Pls solve the query, I'm asking the same 4th time.

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

22 August 2010 Dear Expert...

How to treat the excess amount received on application at the time of forfeiture of shares

Case:-

Mr. X applied for 150 shares and
Only allotted 100 shares to him.
Face Valve is 10.
Issue Price Rs. 12 per share
On Application Rs. 2
On Allotment 3+2 (Rs. 2 is Securities Premium due at the time of allotment)
Rs. 5 on First and final call.

He doesn't Pay any amount after the application.

Now My Qn. is How we treat Excess of amount of Rs. 100 (Received on application of these shares).
Weather It will be adjust against Capital or securities premium at the time of forfeiture.

With how much securities premium will be debited on Forfeiture.

Plz also suggest the Forfeiture entry with amount.

Thanks

POOJA SACHDEVA

POOJA SACHDEVA (Expert)
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22 August 2010 Dear Author

Treatment of share forfeiture will be as

Share capital a/c dr
to Forfeiture a/c

and treatment in balance sheet

Left side (liabilities)

Share capital

Subscribed capital:

Forfeited Shares:

Regards

Pooja

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Querist : Anonymous

Querist : Anonymous (Querist)

22 August 2010 Dear Expert..

I'm asking How much amount will be credited to Forfeiture account?

& Securities Premium will be debited or not if debited then with how much amount?

Thanks,

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POOJA SACHDEVA

POOJA SACHDEVA (Expert)
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22 August 2010 Dear Author

You have received Rs 300 at the time of share application so entry that time will be as

Bank A/c 300
to Share Application a/c 200
To Share allotment a/c 100

then you due the share allotment money
Share allotment a/c 300
Share premium a/c 200
To Share capital a/c 500

But no money received so forfeiture entry is

Share capital a/c 1000
Share premium a/c 200
to Forfeited a/c 300
To Share allotment 700
to Share call A/c 500

Regards

Pooja

Querist : Anonymous

Querist : Anonymous (Querist)

22 August 2010 Dear Expert
Can you elaborate
How we arrive the Share allotment amount 700/- (Credited) in the entry?

POOJA SACHDEVA

POOJA SACHDEVA (Expert)
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22 August 2010 Dear Author

Sorry here amount Rs 400 not Rs 700 .

Rs 100 you received with the application and balance amount is Rs 400.

Querist : Anonymous

Querist : Anonymous (Querist)

22 August 2010 It means Excess money on application can only used for Share Capital not for Securities Premium.

Actually someone taught me that we can also use excess application money,
in similar situation for Securities Premium giving preference to Share capital.
Even if excess money is not enough for premium but we can used it for partly for premium.

Entry Can also be like this

Debit Share Capital 1000
Debit Securities Premium 100
To Share allotment 400
To Share F & F Call 500
To Share Forfeiture 200

We assumed that Excess amount of Rs. 100 used for Securities Premium. So we only debited S.P. with Rs. 100.

Dear Pooja Ji Pls suggest what it better way of Recording the situation like this BY THE ACT.

Pooja Ji,
Thank you very much for guiding me.

shakuntala chhangani

shakuntala chhangani (Expert)
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25 September 2010 Hi, since u hv not given the detail of full question, I can show u the entries related to only 150 shares which are given hereunder :
at the time of receipt of application money :
1) bank A/c Dr. 300
To share application a/c 300
2) at the time of allotment :
a) share application A/c Dr. 300
To share capital A/c 200
To share allotment A/c 100
b)Share allotment A/c Dr. 500
To share capital A/c 300
To securities premium A/c 200
3) Receipt of allotment money - NIL
4) call made :
first and final call A/c Dr. 500
To Share capital A/c 500
5) Receipt of call money - NIL
6) Entry for forfeiture :
Share Capital A/c Dr. 1,000
Securities premium A/c Dr. 200
To share forfeiture A/c 300
To allotment A/c 400
To First and final call A/c 500
ur 1st doubt was 'where should we adjust excess Rs. 100' ? My dear, when the receipt of principal (capital) is doubtful, hw can we think about interest (premium). that is why whatever is received will be adjusted towards capital. secondly, at entry no. 2(b) we give credit to sec. premium before receiving the same. If shareholder fails to pay it subsequently, it indicates that cr. given to sec. pre previously need to be reversed at the time of forfeiture. In other words, If premium money is not received, it is dr. at the tome of forfeiture.
Regards, CA Shakuntala Chhangani

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