SUBECT: ACCOUNTANCY

CLASS: XII(SESSION 2020-21)

UNIT 3 – ACCOUNTING FOR COMPANIES
Ch.- 8 Accounting for Share Capital
Handout -2

Collaborating Technique
 Explanatory
 Group discussion

Recapulitation
 Entries related with goodwill at the time of admission of a partner

UNDER SUBSCRIPTION
A company may receive applications for less number of shares than what it issued; this is the situation of under
subscription.
According to SEBI Guidelines, if a company does not receive minimum subscription, i.e., it does not receive
subscription for at least 90% of the shares issued; it cannot allot the shares.

Q.1 F Ltd. issued 50,000 equity shares of 10 each, payable 3 on Application; 4 on Allotment and 4
on First & Final call. Applications were received for 48,000 shares. All the applied shares are duly
allotted. All the money due was duly received. Pass necessary journal entries in the books of the
company.
 In the books of F Ltd.
Journal
Date Particulars
Bank A/c ………………………… Dr 1,92,00
To Share Application A/c 0 1,92,000
(Being application money received 48,000 @ Rs. 4 p.s.)
Share Application A/c …… Dr 1,92,00
To Equity Share Capital 0 1,92,000
(being share allotted & application money adjusted)
Share Allotment A/c ………. Dr 1,92,00
To Equity Share Capital 0 1,44,000
To SPR 48,000
(Allotment due on 48,000 shares @ Rs. 4per share including premium
Bank ……………………………Dr 1,92,00
To Share allotment 0 1,92,000
(allotment received on shares)
Share 1st and Final Call ……. Dr 1,44,00
To Share Capital 0 1,44,000
(1st call due on 48,000 shares @ Rs. 3per share)
Bank A/c …………………….. Dr 1,44,00
To Share 1st & Final call 0 1,44,000
st
(1 call received on shares)

Q.2 G Ltd. invited applications for 2,00,000 shares of 10 each payable on applications 4 per share and
balance on allotment. Public had applied for 1,60,000 shares.. How the company would deal in this
regard and Pass necessary entries in the following alternative cases:-
(a) Company does not have its own Article of Association and follow Table F of Company Act 2013.
(b) Directors of the company had provided 80% as minimum subscriptions in articles of association.
(c) Assuming articles association is silent and if the underwriters are taking up the remaining shares to
make it minimum subscriptions entries in this regard.
(a)
(b) In the books of F Ltd.
(c) Journal
Date Particulars
Bank A/c ………………………… Dr 6,40,00
To Share Application A/c 0 6,40,000
(Being application money received on 1,60,000 shares @ Rs. 4p.s.)
Share Application A/c …… Dr 6,40,00
To Bank 0 6,40,000
(being application money refunded due to non receipt of minimum
subsription)

(b)
In the books of F Ltd.
Journal
Date Particulars
Bank A/c ………………………… Dr 6,40,00
To Share Application A/c 0 6,40,000
(Being application money received)
 Share Application A/c …… Dr 6,40,00
To Equity Share Capital 0 6,40,000
(being share allotted & application money adjusted)
Share Allotment A/c ………. Dr 9,60,00
To Equity Share Capital 0 9,60,000
(Allotment due on 1,60,000 shares @ Rs. 6per share)
Bank ……………………………Dr 9,60,00
To Share allotment 0 9,60,000
(allotment received on shares)

(c)
In the books of F Ltd.
Journal
Date Particulars
Bank A/c ………………………… Dr 7,20,000
To Share Application A/c 7,20,000
(Being application money received 1,80,000 shares @ Rs. 4p.s.)
Share Application A/c …… Dr 7,20,000
To Equity Share Capital 7,20,000
(being share allotted & application money adjusted)
Share Allotment A/c ………. Dr 10,80,00
To Equity Share Capital 0 10,80,000
(Allotment due on 1,80,000 shares @ Rs. 6 per share)
Bank ……………………………Dr 10,80,00
To Share allotment 0 10,80,000
(allotment received on shares)

Calls in arrears

If a shareholder does not pay the called amount due on allotment or on any call, the amount not so
received is called Calls-in-arrears.

Calls-in-arrears are shown as a deduction from subscribed capital under ‘Share Capital’ under the major
head “Shareholders’ Funds” in the Company’s Balance Sheet.

The company if authorized by its AOA may charge interest at the specified rate on Calls-in-Arrears.
According to Table ‘F’ interest is charged on Calls-in-arrears @ 10% p.a.

There are two methods of accounting of Calls-in-Arrears:-

 Without opening Calls-in-Arrears A/c
 By opening calls in arrears A/c

Q.3 H Ltd. issued 75,000 Equity Shares of Rs. 10 each, at par, payable Rs. 5 on application; Rs, 3 on
Allotment and balance on call. All the shares are duly subscribed and allotted. All the money due was duly
received except allotment on 400 shares and call on 1,000 shares. Pass necessary journal entries in the
books of the company, without opening Calls-in- Arrears A/c.
 In the books of H Ltd.
Journal
Date Particulars
Bank A/c ………………………… Dr 3,75,00
To Share Application A/c 0 3,75,000
(Being application money received on 75,000 shares)
Share Application A/c …… Dr 3,75,00
To Equity Share Capital 0 3,75,000
(being share allotted & application money adjusted)
Share Allotment A/c ………. Dr 2,25,00
To Equity Share Capital 0 2,25,000
(Allotment due on 75,000 shares @ Rs. 3 per share)
Bank ……………………………Dr 2,23,80
To Share allotment 0 2,23,800
(allotment received on 74,600 shares)
Share 1st and Final Call ……. Dr 1,50,00
To Share Capital 0 1,50,000
st
(1 call due on 75,000 shares @ Rs. 2 per share)
Bank A/c …………………….. Dr 1,48,00
To Share 1st & Final call 0 1,48,000
st
(1 call received on 74,000 shares)

Q.4 I Ltd. issued 60,000 Equity Shares of Rs. 10 each, at 20% premium, payable Rs. 5 on application; Rs, 5 on
Allotment and balance in two equal calls. Public subscribed for 55,000 shares which were duly allotted.
Mr. A holding 600 shares failed to pay two calls and Mr. B failed to pay final call on 500 shares. Pass
necessary journal entries in the books of the company, by opening Calls-in-Arrears A/c.

In the books of F Ltd.

Journal
Date Particulars
Bank A/c ………………………… Dr 2,75,00
To Share Application A/c 0 2,75,000
(Being application money received on 55,000 shares)
Share Application A/c …… Dr 2,75,00
To Equity Share Capital 0 2,75,000
(being share allotted & application money adjusted)
Share Allotment A/c ………. Dr 2,75,00
To Equity Share Capital 0 1,65,000
To SPR 1,10,000
(Allotment due on 55,000 shares @ Rs. per share)
Bank ……………………………Dr 2,75,00
To Share allotment 0 2,75,000
(allotment received on 55,0000 shares)
Share 1st Call ……. Dr 55,000
To Share Capital 55,000
st
(1 call due on 55,000 shares @ Rs. 1 per share)
Bank A/c …………………….. Dr 54,400
Calls-in-arrears 600
To Share 1st call 55,000
(1st call received on shares)
 Share 2nd & Final call 55,000
To Share Capital 55,000
Bank 54,000
Calls in arrears 1,000
To Share 2nd & Final call 55,000

Q.5 J Ltd. issued 40,000 Equity Shares of Rs. 10 each, payable Rs. 10 on application( including Rs 5 as
premium); Rs, 10 on Allotment (including Rs. 8 as premium) and balance on call. All the shares are duly
subscribed and allotted. Mr. X paid the amount of allotment on his 1,000 shares along with call money and
Mr. Y, holder of 700 shares failed to pay call. Pass necessary journal entries in the books of the company.
Application = 10= 5C + 5 P allotment = 10 = 2C + 8P
In the books of F Ltd.
Journal
Date Particulars
Bank A/c ………………………… Dr 4,00,00
To Share Application A/c 0 4,00,000
(Being application money received)
Share Application A/c …… Dr 4,00,00
To Equity Share Capital 0 2,00,000
To SPR 2,00,000
(being share allotted & application money adjusted)
Share Allotment A/c ………. Dr 4,00,00
To Equity Share Capital 0 80,000
To SPR 3,20,000
(Allotment due on shares @ Rs. per share)
Bank ……………………………Dr 3,90,00
Calls in arrears 0
To Share allotment 10,000 4,00,000
(allotment received on shares)
Share 1st and Final Call ……. Dr 1,20,00
To Share Capital 0 1,20,000
st
(1 call due on shares @ Rs. per share)
Bank A/c …………………….. Dr 1,27,90
Calls in arrear 0
To Share 1st & Final call 2,100 1,20,000
To calls in arrear 10,000
(1st call received on shares)

Calls in Advance

If a shareholder paid the uncalled amount of call and/or calls, the amount so received is called Calls-in-
advance.

Calls-in-Advance are shown under ‘Other Current Liabilities’ under the major head ‘Current Liabilities’
in the Company’s Balance Sheet.
 The company if authorized by its AOA may provide interest at the specified rate on Calls-in-Advance.
According to Table ‘F’ interest is provided on Calls-in-arrears @ 12% p.a.

There are two methods of accounting of Calls-in-Advance:-

 Without opening Calls-in-Advance A/c
 By opening Calls-in-Advance A/c

Q.6 K Limited issued to the public for subscription 20,000 shares of 10 each at a premium of 20% payable
as follows:-
3 each (including 1 as premium) on application,
3 on allotment and
Balance including remaining premium on first and Final Call
All the shares were duly subscribed and allotted.
Mr. D to whom 800 shares were allotted paid only the application money, and Mr. E who had applied for
1,200 shares paid the entire call money due along with the allotment.
Give journal entries (without opening Calls in advance / Calls in Arrears Accounts).

Q.7 L Limited issued to the public for subscription 20,000 shares of 10 each at a premium of 20% payable as
follows:-
3 each (including 1 as premium) on application,
3 on allotment and
Balance including remaining premium on first and Final Call
All the shares were duly subscribed and allotted.
Mr. D to whom 800 shares were allotted paid only the application money, and Mr. E who had applied for
1,200 shares paid the entire call money due along with the allotment.
Journalise and Prepare calls in arrear and calls in advance A/cs.

Notebook Work:-
Do Q. Nos. 21, 24, 25 and 26