Z Ltd. invited applications for 10,000 equity shares of ₹10 each, payable ₹3 on Application, ₹4 on Allotment and ₹3 on First and Final Call. Applications were received for 15,000 shares. The directors allotted shares to all applicants on a pro-rata basis, and the excess applicati

Question

Z Ltd. invited applications for 10,000 equity shares of ₹10 each, payable ₹3 on Application, ₹4 on Allotment and ₹3 on First and Final Call. Applications were received for 15,000 shares. The directors allotted shares to all applicants on a pro-rata basis, and the excess application money was adjusted towards the amount due on allotment. Pass the necessary journal entries.

Accepted Answer

**Working.**
Application money received = 15,000 shares × ₹3 = ₹45,000.
Application money required on the 10,000 shares actually allotted = 10,000 × ₹3 = ₹30,000.
Excess application money = 45,000 − 30,000 = ₹15,000 — this belongs to the pro-rata applicants and is adjusted towards their Allotment money due, not refunded, since the whole issue was allotted pro-rata.
Allotment money due = 10,000 × ₹4 = ₹40,000; after adjusting the ₹15,000 excess, ₹25,000 remains to be received in cash.

| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Bank A/c ...Dr | 45,000 | |
|   To Share Application A/c | | 45,000 |
| *(Being application money received on 15,000 shares @ ₹3 each)* | | |

| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Share Application A/c ...Dr | 45,000 | |
|   To Share Capital A/c | | 30,000 |
|   To Share Allotment A/c | | 15,000 |
| *(Being application money on 10,000 shares transferred to Share Capital, and excess adjusted towards Allotment)* | | |

| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Share Allotment A/c ...Dr | 40,000 | |
|   To Share Capital A/c | | 40,000 |
| *(Being allotment money due on 10,000 shares @ ₹4 each)* | | |

| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Bank A/c ...Dr | 25,000 | |
|   To Share Allotment A/c | | 25,000 |
| *(Being balance allotment money received, after adjusting excess application money)* | | |

| Particulars | Debit (₹) | Credit (₹) |
|---|---|---| …

Particulars	Working	Amount Rs.
Application money received	30,000 x 25	7,50,000
Application money on allotted shares	25,000 x 25	6,25,000
Excess adjusted to allotment	7,50,000 - 6,25,000	1,25,000
Allotment due	25,000 x 50	12,50,000
Less: excess adjusted		1,25,000
Allotment received in cash		11,25,000
First & final call due	25,000 x 25	6,25,000
Less: unpaid on 2,500 shares (Calls-in-Arrears)	2,500 x 25	62,500
First & final call received		5,62,500

Particulars	Dr. Rs.	Cr. Rs.
Bank A/c ..... Dr.	7,50,000
To Equity Share Application A/c		7,50,000
(Application money on 30,000 shares @ Rs. 25)
Equity Share Application A/c ..... Dr.	7,50,000
To Equity Share Capital A/c		6,25,000
To Equity Share Allotment A/c		1,25,000
(Application money transferred; excess adjusted to allotment)
Equity Share Allotment A/c ..... Dr.	12,50,000
To Equity Share Capital A/c		12,50,000
(Allotment due on 25,000 shares @ Rs. 50)
Bank A/c ..... Dr.	11,25,000

Particulars	Debit (₹)	Credit (₹)
Bank A/c ...Dr	45,000
To Share Application A/c		45,000
(Being application money received on 15,000 shares @ ₹3 each)

Particulars	Debit (₹)	Credit (₹)
Share Application A/c ...Dr	45,000
To Share Capital A/c		30,000
To Share Allotment A/c		15,000
(Being application money on 10,000 shares transferred to Share Capital, and excess adjusted towards Allotment)

Particulars	Debit (₹)	Credit (₹)
Share Allotment A/c ...Dr	40,000
To Share Capital A/c		40,000
(Being allotment money due on 10,000 shares @ ₹4 each)

Particulars	Debit (₹)	Credit (₹)
Bank A/c ...Dr	25,000
To Share Allotment A/c		25,000
(Being balance allotment money received, after adjusting excess application money)

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