The following balances are extracted from the books of Raj Ltd. : ₹ (1) 1,000, 7% Preference Shares of ₹100 each fully called up : 1,00,000 Less : Calls in arrears @ ₹25 per share 500 Amount paid up 99,500 (2) Securities

Journal Entry in the books of Raj Ltd. Particulars Debit (₹) Credit (₹) 1. Bank A/c Dr. 64,000 To Equity Share Application & Allotment A/c 64,000 (Being share application amount received) 2. Equity Share Application & Allotment A/c Dr. 64,000 To Equity Share Capital A/c 64,000 (Being Share application amount transferred to share capital) 3. General Reserve A/c Dr. 34,000 To Capital Redemption Reserve A/c 34,000 (Being General Reserve transferred capital redemption reserve) 4. Securities Premium A/c Dr. 9,800 To Premium on Redemption of Preference Share A/c 9,800 (Being adjusted for premium) 5. 7% Cumulative Preference Capital A/c Dr. 98,000 Premium on Redemption of Preference Shares A/c Dr. 9,800 To 7% Preference Shareholders' A/c 1,07,800 (Being amount due to preference shareholders) 6. 7% Preference Shareholders' A/c Dr. 1,07,800 To Bank A/c 1,07,800 (Being payment made) Working Note: Calls in arrear is on 20 shares i.e. (500/25) 1000-20 = 980 Preference shares shall be redeemed 980 × 100 = 98,000 - 34,000 (General Reserve) = ₹64,000 980 × 10 = ₹9,800 is premium on redemption.