provisions of the
Companies Act, 2013? What is the implication if a company violates these provisions?
As per the provisions of the Companies Act, 2013, amount of premium received on issue of shares is
a capital receipt and is to be transferred to a separate account called “Securities Premium Account”.
According to the Companies Act, 2013, "Securities Premium Account” can be used only for the
following purposes:
1) Towards the issue of unissued shares to the members of the company as fully paid bonus
shares.
2) In writing-off the preliminary expenses of the company.
3) In writing-off the expenses of or the commission paid or discount a1lowed on any issue of
shares or debentures of the company.
4) In providing for any premium payable on redemption of any redeemable preference shares
or any debentures of the company, or
5) For purchase of its own shares or other securities u/s 68.

If the company contravenes the above provisions and utilizes the amount of securities premium
except for the modes specified above, it will attract the provisions relating to reduction of share
capital of a company u/s 66 of the Companies Act, 2013.

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CORPORATE ACOOUNTING
CS EXECUTIVE PROF.FATEMA KAGALWALA (CS, LLB, MCOM)

PAST EXAM QUESTIONS FOR PRACTICE

1. Shiva Ltd. forfeited 4,500 equity shares of ₹ 10 each (which are issued on 40%
pro-rata (basis) for non-payment of allotment @ ₹ 6 (including premium of ₹ 2.50)
and first and final call ₹ 3 pershare. If the excess money received on application is used
for receiving the amount due as securities premium, what amount should be credited to
‘Share Forfeited Account? (DEC 2019)

(a) ₹ 15,750
(b) ₹ 28,125
(c) ₹ 39,375
(d) ₹ 13,500

2. P Ltd. forfeited 5,000 equity shares of ₹ 10 each for non-payment of first

and final call of ₹ 2.50 per share which were issued at a premium of ₹ 3 per share
receivable at allotment. Out of these, 3,200 shares are re-issued at ₹ 8 per share as fully
paid-up. The amount transferred to Capital Reserve will be: (DEC 2019)

(a) ₹ 37,500
(b) ₹ 31,100
(c) ₹ 24,000
(d) ₹ 17,600

3. C Ltd. invited applications for the issue of 20 Lakh equity shares of ₹ 10 each
payable ₹ 3 on application and ₹ 7 on allotment. Applications were received for 35
Lakh equity shares. Applications for 7 Lakh shares were rejected and pro-rata
allotment was made to remaining applicants. Excess application money was
adjusted on the sums due on allotment. Ravi could not pay allotment money on
his 2500 allotted shares. The amount received on allotment will be: (DEC 2019)

(a) ₹ 1,39,92,500
(b) ₹ 1,15,92,500
(c) ₹ 1,04,86,880
(d) ₹ 1,15,85,500

4. Z Ltd. issued 5,000 equity shares of ₹ 10 each at 10% premium which is

payable on allotment. The company received application money @ ₹ 3 per share
and allotment money received on only 4,500 shares @ ₹ 4 per share. The company
forfeited 500 shares for non- payment of allotment money. At the time of forfeiture,
the Equity Shares Capital a/c will be: (DEC 2019)

(a) Debited with ₹ 5,000

(b) Debited with ₹ 3,500
(c) Debited with ₹ 3,000
(d) Credited with ₹ 3,500

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CORPORATE ACOOUNTING
CS EXECUTIVE PROF.FATEMA KAGALWALA (CS, LLB, MCOM)

5. A company has a subscribed capital of 2,00,000 equity shares of ₹ 25 each, ₹ 20

per share called up. The directors forfeited 200 equity held by a shareholder who failed
to pay the first call made @ ₹ 10 per share. Later, the directors reissued these shares
as ₹ 20 per share paid up at ₹15 per share. On reissue, amount to be
transferred to capital reserve account is_________ (AUG 2021)

(A) ₹ 1,000
(B) ₹ 1,400
(C) ₹ 1,500
(D) ₹ 1,100

6. ABC Ltd. issued 1,00,000 equity shares of ₹ 100 each. payable as under:
On application ₹ 30; On allotment ₹ 30. On final call ₹ 40
1,45,000 applications were received as under:
Applicants applied for 25,000 shares, allotted full.
Applicants applied for 1,00,000 shares, allotted 75,000 shares on pro-rata basis.
Remaining applications were rejected.
Amount received at the time of application is ................................. (DEC 2021)

(A) ₹ 50,00,000
(B) ₹ 43,50,000
(C) ₹ 37,50,000
(D) ₹ 25,00,000

7. In the question number of 6, how much excess money received on

application:(DEC 2021)

(A) ₹ 13,50,000
(B) ₹ 30,00,000
(C) ₹ 27,50,000
(D) ₹ 15,00,000

8. In the question number of 6, amount to be refunded .......................... (DEC 2021)

(A) ₹ 3,50,000
(B) ₹ 4,50,000
(C) ₹ 5,00,000
(D) ₹ 6,00,000

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CORPORATE ACOOUNTING
CS EXECUTIVE PROF.FATEMA KAGALWALA (CS, LLB, MCOM)

9. In the question number of 6, amount of excess application money available

foradjustment against allotment money ............................ (DEC 2021)

(A) ₹ 7,50,000
(B) ₹ 13,50,000
(C) ₹ 15,50,000
(D) ₹ 17,50,000

10. LMN Ltd. allotted 20,000 shares to the applicants of 28,000 shares on pro-
rata basis. The amount payable on application is ₹ 25 per share. Kanika applied
for 700 shares, the numberof shares allotted to Kanika will be: (DEC 2021)

(A) 500 shares

(B) 700 shares
(C) 800 shares
(D) 900 shares

11. A Ltd. forfeited 1,000 shares of ₹ 10 each fully called up for non-payment of
first & final call of ₹ 3 per share. 600 of these shares were reissued at ₹ 9 per share,
fully paid up. What is the amount to be transferred to Capital Reserve Account? (DEC
2021)

(A) ₹ 7,000
(B) ₹ 4,200
(C) ₹ 6,400
(D) ₹ 3,600

12. ABC Ltd. issued 10,000 equity shares of ₹ 100 each at par payable as under:
On application ₹ 30; on allotment ₹ 20; on first and on final call ₹ 50 per share.
Applications were received for 30,000 shares. Applications for 5,000 shares were
rejected and pro-rata allotment was made to the applicants for 25,000 shares. Excess
application money is adjusted towards amount due on allotment and calls.
How much amount will be received in cash on first call? (DEC 2021)

(A) ₹ 1,00,000
(B) ₹ 1,50,000
(C) ₹ 2,00,000
(D) ₹ 2,50,000