Global Electronics 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 rejected applications for 3,000 shares outright and refunded th

Question

Global Electronics 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 rejected applications for 3,000 shares outright and refunded their application money in full, and allotted the remaining 10,000 shares to applicants for 12,000 shares on a pro-rata basis, adjusting the excess application money towards the amount due on allotment. All money due on allotment and call was duly received in cash. Pass the necessary journal entries.

Accepted Answer

**Working out the application money**

Total application money received = 15,000 shares × ₹3 = ₹45,000, made up of:
- Rejected category: 3,000 shares × ₹3 = ₹9,000 — refunded in full.
- Pro-rata category: 12,000 shares applied for, allotted 10,000 shares — application money received on this category = 12,000 × ₹3 = ₹36,000, of which ₹30,000 (10,000 shares × ₹3) is capitalised for the shares actually allotted, and the balance ₹6,000 is excess, carried forward and adjusted against allotment.

**Journal entries**

| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Bank A/c Dr (15,000 × ₹3) | 45,000 | |
|   To Equity Share Application A/c | | 45,000 |
| *(Being application money received on 15,000 shares)* | | |
| Equity Share Application A/c Dr | 45,000 | |
|   To Equity Share Capital A/c (10,000 × ₹3) | | 30,000 |
|   To Equity Share Allotment A/c (excess adjusted) | | 6,000 |
|   To Bank A/c (refund on 3,000 rejected shares) | | 9,000 |
| *(Being application money adjusted — capitalised, adjusted towards allotment, and refunded)* | | |
| Equity Share Allotment A/c Dr (10,000 × ₹4) | 40,000 | |
|   To Equity Share Capital A/c | | 40,000 |
| *(Being allotment money due on 10,000 shares)* | | |
| Bank A/c Dr (40,000 − 6,000 already adjusted) | 34,000 | |
|   To Equity Share Allotment A/c | | 34,000 |
| *(Being balance allotment money received in cash)* | | | …

Particulars	Debit (₹)	Credit (₹)
Bank A/c Dr (15,000 × ₹3)	45,000
To Equity Share Application A/c		45,000
(Being application money received on 15,000 shares)
Equity Share Application A/c Dr	45,000
To Equity Share Capital A/c (10,000 × ₹3)		30,000
To Equity Share Allotment A/c (excess adjusted)		6,000
To Bank A/c (refund on 3,000 rejected shares)		9,000
(Being application money adjusted — capitalised, adjusted towards allotment, and refunded)
Equity Share Allotment A/c Dr (10,000 × ₹4)	40,000
To Equity Share Capital A/c		40,000
(Being allotment money due on 10,000 shares)
Bank A/c Dr (40,000 − 6,000 already adjusted)	34,000
To Equity Share Allotment A/c		34,000
(Being balance allotment money received in cash)

🎓Unlock everything free for 14 days

Unlock everything free for 14 days