Murari Ltd. invited applications for issuing 80,000 equity shares of Rs. 10 each at a 6 premium of Rs. 4 per share. The amount per share was payable as follows: Rs. 5 on application and Rs. 9 (including premium) on allotment. Applications were received for 1,40,000 shares and allotment was made on pro-rata basis to all the applicants. Money overpaid on application was utilised towards sums due on allotment. The allotment money was duly received except from Sameer who had applied for 1,400 shares. His shares were forfeited. Pass the necessary journal entries in the books of Murari Ltd. to record the above transactions. Open calls-in-arrears account wherever required.See answer

Murari Ltd invited applications for issuing 80000 equity shares of Rs 10 each at a 6 premium of Rs 4 per share The amount per share was payable as follows Rs 5 on application and Rs 9 including…

Question

Basic Answer

Step 1: Calculate the pro-rata allotment

Total shares applied for = 140,000
Shares to be issued = 80,000
Pro-rata allotment = (80,000 / 140,000) = 4/7

Step 2: Calculate the amount received on application

Amount per share on application = Rs. 5
Total amount received on application = 140,000 shares * Rs. 5 = Rs. 700,000

Step 3: Calculate the amount due on allotment

Amount due per share on allotment = Rs. 9
Total amount due on allotment = 80,000 shares * Rs. 9 = Rs. 720,000

Step 4: Calculate the amount received on allotment

Amount received from applicants (excluding Sameer) = (80,000 – 1400) shares * Rs. 9 = Rs. 777,600

Step 5: Calculate the amount of calls-in-arrears

Amount due from Sameer = 1400 shares * Rs. 9 = Rs. 12,600

Step 6: Journal Entries

Account Title	Debit (Rs.)	Credit (Rs.)
Bank Account	700,000
Share Application Account		700,000
(Being application money received)
Share Allotment Account	720,000
Share Application Account		700,000
Share Capital Account		800,000
Securities Premium Account		320,000
Calls-in-arrears Account	12,600
Bank Account		777,600
(Being allotment money received and calls-in-arrears recorded)
Share Capital Account	12,600
Calls-in-arrears Account		12,600
(Being transfer of forfeited shares to share capital)

Final Answer

The journal entries above record the transactions related to the share issue, including the pro-rata allotment, money received on application and allotment, and the treatment of calls-in-arrears from Sameer’s forfeited shares. Note that the forfeiture of Sameer’s shares and the subsequent transfer to share capital is a simplified representation. A more complete accounting treatment would involve separate entries for forfeiture and then transfer to share capital.