Page 82 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Unit 3: Reissue of Forfeited Shares and Bonus Issue

Notes
Liabilities ` Assets `
Share Capital: Fixed Assets:
Authorised 60,00,000 Land and Buildings 25,00,000
Issued and subscribed 30,00,000 Plant and Machinery 20,00,000
3,00,000 equity shares
of ` 10 each fully paid
13500; 8% redeemable 13,50,000 Furniture and 11,70,000
preference shares of fittings
` 100 each fully paid.
Reserve and surplus: Investments:
Capital reserve 37,500 Bonds of ICICI 4,35,000
Share premium 60,000 Current assets, loans 15,00,000
and advances stock
General Reserve 24,91,500 Debtors 16,59,000
Profit and loss account 11,61,000 Cash in hand 53,000
Current Liabilities: Bank balance 2,80,000
Sundry creditors 10,00,000 Unexposed 3,000
Insurance
Provision:
Provision for taxation 5,00,000
96,00,000 96,00,000
On 1st April, 2006, in order to redeem all of its preference shares at a premium of 5%, the
company issued 60,000 equity shares of ` 10 each at a premium of 10% and sold all of its bonds
in ICICI for ` 4,80,000.
After the redemption of preference shares, the company issued one fully paid equity share of `
10 as bonus for every three shares held by its shareholders.
Show the journal entries for above transactions and prepare the balance sheet of the company
immediately after the issue of bonus shares.

Solution:
Kavita Limited Journal
Date Particulars L.F. ` `
August 1 8% Redeemable Preference Shares Dr. 13,50,000
Capital Account
Premium on Redemption Account Dr. 67,500
To Preference Shareholders 14,17,500
Account
(Being amount due to preference
shareholders on redemption)
Bank Account Dr. 6,60,000
To Equity Share Capital Account 6,00,000
To Share Premium Account 60,000
(Being receipt of amount from the
issue of new shares)
Share Premium Account Dr. 67,500
Contd...
To Premium on Redemption 67,500
Account
(Being utilisation of share premium
in writing off the premium on
LOVELY PROFESSIONAL UNIVERSITY
redemption of preference shares) 75
General Reserve Account Dr. 7,50,000
To Capital Redemption Reserve 7,50,000
Account
(Being utilisation of general reserve
for the redemption of preference
shares)
Bank Account Dr. 4,80,000
To Bonds of ICICI Account 4,35,000
To Profit and Loss Account 45,000
(Being the proceeds of sale of
investments and profit transferred to
P & L Account.)
Preference Shareholders Account Dr. 14,17,500
To Bank Account 14,17,500
(Being payment made to
shareholders on redemption of
preference shares)
Capital Redemption Reserve Dr. 7,50,000
Account
Share Premium Account Dr. 52,500
General Reserve Account Dr. 3,97,500
To Bonus to Shareholders 12,00,000
Account
(Being utilisation of Capital
Redemption Reserve Share Premium
and General Reserve for declaration
of bonus)
Bonus to Shareholders Account Dr. 12,00,000
To Equity Share Capital Account 12,00,000
(Being issue of one bonus share to
every three of shares)