Two Types of Shares – TaxDose.com

Two Types of Shares:

If a company issues both types of shares, Preference and Equity, the accounts will be prefixed by the terms ‘Preference Share’ or ‘Equity Share’ as the case may be.

Priya Ltd. offer to the public 1,00,000 Equity Shares and 50,000 Preference Shares of Rs.10 each payable as under.

The public applied for 1,20,000 Equity Shares and 45,000 Preference Shares. Application for Preference Shares were accepted in full. All excess money received on equity shares was rejected. All money due was received. Pass entries, prepare important ledger accounts and extract from the Balance sheet.

Solution:

In the Books of Priya Ltd.
Journal Entries

Date	Particulars	L.F.	Debit Rs.	Credit Rs.
	Bank A/c Dr		2,40,000
	To Equity Share Application A/c			2,40,000
	(Application money received on 1,20,000 Equity shares)

	Bank A/c Dr		1,35,000
	To Preference Share Application A/c			1,35,000
	(Application money received on 45,000 preference shares)

	Equity Share Application A/c Dr		2,00,000
	To Equity Share Capital A/c			2,00,000
	(Equity application money transferred to equity share capital)

	Preference share application A/c Dr		1,35,000
	To Preference share capital A/c			1,35,000
	(Preference share application money transferred to preference share capital)

	Equity Share Application A/c Dr		40,000
	To Bank A/c			40,000
	(Excess Equity share application money on 20,000 shares refunded)

	Equity Share allotment A/c Dr		4,00,000
	to Equity Share capital			4,00,000
	(Allotment money due on 1,00,000 Equity shares @ Rs.4 per share)

	Bank A/c Dr		4,00,000
	To Equity Share Allotment A/c			4,00,000
	(Allotment money received on equity shares)

	Preference share allotment A/c Dr		1,80,000
	To Preference share capital A/c			1,80,000
	(Allotment money on 45,000 preference shares due)

	Bank A/c Dr		1,80,000
	To Preference share allotment A/c			1,80,000
	(Allotment money received on preference shares)

	Equity First & Final call A/c Dr		4,00,000
	To Equity Share capital A/c			4,00,000
	(First & Final call amount due on 1,00,000 shares)

	Bank A/c Dr		4,00,000
	To Equity Share First & Final call A/c 4,00,000			4,00,000
	(First & Final call amount received on equity shares)

	Preference Share First & Final call A/c Dr		1,35,000
	To Preference Share capital A/c			1,35,000
	(Preference First & Final call amount due on 45,000 shares @ 3)

	Bank A/c Dr		1,35,000
	To Preference Share First & Final call A/c			1,35,000
	(Amount received on Preference first & final call)

Equity Share Capital

Particulars	Rs.	Particulars	Rs.
		By Equity Share Application A/c	2,00,000
		By Equity ShareAllotment A/c	4,00,000
To Balance c/d	10,00,000	By Equity First & Final call A/c	4,00,000
	10,00,000		10,00,000
		By Balance b/d	10,00,000

Preference Share Capital

Particulars	Rs.	Particulars	Rs.
		By Preference Share Application A/c	1,35,000
		By Preference Share Allotment A/c	1,80,000
To Balance c/d	4,50,000	By Preference Share First & Final call A/c	1,35,000
	4,50,000		4,50,000
		By Balance b/d	4,50,000

Bank Account

Particulars	Rs.	Particulars	Rs.
To Equity Share Allotment A/c	2,40,000	By Equity Share Application	40,000
To Preference Share Application A/c	1,35,000
To Equity Share Allotment A/c	4,00,000
To Preference Share	1,80,000
To Equity First & Final call A/c	4,00,000
To Preference First & Final call A/c	1,35,000	By Balance c/d	14,50,000
	14,90,000		14,90,000
To Balance b/d	14,50,000

Extracts from Balance Sheet Entries of Priya

Liabilities	Rs.	Assets	Rs.
Share Capital:
Authorised:	—-	Current Assets:
Issued :		Cash at Bank	14,50,000
50,000 Preference share	5,00,000
@Rs.10 each	5,00,000
@Rs.10 each
1,00,000 Equity share	10,00,000
@Rs.10 each
@Rs.10 each
Subscribed :
45000 Preference Shares
@ Rs.10 each	4,50,000
100000 Equity shares
@ Rs.10 each	10,00,000
Called-up:
45000 Preference Shares
@ Rs.10 each	4,50,000
100000 Equity shares
@ Rs.10 each	10,00,000
Paid-up:
45000 Preference Shares
@ Rs.10 each	4,50,000
100000 Equity shares
@ Rs.10 each	10,00,000
	14,50,000		14,50,000

Illustration :

Thamarai Co. Ltd. issued 70,000 shares of Rs.10 each payable at a premium of Rs.2 per share.

Rs. 4 on application
Rs. 5 on Allotment
Rs. 2 on First Call
Re. 1 on Final Call

All the shares were duly subscribed. The money’s due on the shares were received except the First Call amount on 1,000 shares and the
Final Call amount on 1,500 shares.

The company forfeited the shares on which both the call amounts were not received. Of these 800 shares were reissued at Rs.7 per share.

Draft the necessary journal entries.

Solution:

Journal in the Books of Thamarai Co. Limited


Bank A/c Dr	96,000
To Share Application A/c – 96,000		96,000
(Share application money on 24000 applications received)

Share Application A/c Dr	64,000
To Share Capital A/c 64,000
(The application money on 16,000 applications transferred to share capital account)


Share Application A/c Dr	19,200
To Bank A/c –		19,200
(Excess application money refunded on 4,800 shares @ Rs.4))

Share application A/c Dr	12,800
To Share Allotment A/c –		12,800
(Excess application money transferred to share allotment A/c)

Share allotment A/c Dr	96,000
To Share capital A/c –		96,000
(Allotment money on 16,000 shares)

Bank A/c Dr	83,200
To Share allotment A/c		83,200
(Allotment money received )

Share first call A/c Dr	80,000
To Share capital A/c		80,000
(First call money due )

Bank A/c Dr	80,000
To Share first call A/c 80,000		80,000
(First call money received )

Share second and final call A/c Dr	80,000
To Share capital A/c		80,000
(Second call money due )

Bank A/c Dr	76,000
To Share second and final call A/c		76,000
(Second call money received except on 800 shares)

Share capital A/c Dr	16,000
To Share second & final call A/c		4,000
To Forfeited Shares A/c 12,000		12,000
(800 shares forfeited on which final call money was not received)

Bank A/c Dr	14,400
Forfeited Shares A/c Dr	1,600
To Share capital A/c		16,000
(800 shares reissued @ Rs.18)

Forfeited Shares A/c Dr	10,400
To Capital reserve A/c		10,400
(Profit on forfeited and reissued shares transferred to capital reserve A/c)

Ledger in the books of Surya Ltd.
Dr. Bank Account Cr.

Particulars	Rs.	Particulars	Rs.
To Share Application A/c	96,000	By Share Application A/c	19,200
To Share Allotment A/c	83,200	By Balance c/d	3,30,400
To Share First Call A/c	80,000
To Share Second Call A/c	76,000
To Share Capital A/c	14,400
	3,49,600		3,49,600
To Balance b/d	3,30,400

Dr. Share Application Account Cr.

Particulars	Rs.	Particulars	Rs.
To Share Capital A/c To Bank A/c	64,000	By Bank A/c	96,000
To Share Allotment A/c	19,200
	12,800
	96,000		96,000

Dr. Share Allotment Account Cr.

Particulars	Rs.	Particulars	Rs.
To Share Capital A/c	96,000	By Bank A/c	83,200
		By Share Application A/c	12,800
	96,000		96,000

Dr. Share First Call Account Cr.

Particulars	Rs.	Particulars	Rs.
To Share Capital A/c	80,000	By Bank A/c	80,000
	80,000		80,000

Dr. Share Capital Account Cr.

Particulars	Rs.	Particulars	Rs.
To Share Capital A/c	80,000	By Bank A/c	76,000
		By Share Capital A/c	4,000
	80,000		80,000

Dr. Share Capital Account Cr.

Particulars	Rs.	Particulars	Rs.
To Share second call A/c	4,000	By Share Application A/c	64,000
To Forfeited Shares A/c	12,000	By Share Allotment A/c	96,000
To Balance c/d	3,20,000	By Share First call A/c	80,000
		By Shares Second call A/c	80,000
		By Bank A/c	14,400
		By Shares forfeited A/c	1,600
	3,36,000		3,36,000
		By Balance b/d	3,20,000

Dr. Shares Forfeited Account Cr.

Particulars	Rs.	Particulars	Rs.
To Share Capital A/c	1,600	By Share Capital A/c	12,000
To Capital Reserve A/c	10,400
	12,000		12,000

Dr. Capital Reserve Account Cr.

Particulars	Rs.	Particulars	Rs.
To Balance c/d	10,400	By Share Forfeited A/c	10,400
	10,400		10,400
		By Balance b/d	10,400

Extracts from the Balance Sheet of Surya Ltd.

Liabilities	Rs.	Assets	Rs.
Share Capital		Current Assets:
Authorised Capital	—-	Bank	3,30,400
Issued Capital
16,000 shares @ Rs.20 each	3,20,000
Subscribed Capital
16,000 shares @ Rs.20 each	3,20,000
Called-up Capital
16,000 shares @ Rs.20 each	3,20,000
Paid up Capital
16,000 shares @ Rs.20 each	3,20,000
Reserves and surplus:
Capital reserve	10,400
	3,30,400		3,30,400

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