High Land India Ltd. invited applications for 50,000 Shares of ₹100 each per share. Applications were received for 70,000 shares and pro-rata allotment was made on the application for 50,000 shares. Rohan to whom 600 shares were allotted failed to pay the allotment money and his shares were forfeited immediately after allotment. Of the shares forfeited, 500 share were reissued as fully paid-up for ₹80 per share.

Order to be followed for recording entries will be:

(A) Forfeiture of shares

(B) Calculation of amount received on allotment

(C) Adjustment of excess money received on application towards allotment

(D) Reissue of shares

Choose the correct answer from the options given below:

(C), (B), (A), (D)

The correct answer is option 3- (C), (B), (A), (D).

(C) Adjustment of excess money received on application towards allotment- Since 70,000 shares were applied for and only 50,000 shares were allotted, there’s excess application money. This excess money is adjusted towards the allotment. This is the first step, as it affects how much is due from each shareholder on allotment.

(B) Calculation of amount received on allotment- After adjusting the excess application money, calculate how much is still due and received on allotment. In Rohan’s case, he didn’t pay his remaining allotment dues — this leads to forfeiture next.

(A) Forfeiture of shares- Rohan’s 600 shares are forfeited since he failed to pay the allotment money. Record the forfeiture entry to cancel his shares. 

(D) Reissue of shares-  500 of the forfeited shares are reissued at ₹80 per share as fully paid-up. This is the final step, and involves recording the cash received and transferring the related forfeited amount to Capital Reserve.