I YEAR BBA LLB (HONS.

) – SEMESTER -II (2022-23)

1ST -INTERNAL ASSESSMENT

SUBJECT: CORPORATE ACCOUNTING

TOPIC: ACCOUNTING TERMINOLOGY & INDIA’S COMPANY
ACCOUNT, ISSUE OF SHARES,

CALL ON ARREARS, CALL ON ADVANCE, FORFEITURE, REISSUE

NAME: ANUJ MAHESHWARI

DIVISION: C

PRN: 22010126231

COURSE: BBA LL.B. (H)

BATCH: 2022-2027
 )

Question 1:

Section A: Short Notes – Call in Advance, Call in Arrear, Issue at Premium,

Forfeiture of Shares.

Answer (A):

1. Calls in Advance.
"Calls in Advance" refers to a situation in Corporate Accounting where a shareholder of a
firm pays the sum that has not yet been called upon his shares. In other words, "Calls in
Advance" refers to the number of upcoming calls that the business has received in advance.
Section 50 of the Companies Act, 2013 says that the company can accept the amount of Calls
in Advance only when it is authorised by its Articles of Association.

The amount of Calls in Advance is displayed on the Equity & Liabilities side of the Balance
Sheet as "Calls in Advance A/c" under "Current Liabilities"

It can be summed up as a situation wherein a shareholder pays off Future Calls which have
not been called yet in a One-Time payment along with the calls that have been called in for
by the company.

2. Calls in Arrears.
Calls-in-arrears are the portions of called-up capital that are not paid by the shareholder
within the specified time frame. In other words, call-in-arrears occurs when a shareholder
fails to pay the sum due on allotment or any future calls.

The company's Articles of Association authorise it to charge interest at a specified rate on the
amount of call-in arrears from the due date until the date of payment. If not authorized in the
Articles of Organization, the company may collect interest at a rate of 10% per annum in
accordance with Table F of the Companies Act, 2013.

“Calls in Arrear” is deducted from the called-up share capital on the liabilities side of the
Company's Balance Sheet. The company can also forfeit the shares on account of non-
payment of the calls money after giving proper notice to shareholders.

3. Issue at Premium
“Issue of shares at premium” refers to the issuance of shares at a price higher than the face
value of the share (The original Base Price of the Share). In other words, the premium is the
amount over and above the face value of a share.

Usually, the companies that are financially strong, well- managed and have a good reputation
in the market issue their shares at a premium. For example, if a company issues a share of
nominal or face value of ₹10 at ₹11, it issues it at 10% premium, i.e., at a premium of ₹1.

A company may call the amount of premium from the applicants or shareholders at any stage,
i.e., at the time of application, allotment, or calls. However, the general trend followed in the
market is that Companies call the amount of Premium at the time of allotment.

4. Forfeiture of Shares
A forfeited share is one that is cancelled by the corporation because the purchaser did not
meet the requirements for purchasing it. These conditions may include the payment of
outstanding call money.

Share forfeiture is only applicable to publicly traded companies whose Articles of

Association include a provision for share forfeiture

After the shares are forfeited, the shareholder loses total ownership of all his shares in the
corporation. These shares are returned to the issuing corporation, and any potential capital
gain is forfeited.

In some scenarios, shareholders might have only failed to pay certain instalments and not all ,
viz., allocation of money or call money. In such a scenario:

 Their share will be forfeited, which means that the shareholder’s

share will be cancelled.
 All the entries associated with the forfeited stocks, apart from those
associated with premium, already mentioned in the accounting
records must have conversed.
 The share capital account is debited with the amount called-up.

Section B: Difference between Public & Private Limited.

Answer (B):

BASIS PRIVATE COMPANY PUBLIC COMPANY

Meaning A privately-owned business A public organisation can

can sell its own, secretly, or offer its own enlisted shares
privately held shares to a to the overall population or
 couple of willing financial the public at large.
backers.

Regulations Until the privately owned A public organisation needs

imposed businesses reach $10 million to comply with a ton of
and a greater number of than guidelines and detailing
500 investors or principles according to the
shareholders, they don’t Government.
need to follow any
guidelines given by the
Government.

Advantage The essential benefit of a The essential benefit of a

privately traded or public corporation is that it
exchanged organisation is can take advantage of the
that it doesn’t have to pay all market by selling more
due respects to any shares.
investors, and there’s no
requirement for divulgences
also.

Funding For privately held For the public corporation,

organisations, the wellspring the source of assets or funds
of assets is not many private is by selling its bonds and
financial backers or shares.
investors.

Shares in The stock of a privately The stocks of a public

Stock owned business is claimed organisation are exchanged
Exchange and exchanged or traded by or traded in the stock
a couple of private financial exchanges.
backers.

Question 2:

1. Namita Ltd. having a nominal capital of Rs. 20,00,000 in shares of Rs. 10 each,

invited applications for 1,00,000 shares, payable as follows:

On Application Rs. 3

On Allotment Rs. 3

On First Call Rs. 2

On Second & Final Call Rs. 2

The company received applications for 99,000 shares. All the applications were

accepted. All money’s due as stated were received with the exception of the second

and final call on 200 shares; these shares were forfeited and reissued as fully paid @

Rs. 9 per share. Record the entries relating to the above – mentioned matters in the

journal of the Company.

Answer (1):
In the Books of Namita Ltd.

JOURNAL

Date Particulars L.F Dr (Amt. in Cr

. Rs.) (Amt. in
Rs)

Bank A/c … 2,97,000

Dr
2,97,000
To Share Application A/c

(Application money received on 99,000

Equity Shares @ Rs. 3 per share)

Share Application A/c 2,97,000

…Dr
2,97,000
To Share Capital A/c

(Application money transferred to Share

Capital Account)

Share Allotment A/c … 2,97,000

Dr
2,97,000
To Share Capital A/c
(Allotment money due on 99,000 Equity
Shares @ Rs. 3 per share)

Bank A/c … 2,97,000

Dr
2,97,000
To Share Allotment A/c

(Allotment money received)

Share First Call A/c … 1,98,000

Dr
1,98,000
To Share Capital A/c

(Share First Call money due on 99,000 Equity

Shares @ Rs. 2 per share)

Bank A/c … 1,98,000

Dr
1,98,000
To Share First Call A/c

(Share First Call money received)

Share Second and Final Call A/c 1,98,000

…Dr
1,98,000
To Share Capital A/c

(Share Second and Final Call due on 99,000

Equity Shares @ Rs. 2 per share)

Bank A/c … 1,97,600

Dr
400
Call in Arrears A/c …
1,98,000
Dr

To Share Second and Final Call A/c

(Share Second and Final Call money received

except on 200 shares)
 Share Capital A/c 2,000
…Dr
1,600
To Share Forfeited A/c
400
To Call in Arrears A/c

(Forfeited 200 shares at Rs. 10 due to the

non-payment of second and final call @ Rs. 2
per share)

Bank A/c … 1,800

Dr
200
Share Forfeited A/c …
2,000
Dr

To Share Capital A/c

(Re-issued 200 shares @ Rs. 9 per share)

Share Forfeited A/c … 1,400

Dr
1,400
To Capital Reserve A/c

(The balance of Forfeiture Account, after the

re-issuing of shares, was transferred to
Capital Reserve Account)

Working Note:-

Share Forfeiture Account (debit) = Rs.1600

Less: Share Forfeiture Account (credit) = (Rs.200)

Balance in Share Forfeiture after re-issue = Rs.1400

Capital Reserve = Balance in Share Forfeiture Account after re-issue = Rs. 1400

2. A Company issues 10,000 shares of the value of Rs. 10 each, payable Rs. 3 on application,

Rs. 3 on allotment and Rs. 4 on 1 st & final call. All cash is duly received except the call
money on 100 shares.

These shares are forfeited and are resold as fully paid for Rs. 500. Give the necessary journal

entries for the transactions.

Answer (2):
Company JOURNAL

Date Particulars L.F Dr (Amt. in Cr (Amt.

. Rs.) in Rs)

Bank A/c … 30,000

Dr
30,000
To Share Application A/c

(Application money received on 10,000

Equity Shares @ Rs. 3 per share)

Share Application A/c … 30,000

Dr
30,000
To Share Capital A/c

(Application money transferred to Share

Capital Account)

Share Allotment A/c … 30,000

Dr
30,000
To Share Capital A/c

(Allotment money due on 10,000 Equity

Shares @ Rs. 3 per share)

Bank A/c … 30,000

Dr
30,000
To Share Allotment A/c

(Allotment money received)

Share First Call A/c … 40,000
Dr
40,000
To Share Capital A/c

(Share First Call money due on 10,000 Equity

Shares @ Rs. 4 per share)

Bank A/c … 39,600

Dr
400
Call in Arrears A/c
40,000
To Share First and Final Call A/c

(First and final call of Rs 4 per share received

on 9,900 shares, and 100 shares failed to pay
it)

Share Capital A/c … 1,000

Dr
600
To Share Forfeited A/c
400
To Calls-in-Arrears A/c

(100 shares of Rs 10 each forfeited for the

non-payment of first and final call Rs 4 per
share)

Bank A/c … 500

Dr
500
Share Forfeited A/c …
1,000
Dr

To Share Capital A/c

(100 shares of Rs 10 each re-issued for the

sum of Rs 100)
 Share Forfeited A/c … 100
Dr
100
To Capital Reserve A/c

(Balance in Share Forfeiture Account after re-

issue of shares, transferred to Capital Reserve
Account)

Working Note: -

Share Forfeiture Account (debit) =600

Less: Share Forfeiture Account (credit) = (500)

Balance in Share Forfeiture after re-issue = 100

Capital Reserve = Balance in Share Forfeiture Account after re-issue = Rs. 100

3. Ankita Ltd. Offered for public 10,000 equity shares of Rs. 10 each at a premium of Rs. 12
per

share payable as under.

On application- Rs. 4

On allotment – Rs. 4 (including premium)

On first & final call – Balance amount

Company received all the money. The issue was fully subscribed. Give journal entries in the

books of Ankita Ltd.

Answer (3):
In the Books of Ankita Ltd.

JOURNAL

Date Particulars l.f Dr (Amt. in Rs.) Cr (Amt.

in Rs)
Bank A/c … 40,000
Dr
40,000
To Share Application A/c

(Application money received on 10,000 Equity

Shares @ Rs. 4 per share)

Share Application A/c … 40,000

Dr
40,000
To Share Capital A/c

(Application money transferred to Share

Capital Account)

Share Allotment A/c … 40,000

Dr
20,000
To Share Capital A/c
20,000
To Share Premium A/c

(Allotment money due on 10,000 Equity Shares

@ Rs. 4 per share [including premium])

Bank A/c … 40,000

Dr
40,000
To Share Allotment A/c

(Allotment money received)

Share First and Final Call A/c 40,000

…Dr
40,000
To Share Capital A/c

(Share First and Final Call money due on

10,000 Equity Shares @ Rs. 4 per share)

Bank A/c … 40,000

Dr
 To Share First and Final Call A/c 40,000

(Share First and Final Call money received)