Skip to content
Illustrations · Illustration 1
Q.

Mona Earth Mover Limited decided to issue 12,000 shares of ₹100 each payable at:

ParticularsAmount (₹)
On Application30
On Allotment40
On First Call20
Balance on Second and Final Call

Applications were received for 13,000 shares. The directors decided to reject application of 1,000 shares and their application money being refunded in full. The allotment money was duly received on all the shares, and all sums due on calls are received except on 100 shares. Record the transactions in the books of Mona Earth Movers Limited

CBSENCERTSubjectiveImportance★★★★★
3% · 2/74 Questions
✓ Free question

13,000 applications, 12,000 allotted: refund ₹30,000 on 1,000 rejected shares, and receive both calls short on 100 shares — full share capital due is ₹12,00,000.

Concept

When a company receives more applications than shares issued, the surplus applicants are rejected and their application money is refunded. Money on the allotted shares is transferred to Share Capital in stages — application, allotment and each call — with Share Capital always credited (it is a liability). Amounts not received on the calls are simply left unrecorded on the bank side (calls in arrears), so the Bank entry only captures cash actually received.

Working Notes

  • Face value ₹100 = ₹30 (application) + ₹40 (allotment) + ₹20 (first call) + ₹10 (second and final call, the balance).
  • Application money received: 13,000 × ₹30 = ₹3,90,000.
  • Application transferred to capital: 12,000 × ₹30 = ₹3,60,000.
  • Application refunded: 1,000 × ₹30 = ₹30,000.
  • Allotment due and received: 12,000 × ₹40 = ₹4,80,000.
  • First call due: 12,000 × ₹20 = ₹2,40,000; received on 11,900 shares = ₹2,38,000.
  • Second and final call due: 12,000 × ₹10 = ₹1,20,000; received on 11,900 shares = ₹1,19,000.

Solution

Books of Mona Earth Mover Limited — Journal

DateParticularsL.F.Debit (₹)Credit (₹)
Bank A/c Dr.3,90,000
To Share Application A/c3,90,000
(Application money on 13,000 shares @ ₹30 per share received)
Share Application A/c Dr.3,60,000
To Share Capital A/c3,60,000
(Application money on 12,000 shares transferred to Share Capital)
Share Application A/c Dr.30,000
To Bank A/c30,000
(Application money on 1,000 shares returned)
Share Allotment A/c Dr.4,80,000
To Share Capital A/c4,80,000
(Allotment money due on 12,000 shares @ ₹40 per share)
Bank A/c Dr.4,80,000
To Share Allotment A/c4,80,000
(Allotment money received on 12,000 shares)
Share First Call A/c Dr.2,40,000
To Share Capital A/c2,40,000
(First call money due on 12,000 shares @ ₹20 per share)
Bank A/c Dr.2,38,000
To Share First Call A/c2,38,000
(First call money received except on 100 shares)
Share Second and Final Call A/c Dr.1,20,000
To Share Capital A/c1,20,000
(Second and final call money due on 12,000 shares @ ₹10 per share)
Bank A/c Dr.1,19,000
To Share Second and Final Call A/c1,19,000
(Second and final call money received except on 100 shares)
Important

Refund the rejected applicants' money before making any call, and never credit Bank with the unpaid portion of a call — only the cash actually received is recorded, leaving the shortfall as calls in arrears.

✓Final answer

Total Share Capital credited = ₹12,00,000 (12,000 shares × ₹100). ₹30,000 is refunded on 1,000 rejected shares; first call is received short by ₹2,000 and the second and final call short by ₹1,000 (100 shares defaulting on both).

Unlock everything free for 14 days

  • Full step-by-step solutions
  • Concept-first explanations
  • Methods, shortcuts & mistakes
  • PYQ mapping + timed mock tests
Start 14-day free trial →See Plans & Pricing →

Full access for 14 days. No credit card required.

←Previous section · 1.6Accounting Treatment→Next question · 1.6Illustration 2 — Eastern Company Limited issued 40,000 shares of ₹10 each to the public…