Konica Limited registered with an authorised equity capital of ₹2,00,000 divided into 2,000 shares of ₹100 each, issued for subscription of 1,000 shares payable at:
| Particulars | Amount (₹) |
|---|---|
| On Application (per share) | 25 |
| On Allotment (per share) | 30 |
| On First Call (per share) | 20 |
| Balance (as and when required) | Balance |
Application money on 1,000 shares was duly received and allotment was made to them. The allotment amount was received in full, but when the first call was made, one shareholder failed to pay the amount on 100 shares held by him and another shareholder with 50 shares, paid the entire amount on his shares. The company did not make any other call.
Give the necessary journal entries in the books of the company to record these share capital transactions.
All application (₹25,000) and allotment (₹30,000) money is received in full. On the first call of ₹20 per share, 100 shares default (Calls in Arrears ₹2,000) and a 50-share holder pays the whole ₹25 balance call in advance (Calls in Advance ₹1,250) — so only ₹19,250 is banked against a ₹20,000 call due.
Concept
When a call is made, the amount due is recorded on every share (Call A/c debited in full against Share Capital). What actually comes into the bank may differ: a defaulter creates Calls in Arrears (an asset — money still owed), and a shareholder paying a not-yet-due call creates Calls in Advance (a liability — money the company holds but has not earned). Both are captured in the single receipt entry so that the Call A/c is fully squared off.
Working Notes
- First call due: 1,000 shares × ₹20 = ₹20,000.
- Cash on first call: 900 shares (1,000 − 100 defaulters) × ₹20 = ₹18,000.
- Calls in advance: 50 shares × ₹25 (the balance/final call) = ₹1,250.
- Total cash banked: ₹18,000 + ₹1,250 = ₹19,250.
- Calls in arrears: 100 shares × ₹20 = ₹2,000.
Solution
Books of Konica Limited — Journal
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
| Bank A/c Dr. | 25,000 | |||
| To Equity Share Application A/c | 25,000 | |||
| (Money received on application for 1,000 shares @ ₹25 per share) | ||||
| Equity Share Application A/c Dr. | 25,000 | |||
| To Equity Share Capital A/c | 25,000 | |||
| (Transfer of application money on 1,000 shares to share capital) | ||||
| Equity Share Allotment A/c Dr. | 30,000 | |||
| To Equity Share Capital A/c | 30,000 | |||
| (Amount due on the allotment of 1,000 shares @ ₹30 per share) | ||||
| Bank A/c Dr. | 30,000 | |||
| To Equity Share Allotment A/c | 30,000 | |||
| (Allotment money received) | ||||
| Equity Share First Call A/c Dr. | 20,000 | |||
| To Equity Share Capital A/c | 20,000 | |||
| (First call money due on 1,000 shares @ ₹20 per share) | ||||
| Bank A/c Dr. | 19,250 | |||
| Calls in Arrears A/c Dr. | 2,000 | |||
| To Equity Share First Call A/c | 20,000 | |||
| To Calls in Advance A/c | 1,250 | |||
| (First call money received on 900 shares, calls in arrears for 100 shares @ ₹20 per share and calls in advance for 50 shares @ ₹25 per share) |
In practice the entries for the amount received are recorded in the cash book and not in the journal (see Illustration 5).
The first-call receipt is recorded as Bank A/c Dr. ₹19,250 and Calls in Arrears A/c Dr. ₹2,000, crediting Equity Share First Call A/c ₹20,000 (in full) and Calls in Advance A/c ₹1,250. Application and allotment are fully received (₹25,000 and ₹30,000).
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