Page 54 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Unit 2: Forfeiture of Shares

Forfeiture of Shares allotted on Pro-rata Basis Notes

In case the shares being over subscribed one of the scheme of allotment of shares to applicants
is to allot in the ratio of shares for which applications are entertained by the company for
allotment and the number of shares company has offered for subscription. This is called allotment
of shares on pro-rata basis. In case of pro-rata allotment the excess money received on applications
is transferred to Share Allotment A/c from Share Application A/c. In case a shareholder fails to
make payment on allotment and call money of shares held by him/her, the unpaid amount will
be calculated as under:
(i) Number of shares applied for allotment

´
Total No. of shares applied shares allotted to defaulter
=
Total shares allotted
(ii) Number of shares applied for (as per step) – number of shares allotted = Excess applications
received.
(iii) Excess application money received = Excess number of applied shares × money called per
share on application.
(iv) Amount unpaid on allotment = Amount due on allotment – excess application money
adjusted towards allotment
Illustration 3:
A company has offered for subscription to the public 10000 shares of 10 each. It has received
applications for 15000 shares. Company has decided to allot shares on pro-rata basis. Gunakshi
holding 200 shares failed to pay allotment money and first call money. Her shares were forfeited:
Amount payable was as under:

2 per share on application.
3 per share on allotment.
5 per share on call.
Make journal entries and prepare relevant account in the books of the company.

Solution:
Working notes:

´
Total No. of shares applied shares alloted to Gunakshi
Number of shares applied =
Total No. of shares allotted
15000
= 300
´
10000 200
Excess applications received = 300 – 200 = 100
Excess applications amount received = 100 2 = 200 Amount Due on allotment = 200 3 = 600
Excess application money adjusted = 200

Net unpaid amount on allotment = 600 – 200 = 400

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