Page 33 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Accounting for Companies-I

Notes Under-subscription

Example 8: Raja Ram Ltd. issued a prospectus for 20,000 shares of 25 each at par,
payable as under:
On Application 6
On Allotment 6
On First Call 7

On Second Call 6
The applications were received for 19,000 shares and all these were accepted and all the money
due received. Show the cash book and journal and prepare the balance sheet of the company.

Solution:
Raja Ram Ltd. Journal Entries
Date Particulars Debit ( ) Credit ( )
Share Application Account Dr. 1,14,000
To share capital account 1,14,000
(Being application money transferred to share
capital account on 19,000 shares @ 6 per share)
Share Allotment Account Dr. 1,14,000
To Share Capital Account 1,14,000
(Being allotment money due on 19,000 shares @ 6 per share)
Share First Call Account Dr. 1,33,000
To Share Capital Account 1,33,000
(Being first call money due on 19,000 shares @ 7 per share)
Share Second & Final Call Account Dr. 1,14,000
To Share Capital Account 1,14,000
(Being second & final call money due on 19,000 shares @ 6 per share)
Balance Sheet As On …………….
Liabilities Assets
Authorised & Issued Capital
(20,000 shares of 25 each) 5,00,000 Cash at Bank 4,75,000
Subscribed, Called up and Paid up capital
(19,000 shares of 25 each) 4,75,000
4,75,000 4,75,000
Over-subscription

Example 9: Waye Ltd. invited applications for 50,000 equity shares of 100 each on the
following terms:
On applications 10 per share, on allotment 40 per share and on final payment 50 per share.
Over-payments on application were to be applied towards sums due on allotment. Where no
allotment was made, application money was to be returned in full. The issue was over-subscribed
to the extent of 15,000 shares. It was decided to :
(i) refuse allotment to the applicants for 10,000 shares and send them letters of regret.
(ii) allot 10,000 shares to Mr. X who has applied for 15,000 shares.

26 LOVELY PROFESSIONAL UNIVERSITY