X ltd. invited applications for the issue of 100000 equity shares of 1...
Journal Entries for X Ltd.
Background Information
X Ltd. invited applications for the issue of 100000 equity shares of 10 each payable as on application and allotment rupees 3 per share on first call, 4 per share on second call, 3 per share on the final call.
Application for 1500000 shares were received and pro rata allotment was made to all applicants. Excess application money was adjusted on the sums due on the first call.
When the first call was made, one shareholder who had applied for 15000 shares did not pay first call money.
Journal Entries
The following journal entries need to be made by X Ltd.:
On Receiving Applications
Debit: Bank Account (1500000 x 10) = 15000000
Credit: Equity Share Application Account (1500000 x 10) = 15000000
On Allotment of Shares
Debit: Equity Share Application Account (100000 x 10) = 1000000
Credit: Equity Share Capital Account (100000 x 10) = 1000000
Debit: Equity Share Application Account (1400000 x 3) = 4200000
Credit: Equity Share First Call Account (1400000 x 3) = 4200000
On Receipt of Payment for First Call
Debit: Bank Account (Amount received from shareholders)
Credit: Equity Share First Call Account (Amount received from shareholders)
On Non-Payment of First Call by Shareholder
Debit: Equity Share First Call Account (15000 x 3) = 45000
Credit: Share Allotment Account (15000 x 10) = 150000
Credit: Equity Share First Call in Arrears Account (15000 x 3) = 45000
The Equity Share First Call in Arrears Account represents the amount due from the shareholder who did not pay the first call money. The amount will be carried forward and added to the second call.
On Second Call
Debit: Equity Share Second Call Account (15000 x 4) = 60000
Credit: Equity Share Second Call in Arrears Account (15000 x 3) = 45000
Credit: Bank Account (15000 x 4) = 60000
On Final Call
Debit: Equity Share Final Call Account (15000 x 3) = 45000
Credit: Bank Account (15000 x 3) = 45000
Conclusion
These journal entries will ensure that all transactions related to the issue of equity shares by X Ltd. are properly recorded in the books of accounts. It is important to maintain accurate records to ensure compliance with accounting standards and regulations.