- Rathi Industries issued a prospectus for 2000 equity shares at Rs. 10 per share with a Rs. 2 premium to be paid in installments. They received applications for 3000 shares and allotted 2400 shares proportionately. - Anokhi failed to pay allotment and first call money for her 40 shares, which were forfeited. Kasturi failed to pay two calls on her 60 shares, resulting in forfeiture. 80 forfeited shares including Anokhi's were reissued to Shyam as fully paid for Rs. 9 per share. - Journal entries were made for allotment, calls, forfeitures, reissue and profit transfer to the capital reserve. The cash book and balance sheet were

1. Pro-Rata
Allotment,
Calls in Advance,
Forfeiture,
Reissue,
Net Gain :
Problem and
Solution

2. ILLUSTRATION:
Rathi Industries Ltd. issued a prospectus inviting applications
for 2000 Equity shares of Rs. 10 each, at a premium of Rs. 2 per
share payable as follows:
Application……. Rs.2 per share
Allotment(Including Premium)……. Rs.5 per share
First Call……. Rs.3 per share
Second and Final call……Rs.2 per share
The company received application for 3000 shares and allotment
made on pro rata to the applicants of 2400 shares. Money overpaid
on application by the allottees was employed on account of sums
due on allotment.
Anokhi to whom 40 shares were alloted, failed to pay allotment
money and on her failure to pay the first call her shares were
forfeited.
Kasturi the holder of 60 shares failed to pay the two calls, and
her shares were forfeited after the second call.
of the shares forfeited, 80 shares were sold to Shyam, credited
as fully paid, for Rs. 9 per share, the whole of Anokhi’s shares
being included.
Pass journal entries, the cash book and show the Balance Sheet.

3. Applications
Received
3000
Pro Rata
Allotment
2400
Refund
600
Allotment
2000
calls In
Advance
400
24:20
6:5

4. Working Note:
1. Amount due from Anokhi (40 Shares):
Gross Amount due on allotment (40*5) : 200
Less: Anokhi was allowed 40 shares.
Shares were allowed on Pro-Rata
Ratio for allotment on Pro-rata was 6:5
It means Anokhi has allowed 40 shares but
she has applied for more shares:
So,5 shares…..6 applied
40 shares……..? Applied
40*6 = 48 Shares were applied for
5
Excess shares were 8:
Extra amount paid by Anokhi on application(8*2). : 16
——————
Net amount due but not received (calls in arrears) 184
2. Money received on Allotment:
Gross Amount due : 10000
Less: excess application money retained for allotment(400*2) : 800
————————-
Net amount due on allotment. 9200
Less: amount unpaid by Anokhi : 184
————————-
Amount received 9016

5. Statement of Issue of Shares
Installments
No. of
Appli.
Per
share
Amount
Due
Amount
Received
Excess
Amount
Arrears
Application:Rs.2
3000
(2000*2)
4000
(3000*2)
6000
(600*2)
1200
800
-
Allotment : Rs.5
2000
(2000*5)
10000 9016 - 184
First Call :Rs.3
2000
(2000*3)
6000
(1900*3)
5700 - 300
Final Call :Rs.2
1960
(1960*2)
3920
(1900*2)
3800 -
(60*2)
120
Total…. Rs.12
23920 24516
1200
800
604
SOLUTION:

6. Date Particulars
L.
F.
Amount
(Dr)
Amount
(Cr)
1 On Application
a
Bank A/c (3000*2) Dr
To Share Application A/c
(Being application money received)
6000
6000
b
Share Application A/c Dr
To Share Capital A/c (2000*2)
To Bank A/c (Refund 600*2)
To Share Allotment A/c(400*2)
(Being transfer, refund and adjustment
of application money)
6000
4000
1200
800
JOURNAL OF RATHI INDUSTRIES LTD.

7. Date Particulars
L.
F.
Amount
(Dr)
Amount
(Cr)
2 On Allotment
a
Share Allotment A/c (2000*5) Dr
To Share Capital A/c (2000*3)
To Share Premium A/c (2000*2)
(Being amount due on allotment)
10000
6000
4000
b
Bank A/c Dr
To Share Allotment A/c
(Being allotment money received)
9016
9016
3 On First Call
a
Share First Call A/c(2000*3) Dr
To Share Capital A/c
(Being amount due on first call)
6000
6000
b
Bank A/c Dr
To Share First Call A/c
5700
5700

8. Date Particulars
L.
F.
Amount
(Dr)
Amount
(Cr)
4 On Forfeiture of 40 shares of Anokhi
a
Share Capital A/c (8*40) Dr
Share Premium A/c (2*40) Dr
To Share Forfeited A/c (2*48)
To Share Allotment A/c (200-16)
To Share First Call A/c (3*40)
(Being forfeiture of 40 shares of
Anokhi)
320
80
96
184
120

9. Date Particulars
L.
F.
Amount
(Dr)
Amount
(Cr)
5 On Second and Final Call
a
Share Final Call A/c(1960*2) Dr
To Share Capital A/c
(Being amount due on second and final
call)
3920
3920
b
Bank A/c (1900*2) Dr
To Share Final Call A/c
(Being final call money received except
60 shares)
3800
3800

10. Date Particulars
L.
F.
Amount(Dr
)
Amount(Cr
)
6 On Forfeiture of 60 shares of Kasturi
a
Share Capital A/c (10*60) Dr
To Share Forfeited A/c (5*60)
To Share First Call A/c (3*60)
To Share Final Call A/c (2*60)
(Being forfeiture of 60 shares of Kasturi)
600
300
180
120
7 On Reissue of 80 shares
Bank A/c (80*9) Dr
Share Forfeited A/c(discount) (80*1) Dr
To Share Capital A/c (80*10)
(Being reissue of Forfeited Shares)
720
80
800
8 Transfer of Net Gain
Share Forfeited A/c Dr
To Capital Reserve A/c
(Being profit on forfeiture transferred to
capital reserve)
216
216

11. Capital Reserve:
Amount received from Shyam (48*2) : 96
Amount received as capital on
40 shares of Kasturi(40*5) : 200
——————
Total 296
Less : Discount on reissue of 80
share(80*1) : 80
—————-
Gain on forfeiture and reissue
transferred to Capital Reserve : 216

12. Cash Book (Bank Column)
Receipts Amount Payments Amount
To Share Application 6000
By Share Application
(Refund)
1200
To Share Allotment 9016 By Bal C/d 24036
To Share First Call 5700
To Share Final Call 3800
To Share Capital
(Reissue)
720
25236 25236

13. Balance Sheet as on..
Liabilities Amount Assets Amount
Share capital
(1980 shares of Rs.
10 each fully paid)
19800 cash at Bank 24036
Shares Forfeited A/c
(Rs 5 per share on
20 Shares of Kasturi
not reissued)
100
Share Premium A/c
(1960 shares @Rs 2
per share)First Call
3920
Capital Reserve A/c
(Profit on
forfeiture and
reissue of shares)
216
24036 24036

14. Thank You