Following is the extract of the Balance Sheet of Sankalp Ltd. as per Schedule III, Part I of the Companies Act, 2013 as at 31st March, 2024 along with the notes to accounts :
Balance Sheet of Sankalp Ltd. as at 31st March, 2024 (An extract)
| Particulars | Note No. | 31.03.2024 (₹) | 31.03.2023 (₹) |
|---|---|---|---|
| I – Equity and Liabilities : 1. Shareholders' Funds (a) Share Capital | 1. | 29,80,000 | 25,00,000 |
Notes to Accounts as at 31st March, 2023
| Note No. | Particulars | 31.03.2023 (₹) |
|---|---|---|
| 1. | Share Capital Authorised Capital / 4,50,000 Equity Shares of ₹ 10 each | 45,00,000 |
| Issued Capital / 2,50,000 Equity Shares of ₹ 10 each | 25,00,000 | |
| Subscribed Capital / Subscribed and fully paid-up / 2,50,000 Equity Shares of ₹ 10 each | 25,00,000 | |
| Subscribed but not fully paid-up | NIL |
Notes to Accounts as at 31st March, 2024
| Note No. | Particulars | 31.03.2024 (₹) |
|---|---|---|
| 1. | Share Capital Authorised Capital / 4,50,000 Equity Shares of ₹ 10 each | 45,00,000 |
| Issued Capital / 3,00,000 Equity Shares of ₹ 10 each | 30,00,000 | |
| Subscribed Capital / Subscribed and fully paid-up / 2,90,000 Equity Shares of ₹ 10 each | 29,00,000 | |
| Subscribed but not fully paid-up / 10,000 Equity Shares of ₹ 10 each fully called-up 1,00,000 / Less Calls-in-Arrears 10,000 Equity Shares @ ₹ 2 per share 20,000 | 80,000 |
Answer the following questions :
- Equity share capital issued during the year 2023 – 24 amounted to : (A) ₹ 2,10,000 (B) ₹ 4,90,000 (C) ₹ 5,00,000 (D) ₹ 5,50,000
- The number of shares on which the amount called-up was not received were : (A) 10,000 (B) 40,000 (C) 50,000 (D) 1,50,000
- On 1st April, 2024, Sankalp Ltd. forfeited all the shares on which the called-up amount was not received. 'Share Capital Account' will be debited with : (A) ₹ 20,000 (B) ₹ 80,000 (C) ₹ 1,00,000 (D) ₹ 1,20,000
- On forfeiture of shares, the amount credited to 'Share Forfeiture Account' will be : (A) ₹ 20,000 (B) ₹ 80,000 (C) ₹ 1,00,000 (D) ₹ 1,20,000
- If all the forfeited shares are reissued at ₹ 9 per share fully paid-up, the amount credited to 'Capital Reserve' will be : (A) ₹ 20,000 (B) ₹ 80,000 (C) ₹ 1,00,000 (D) ₹ 70,000
- If the forfeited shares are reissued at a minimum reissue price, the amount credited to 'Capital Reserve A/c' will be : (A) Nil (B) ₹ 20,000 (C) ₹ 80,000 (D) ₹ 1,00,000
You're viewing a preview — the full solution, concept, methods & PYQ mapping are locked.
Start your 14-day free trial to unlock the full solution →The solution calculates the increase in issued share capital, identifies shares with calls-in-arrears, determines the amounts debited to Share Capital Account and credited to Share Forfeiture Account upon forfeiture, and calculates the amount transferred to Capital Reserve under two different reissue scenarios.
When a company issues shares, it typically collects the full face value in installments: application, allotment, and subsequent calls. If a shareholder fails to pay any call amount, the company has the right to forfeit their shares. Forfeiture means cancelling the shares and extinguishing all rights of the defaulting shareholder. The accounting treatment for share capital, forfeiture, and reissue is crucial for presenting a true and fair view of the company's financial position.
Let's break down the concepts and accounting treatment for each part of the question.
Share Capital Accounting Treatment:
- Issued Capital: This represents the portion of the authorised capital that the company has offered to the public for subscription. An increase in issued capital means the company has offered more shares to the public.
- Subscribed Capital: This is the portion of the issued capital that has been subscribed by the public. It is further classified into 'Subscribed and fully paid-up' (where the full face value has been called and received) and 'Subscribed but not fully paid-up' (where either the full face value has not been called, or it has been called but not fully received, leading to Calls-in-Arrears).
- Calls-in-Arrears: This account represents the amount that has been called up by the company but has not yet been paid by the shareholders. It is shown as a deduction from 'Subscribed but not fully paid-up' capital in the Notes to Accounts.
- Share Forfeiture: When shares are forfeited, the following journal entry is passed:
- Share Capital Account (Dr.): This account is debited with the total amount called up on the forfeited shares. This reduces the share capital to reflect the cancellation of these shares.
- Calls-in-Arrears Account (Cr.): This account is credited with the unpaid amount on the forfeited shares. This closes the Calls-in-Arrears balance related to these shares.
- Share Forfeiture Account (Cr.): This account is credited with the amount already received from the defaulting shareholders on the forfeited shares. This amount is a capital gain for the company and can be used to absorb any discount on the reissue of these shares.
- Reissue of Forfeited Shares: Forfeited shares can be reissued at a discount, but the discount cannot exceed the amount originally forfeited on those shares.
- Bank Account (Dr.): With the reissue price received.
- Share Forfeiture Account (Dr.): With the discount allowed on reissue. This reduces the balance in the Share Forfeiture Account.
- Share Capital Account (Cr.): With the face value of the reissued shares.
- Transfer to Capital Reserve: After reissue, any balance remaining in the Share Forfeiture Account (i.e., the forfeited amount less any discount allowed on reissue) is a capital profit and is transferred to Capital Reserve.
- Share Forfeiture Account (Dr.): With the remaining balance.
- Capital Reserve Account (Cr.): With the capital profit.
Solution
Let's address each question based on the provided Balance Sheet extract and Notes to Accounts.
(i) Equity share capital issued during the year 2023 – 24 amounted to:
To find the equity share capital issued during the year, we compare the 'Issued Capital' from the Notes to Accounts for 31st March, 2023, and 31st March, 2024.
Working Note 1: Equity Share Capital Issued during 2023-24
Issued Capital as at 31st March, 2024 = ₹30,00,000
Issued Capital as at 31st March, 2023 = ₹25,00,000
Equity Share Capital issued during 2023-24 = ₹30,00,000 - ₹25,00,000 = ₹5,00,000
The equity share capital issued during the year 2023-24 amounted to ₹5,00,000.
(ii) The number of shares on which the amount called-up was not received were:
This refers to the shares with 'Calls-in-Arrears'. We can find this information in the Notes to Accounts as at 31st March, 2024, under 'Subscribed but not fully paid-up'.
Working Note 2: Number of Shares with Calls-in-Arrears
From Notes to Accounts as at 31st March, 2024:
Subscribed but not fully paid-up:
10,000 Equity Shares of ₹10 each fully called-up ₹1,00,000
Less: Calls-in-Arrears 10,000 Equity Shares @ ₹2 per share ₹20,000
The number of shares on which the amount called-up was not received were 10,000.
(iii) On 1st April, 2024, Sankalp Ltd. forfeited all the shares on which the called-up amount was not received. 'Share Capital Account' will be debited with:
When shares are forfeited, the Share Capital Account is debited with the amount called up on those shares.
Working Note 3: Amount Debited to Share Capital Account on Forfeiture
Number of shares forfeited = 10,000 shares (from Working Note 2)
Called-up amount per share = ₹10 (as stated "fully called-up" in the Notes to Accounts)
Amount debited to Share Capital Account = 10,000 shares × ₹10/share = ₹1,00,000
The 'Share Capital Account' will be debited with ₹1,00,000.
(iv) On forfeiture of shares, the amount credited to 'Share Forfeiture Account' will be:
The Share Forfeiture Account is credited with the amount already received from the defaulting shareholders on the forfeited shares.
Working Note 4: Amount Credited to Share Forfeiture Account on Forfeiture
Total called-up amount per share = ₹10
Calls-in-Arrears per share = ₹2 (from Notes to Accounts)
Amount received per share = Called-up amount - Calls-in-Arrears = ₹10 - ₹2 = ₹8
Number of shares forfeited = 10,000 shares
Amount credited to Share Forfeiture Account = 10,000 shares × ₹8/share = ₹80,000
The amount credited to 'Share Forfeiture Account' will be ₹80,000. …
Unlock everything free for 14 days
- Full step-by-step solutions
- Concept-first explanations
- Methods, shortcuts & mistakes
- PYQ mapping + timed mock tests
Full access for 14 days. No credit card required.