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Illustrations · Illustration 8
Q.

Jupiter Company Limited issued 35,000 equity shares of ₹10 each at a premium of ₹2 payable as follows:

InstalmentAmount (₹)
On Application3
On Allotment5 (including premium)
On First and Final CallBalance

The issue was fully subscribed. All the money was duly received.

Record journal entries in the books of the Company.

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Six journal entries record the full issue; the ₹2 premium is credited to Securities Premium Reserve on allotment (₹70,000), and Equity Share Capital builds up to ₹3,50,000 (35,000 × ₹10).

Concept

When shares are issued at a premium, the premium is not part of share capital. It is credited to a separate account — Securities Premium Reserve — and only at the stage at which it is actually called. Here the premium is called with allotment, so it appears in the allotment entry, not the application or call entries.

Working Notes

Face value = ₹10; premium = ₹2; total per share = ₹12.

  • Application: 35,000 × ₹3 = ₹1,05,000 (all capital — no premium called yet).
  • Allotment: 35,000 × ₹5 = ₹1,75,000 due. Of the ₹5, ₹2 is premium and ₹3 is capital, so capital = 35,000 × ₹3 = ₹1,05,000 and premium = 35,000 × ₹2 = ₹70,000.
  • First and Final Call: balance of face value = ₹10 − ₹3 − ₹3 = ₹4 per share, so 35,000 × ₹4 = ₹1,40,000 (all capital).

Solution

Books of Jupiter Company Limited — Journal

DateParticularsL.F.Debit (₹)Credit (₹)
Bank A/c Dr.1,05,000
To Equity Share Application A/c1,05,000
(Money received on applications for 35,000 shares @ ₹3 per share)
Equity Share Application A/c Dr.1,05,000
To Equity Share Capital A/c1,05,000
(Transfer of application money on allotment to share capital)
Equity Share Allotment A/c Dr.1,75,000
To Equity Share Capital A/c1,05,000
To Securities Premium Reserve A/c70,000
(Amount due on allotment of 35,000 shares @ ₹5 per share including premium)
Bank A/c Dr.1,75,000
To Equity Share Allotment A/c1,75,000

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