Page 21 - DEBK12

Chapter 8 . Company Accounts—Accounting for Share Capital 8.11
Illustration 4.
A company purchased a running business from M/s. Maheshwari Brothers for a sum of
` 1,50,000, payable as ` 1,20,000 in fully paid Equity Shares of ` 10 each and balance in cash.
The assets and liabilities consisted of the following:
Plant and Machinery ` 40,000; Stock ` 50,000;
Building ` 40,000; Cash ` 20,000;
Sundry Debtors ` 30,000; Sundry Creditors ` 20,000.
You are required to pass necessary Journal entries in the company’s books.

Solution: JOURNAL
Date Particulars L.F. Dr. (`) Cr. (`)
Plant and Machinery A/c ...Dr. 40,000
Building A/c ...Dr. 40,000
Sundry Debtors A/c ...Dr. 30,000
Stock A/c ...Dr. 50,000
Cash A/c ...Dr. 20,000
To Sundry Creditors A/c 20,000
To M/s. Maheshwari Brothers 1,50,000
To Capital Reserve A/c (Balancing Figure) 10,000
(Assets and liabilities taken over)
M/s. Maheshwari Brothers ...Dr. 1,50,000
To Equity Share Capital A/c 1,20,000
To Bank A/c 30,000
(Consideration paid to M/s. Maheshwari Brothers)
Illustration 5 (Forfeiture of Shares issued at Premium—Premium not received).
Mukesh Ltd. issued 10,000 Equity Shares of ` 10 each at ` 12 per Equity Share. The amount
was payable as follows:
On application ` 3, on allotment ` 4 (including premium), on first call ` 3 and on final call ` 2.
The company did not make the final call. Mohan, holder of 250 Equity Shares, failed to pay
allotment and first call money. His shares were forfeited.
Pass the Journal entry for forfeiture of Mohan’s shares.
Solution: JOURNAL

Date Particulars L.F. Dr. (`) Cr. (`)
Equity Share Capital A/c (250 × ` 8) ...Dr. 2,000
Securities Premium Reserve A/c (250 × ` 2) ...Dr. 500
To Forfeited Shares A/c (250 × ` 3) 750
To Equity Shares Allotment A/c* (250 × ` 4) 1,000
To Equity Shares First Call A/c* (250 × ` 3) 750
(Forfeiture of Mohan’s 250 Equity Shares for non-payment of allotment
and first call money)
* If amount not received towards allotment and first call is transferred to Calls-in-Arrears Account,
Calls-in-Arrears Account will be credited.
Notes:
1. On forfeiture of shares, Share Capital Account is debited with the amount called on these shares (i.e., Number
of Forfeited Shares × Called-up Value per share).
2. In the case of Mohan, Securities Premium Reserve Account has been debited because the amount of premium
has not been received.