Journalise the following transactions in the books of Bhushan Oil Ltd.: (a) 200 shares of Rs. 100 each issued

Numerical Questions · Q23

Q. Journalise the following transactions in the books of Bhushan Oil Ltd.:

(a) 200 shares of Rs. 100 each issued at a premium of Rs. 10 were forfeited for the non-payment of allotment money of Rs. 60 per share. The first and final call of Rs. 20 per share on these shares were not made. The forfeited shares were reissued at Rs. 70 per share as fully paid-up.

(b) 150 shares of Rs. 10 each issued at a premium of Rs. 4 per share payable with allotment were forfeited for non-payment of allotment money of Rs. 8 per share including premium. The first and final calls of Rs. 4 per share were not made. The forfeited shares were reissued at Rs. 15 per share fully paid-up.

(c) 400 shares of Rs. 50 each issued at par were forfeited for non-payment of final call of Rs. 10 per share. These shares were reissued at Rs. 45 per share fully paid-up.

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Concept understanding — Share Capital Accounting

Let’s begin with something you already know from everyday life.

Imagine you and two friends decide to start a small business — say, a tiffin service. You each put in some money to buy utensils, a stove, and ingredients. That money you all contributed is the capital of the business. The business doesn’t own that money; it owes it back to you, the owners. In accounting, we call you the shareholders, and the money you put in is share capital.

Now scale that up to a company. A company needs huge amounts of money to build factories, buy machinery, or develop software. It raises this money by selling shares — small units of ownership. When you buy a share, you become a part-owner of that company. The total money collected from all shareholders is the company’s share capital.

Why does share capital matter in accounting?

Because the company is a separate legal person. It does not own the money — the shareholders do. So the company must record exactly how much it has collected from whom, and in what form. This affects the balance sheet (where share capital appears under Equity and Liabilities) and the cash flow (money coming in from shareholders is a financing activity).

The precise meaning (NCERT Class 12)

Share Capital is the money raised by a company by issuing shares to the public or to promoters. It is shown under the head Shareholders’ Funds in the Balance Sheet.

There are two main types of shares:

Equity shares – ordinary shares; owners get dividends only if the company makes profit.
Preference shares – owners get a fixed dividend before equity shareholders, but usually have no voting rights.

Accounting treatment — the journal entries

When a company issues shares, it follows a standard sequence. Let’s say a company issues 10,000 equity shares of ₹10 each at par (i.e., at face value). The money is received in two instalments: ₹4 on application, ₹6 on allotment.

Step 1: Application money received

Date	Particulars	Debit (₹)	Credit (₹)
	Bank A/c Dr.	40,000
	To Share Application A/c		40,000
(Being application money received on 10,000 shares @ ₹4 each)

Step 2: Transfer application money to Share Capital

Date	Particulars	Debit (₹)	Credit (₹)
	Share Application A/c Dr.	40,000
	To Share Capital A/c		40,000
(Being application money transferred to Share Capital)

Step 3: Allotment money due

Date	Particulars	Debit (₹)	Credit (₹)
	Share Allotment A/c Dr.	60,000
	To Share Capital A/c		60,000
(Being allotment money due on 10,000 shares @ ₹6 each)

Step 4: Allotment money received

Date	Particulars	Debit (₹)	Credit (₹)
	Bank A/c Dr.	60,000
	To Share Allotment A/c		60,000
(Being allotment money received)

Note

If shares are issued at a premium (e.g., ₹10 face value, issued at ₹12), the extra ₹2 goes to a separate account called Securities Premium Reserve A/c. It is not part of share capital.

The Balance Sheet format (as per NCERT)

Under Equity and Liabilities, share capital appears like this:

Particulars	Note No.	Amount (₹)
1. Shareholders’ Funds
(a) Share Capital	1	1,00,000
(b) Reserves and Surplus	2	20,000
2. Non-Current Liabilities	...	...
3. Current Liabilities	...	...

And Note 1 (Share Capital) is typically shown as:

Particulars	Amount (₹)
Authorised Capital
1,00,000 Equity Shares of ₹10 each	10,00,000
Issued Capital
80,000 Equity Shares of ₹10 each	8,00,000
Subscribed and Paid-up Capital
80,000 Equity Shares of ₹10 each fully paid	8,00,000

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We will journalise each case step by step, showing the exact amounts and the final transfer to Capital Reserve. The key is to track the amount forfeited (credit to Share Forfeiture Account) and the discount allowed on reissue, then transfer the surplus to Capital Reserve.

Case (a) – 200 shares of ₹100 each, issued at ₹110 (₹10 premium)

Facts:

Face value per share: ₹100
Premium per share: ₹10 (payable with allotment)
Allotment money due: ₹60 per share (including premium? No – premium is separate; here allotment of ₹60 includes ₹10 premium? The problem says "allotment money of ₹60 per share" and premium is ₹10, so allotment includes premium: ₹50 face + ₹10 premium = ₹60).
First and final call of ₹20 per share not made.
Forfeited for non-payment of allotment money.
Reissued at ₹70 per share as fully paid-up.

Amounts per share:

The issue price per share is ₹110 (face value ₹100 + premium ₹10). Of this, ₹60 was due on allotment (including the ₹10 premium) and ₹20 was due on the first and final call. That leaves ₹110 − ₹60 − ₹20 = ₹30 per share due on application — so ₹30 per share was already received before forfeiture.

Forfeiture account credit per share = ₹30 (the application money already received).
Total forfeiture credit = 200 × ₹30 = ₹6,000.
Reissue price: ₹70 per share (face value ₹100, so a discount of ₹30 per share).
Total discount on reissue = 200 × ₹30 = ₹6,000.
This discount is fully absorbed by the ₹6,000 already standing to the credit of the Share Forfeiture Account, leaving a nil balance — so nothing is left to transfer to Capital Reserve, matching the official answer of Capital Reserve = NIL for this case.

The journal entries:

Journal of Bhushan Oil Ltd.

Date	Particulars	Debit (₹)	Credit (₹)
	Share Capital A/c (200×100) Dr.	20,000
	Securities Premium A/c (200×10) Dr.	2,000
	To Share Allotment A/c (200×60)		12,000
	To Share First & Final Call A/c (200×20)		4,000
	To Share Forfeiture A/c (200×30)		6,000
	(Forfeiture of 200 shares for non-payment of allotment and call)
	Bank A/c (200×70) Dr.	14,000
	Share Forfeiture A/c (200×30) Dr.	6,000
	To Share Capital A/c (200×100)		20,000
	(Reissue of 200 forfeited shares at ₹70 each as fully paid)
After the reissue entry above, the Share Forfeiture Account has a debit of ₹6,000 (used to make up the reissue discount) and a credit of ₹6,000 (the amount originally forfeited) — leaving a nil balance. So no third entry is needed: there is no surplus left to transfer to Capital Reserve, consistent with the answer of Capital Reserve = NIL for this case.

Case (b) – 150 shares of ₹10 each, issued at ₹14 (₹4 premium)

Facts:

Face value: ₹10
Premium: ₹4 (payable with allotment)
Allotment money due: ₹8 per share (including premium) – so ₹4 face + ₹4 premium = ₹8.
First and final call: ₹4 per share (not made).
Forfeited for non-payment of allotment.
Reissued at ₹15 per share fully paid-up.

Amounts per share:

The issue price per share is ₹14 (face value ₹10 + premium ₹4). Of this, ₹8 was due on allotment (including the ₹4 premium) and ₹4 was due on the first and final call. That leaves ₹14 − ₹8 − ₹4 = ₹2 per share due on application, which was already received before the default.

Forfeiture account credit per share = ₹2 (the application money already received).
Total forfeiture credit = 150 × ₹2 = ₹300.
Reissue price: ₹15 per share (face value ₹10, so this is ₹5 above par — a premium on reissue, not a discount).
Since there is no discount to absorb on reissue, the Share Forfeiture Account's full ₹300 balance is transferred to Capital Reserve, matching the official answer of Capital Reserve = ₹300 for this case.

The journal entries:

Particulars	Debit (₹)	Credit (₹)
Share Capital A/c (150×10) Dr.	1,500
Securities Premium A/c (150×4) Dr.	600
To Share Allotment A/c (150×8)		1,200
To Share First & Final Call A/c (150×4)		600
To Share Forfeiture A/c (150×2)		300
(Forfeiture of 150 shares for non-payment of allotment and call)
Bank A/c (150×15) Dr.	2,250
To Share Capital A/c (150×10)		1,500

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(a) Capital Reserve = Nil (the ₹6,000 in Share Forfeiture is exactly absorbed by the ₹6,000 reissue discount, so there is no profit and no loss). (b) Capital Reserve = ₹300. (c) Capital Reserve = ₹14,000.

In each case the amount actually received from the defaulting shareholder is credited to Share Forfeiture. On reissue the discount is debited to that account, and only the surplus left is transferred to Capital Reserve. Premium not received is reversed out of Securities Premium at forfeiture.

(a) 200 shares of ₹100 (premium ₹10), allotment ₹60 unpaid; first & final call ₹20 not made; reissued @ ₹70

Allotment ₹60 includes the ₹10 premium, so its capital part is ₹50. Application = 100 - 50 - 20 = 30 per share, and only this was received. Amount forfeited = 200 × 30 = 6,000.

Particulars	Debit (₹)	Credit (₹)
Share Capital A/c Dr. (200 x 80)	16,000
Securities Premium Reserve A/c Dr. (200 x 10)	2,000
To Share Forfeiture A/c (200 x 30)		6,000
To Share Allotment A/c (200 x 60)		12,000
(Forfeiture of 200 shares for non-payment of allotment)
Bank A/c Dr. (200 x 70)	14,000
Share Forfeiture A/c Dr. (200 x 30)	6,000
To Share Capital A/c (200 x 100)		20,000
(Reissue of 200 shares @ ₹70 each fully paid)

Reissue discount = (100 - 70) × 200 = 6,000, which equals the whole Share Forfeiture balance. Capital Reserve = Nil (no surplus, and no loss).

(b) 150 shares of ₹10 (premium ₹4), allotment ₹8 (incl. premium) unpaid; call ₹4 not made; reissued @ ₹15

Allotment ₹8 includes ₹4 premium, so its capital part is ₹4. Application = 10 - 4 - 4 = 2 per share, and only this was received. Amount forfeited = 150 × 2 = 300.

Particulars	Debit (₹)	Credit (₹)
Share Capital A/c Dr. (150 x 6)	900
Securities Premium Reserve A/c Dr. (150 x 4)	600
To Share Forfeiture A/c (150 x 2)		300
To Share Allotment A/c (150 x 8)		1,200
(Forfeiture of 150 shares for non-payment of allotment)
Bank A/c Dr. (150 x 15)	2,250
To Share Capital A/c (150 x 10)		1,500
To Securities Premium Reserve A/c (150 x 5)		750
(Reissue of 150 shares @ ₹15 each fully paid)
Share Forfeiture A/c Dr.	300
To Capital Reserve A/c		300
(Surplus on reissue transferred to Capital Reserve)

Shares are reissued at a premium (no discount), so the full ₹300 is profit. Capital Reserve = ₹300.

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Q.Journalise the following transactions in the books of Bhushan Oil Ltd.:

(a) 200 shares of ₹100 (premium ₹10), allotment ₹60 unpaid; first & final call ₹20 not made; reissued @ ₹70

(b) 150 shares of ₹10 (premium ₹4), allotment ₹8 (incl. premium) unpaid; call ₹4 not made; reissued @ ₹15

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