Surya limited invited applications for 15,000 shares for ₹10 each at a premium of 20% per share. The amount was payable as under

On application ₹4        On allotment ₹6
On first call ₹1             On final call-Balance

Applications were received for 36,000 shares and pro-rata allotment was made to all the applicants. Directors have not made the final call. Mr. Ritesh the holder of 300 shares did not pay anything after application money. Directors forfeited these shares and re-issued them at ₹6 per share.

On the basis of following case, answer the Question.

At the time of forfeiture of share journal entry would be:

Securities Premium Reserve A/c Dr.    ₹120
Share capital A/c Dr.                          ₹2700
                 To Share Allotment A/c                  ₹120
                 To Share I^st Call A/c                      ₹300
                 To Share forfeiture A/c                   ₹2400

The correct answer is Option (3) -

Securities Premium Reserve A/c Dr.    ₹120
Share capital A/c Dr.                             ₹2700
                 To Share Allotment A/c                      ₹120
                 To Share I^st Call A/c                           ₹300
                 To Share forfeiture A/c                       ₹2400

Pro-rata ratio = 12:5
Those alloted 15000 shares applied for 36000 shares.
Ritesh alloted 300 shares
Ritesh applied for = 36000/15000 x 300
                          = 720 shares.

On application ₹4
On allotment ₹6

Money received from Ritesh = 720 x 4
                                         = ₹2880

Money on application needed = 300 x 4
                                          = ₹1200

Excess money adjusted towards allotment = 2880 - 1200
                                                             = ₹1680

Money due on allotment = 300 x 6
                                   = ₹1800

Money not received on allotment = Money due on allotment - Excess money adjusted
                                                = 1800 - 1680
                                                = ₹120

* Money not received on allotment is to be for securities premium reserve account.

Share Capital A/c Dr. (300 x 9)         ₹2700
Securities Premium Reserve A/c Dr.  ₹120
     To Share Forfeiture A/c                           ₹2400 (Amount received)
     To Share Allotment A/c                            ₹120 (Amount not received)
     To Share First call A/c ( 300 x 1)              ₹300 (Amount not received)
(300 shares forfeited for non-payment of allotment money and calls made)