Vikas Steel & Co. ("The Company") is a steel manufacturing company in existence since the past three decades. The Executive Chairman and Managing Director is Mr. Mohan. Mr. Mohan is a Mechanical Engineer and has cons

CS Executive · Corporate Accounting and Financial Management · PYQS · December 2025
Vikas Steel & Co. ("The Company") is a steel manufacturing company in existence since the past three decades. The Executive Chairman and Managing Director is Mr. Mohan. Mr. Mohan is a Mechanical Engineer and has constructed and operationalized the steel plant. The steel plant has achieved major success with the growing economy. Ms. Disha, Mr. Mohan's daughter, is an Executive Director at the Company. She oversees the operations of the Company. A study was done by the Operations team and it felt the need to modernize the Company's operations. The estimated budget for the modernization efforts is likely to be ₹ 75 lakh. The merchant bankers of the Company advise the Company to partially raise capital by issue of equity shares by way of an Initial Public offering. The prospectus of Vikas & Co's equity issue for 50,000 equity shares of ₹ 100 each. (Issue price ₹ 120). Payment to be made is as follows: On application ₹ 25 On allotment (Including premium of ₹ 20) ₹ 50 First Call ₹ 20 Final Call ₹ 25 Applications were received for 75000 shares. Shares were allotted to the applicants on pro rata basis. Kamal who was allotted 500 shares did not pay the allotment money. He also failed to pay the first call. His shares were forfeited. Amar was holding 200 shares did not pay the first call. Final call was not made. Pass all the journal entries for issue and forfeiture of equity shares with necessary working notes.

Answer & Explanation:

Vikas Steel & Co. Journal Entries S. No. Particulars Debit (₹) Credit (₹) 1 Bank A/c Dr. To Share Application A/c (Being application money received on 75000 shares @ ₹ 25 per share) 18,75,000 18,75,000 2 Share Application A/c Dr. To Share Capital A/c To Share Allotment A/c (Application money of 50000 shares x ₹ 25 transferred to share Capital A/c and remaining adjusted towards shares allotment, 25000 x ₹ 25) 18,75,000 12,50,000 6,25,000 3 Share Allotment A/c Dr. To Share Capital A/c To Securities premium A/c (Allotment money due including premium 50000 x ₹ 50) 25,00,000 15,00,000 10,00,000 4 Bank A/c Dr. Call in Arrear A/c Dr. To Share Allotment A/c (Allotment money received as per working note) 18,56,250 18,750 18,75,000 5 Share First Call A/c Dr. To Share Capital A/c (First Call money due 50000 x ₹ 20) 10,00,000 10,00,000 6 Bank A/c Dr. Calls-in-Arrears Dr. To Share First Call A/c (First call money received of 49300 shares, and of 700 shares debited to Calls in Arrears) 9,86,000 14,000 10,00,000 7 Share capital A/c Dr. Securities premium A/c Dr. To Call in Arrear A/c To Share Forfeiture A/c (Forfeiture of 500 shares on non-payment of allotment and call money) 37,500 10,000 18,750 28,750 Working Note: Shares applied for 75,000; Share Allotted 50,000 Ratio = 3 : 2 Kamal - Number of shares holding = 500 Number of shares applied = 750 Excess application money received = 250 × 25 = ₹ 6,250 Share allotment money due = 500 × ₹ 50 = ₹ 25,000 Net Amount due after adjustment of excess application money = ₹ 25,000 – ₹ 6,250 = ₹ 18,750 Total allotment money due = ₹ 25,00,000 Less: Excess application money adjusted (₹ 6,25,000) Less: Kamal's amount due on allotment (₹ 18,750) Net Amount Received = ₹ 18,56,250

Topics: Corporate Accounting

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