a. When shares are issued at par:

In the books of paradise Ltd Journal entries

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Assets A/c	Dr		4,40,000
	To Suganya Furniture Ltd A/c				4,40,000
	(Purchase of assets)
	Sugnaya Furniture Ltd A/c	Dr		4,40,000
	To Equity share capital A/c				4,40,000
	(Issue of Rs.44,000 shares of 10 each fully paid)

b. When shares are issued at a premium of 10%

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Asset A/c	Dr		4,40,000
	To Suganya Furniture Ltd A/c				4,40,000
	(Purchase of asset)
	Suganya Furniture Ltd A/c	Dr		4,40,000
	To Equity share capital A/c (40000 x 10				4,00,000
	To Securities premium A/c (40,000 x 1)				40,000
	(Issue of Rs.40000 shares of 10 each at a premium of 10%

 Computation of number of shares to be issued
Total amount = Rs.4,40,000
Face value of the shares = Rs.10
Premium = 10%; Therefore, premium amount
10 x 10% =1
Issue price = Face value + premium =10+1 =Rs.11
Number of equity shares to be Issued =\(\frac{Total amount}{Issue price}\) = \(\frac{4,40,000}{11}\) =Rs. 40,000

a.Issued at par:

In the books of United Industries Ltd., Journal Entries

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Bank A/c (50000 x 10)	Dr		5,00,000
	To Share application A/c				5,00,000
	(Application money received)
	Share application A/c	Dr		5,00,000
	To Share capital A/c				5,00,000
	(Application money transferred to share capitals)

b.Issued at a premium:

In the books of United Industries Ltd., Journal Entries

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Bank A/c (50000 x 13)	Dr		6,50,000
	To share application A/c				6,50,000
	(Application money received)
	Share application A/c	Dr		6,50,000
	To Securities premium A/c				1,50,000
	To Securities premium A/c				1,50,000
	(Application money transferred)

Issue of shares for consideration other than cash.

 

In the books of Nathiya Textiles Ltd Journal entries

Date	Particulars		L.F	Debit Rs.	Credit Rs.
	Share capital A/c (100 x 8)	Dr		800
	To Equity share first call A/c (100 x 2)				200
	To Forfeited shares A/c (100 x 6)				600
	(Forfeiture of 700 shares, Rs.8 called up)
	Bank A/c (75 x 7)	Dr		525
	Forfeited shares A/c	Dr		225
	To Share capital A/c				750
	(Reissue of 75 forfeited Share)
	Forfeited shares A/c	Dr		375
	To Capital reserve A/c				375
	(Balance left in shares forfeited account transferred to capital reserve A/c)

In the books of Nivetha Ltd Journal entries Date Particulars   L.F Debit Rs. Credit Rs.   Equity share capital A/c (100 x 10) Dr   10,000     To Equity share final call (1000 x 4) A/c       4,000   To Forfeited shares (1000 x 6) A/c       6,000   (1000 shares forfeited)           Bank A/c (800 x 7) Dr   5,600     Forfeited shares A/c (800 x 3)     2,400     To Equity share capital A/c (800 x 10)       8,000   (800 forfeited shares reissued @ 7 per share)           Forfeited shared A/c Dr   2,400     To Capital reserve A/c       2,400   (Gain in reissue of forfeited shares transferred to
capital reserve account)        

In the books of Gowtham Ltd Journal entries

Date	Particulars		L.F	Debit Rs.	Credit Rs.
	Equity share capital A/c (500 x 10)	Dr		5,000
	To Equity share final call A/c (500 x 2)				1,000
	To Forfeited shared A/c (500 x 8)				4,000
	(500 shares forfeited)
	Bank A/c (500 x 8)	Dr		4,000
	Forfeited shares A/c (500 x 2)	Dr		1,000
	To Equity share capital A/c (500 x 10)				5,000
	(Forfeited shares reissued)
	Forfeited shares A/c ( 4000 - 1000)	Dr		3,000
	To Capital reserve A/c
	(Balance in shares forfeited account transferred to capital reserve account)				3,000

Journal entry

Date	Particulars		L.F	Debit Rs.	Credit Rs.
	Share capital A/c (50 x 8)	Dr		400
	To Share allotment A/c (50 x 4)				200
	To Share first call A/c (50 x 2)				100
	To Forfeited shares A/c (50 x 2)				100
	(Shares forfeited)

Journal entry

Date	Particulars		L.F	Debit Rs.	Credit Rs.
	Share capital A/c (1000 x 10)	Dr		10,000
	To Equity share capital A/c (1000 x 3)				3,000
	To Forfeited shares A/c (1,000 x 7)				7,000
	(1,000 shares forfeited for non-payment of call money)

Date	Particulars		L.F	Debit Rs.	Credit Rs.
	Share first and final call A/c (50,000 x 4)	Dr		2,00,000
	To Share capital A/c				2,00,000
	(share first and final call money due)
	Bank A/c (49,000 x 4)	Dr		1,96,000
	Calls in arrear A/c (1000 x 4)	Dr		4,000
	To Share first and final call A/c				2,00,000
	(Amount received on calls and not received transferred to calls in arrear account)

A company may issue shares for consideration other than cash when the company acquires fixed assets such as land and buildings, machinery, etc under such situation, the following journal entries are to be passed.

Date	Particulars	L.F	Debit Rs.	Credit Rs.
	(i) For Purchase of asset:
	Respective asset A/c Dr		xxx
	To Vendor A/c			xxx
	(ii) For issue of shares:
	Vendor A/c Dr		xxx
	To Equity share capital A/c			xxx
	To Securities premium A/c (if issued at premium)			xxx

A company may also issue shares a consideration for the purchase of business, to promoters for their services and to brokers and underwriters for commission.

(a) Authorised capital:
It means such capital as is authorised by the memorandum of association. It is the maximum amount which can be raised as capital. It is also known as registered capital or nominal capital.
(b) Reserve capital :
Sec. 65 of Companies Act, 2013, only an unlimited company having share capital while Converting into a limited company may have a reserve capital. the company reserve a part of its subscribed Capital to be called up, only at the time of winding up. It is called reserve capitals. 

The direction of a company have an authority of reissue of shares once forfeited by them due to non-payments of calls. They can rreissue the forfeitedshares at par, at premium or at discount. When forfeited shares are reissued at a premium, the amount of such premium will be credited to securities premium account.
If the reissue price is more than the amount. Unpaid on forfeited shares it results in profit and is transferred to capital reserve account.

(i) The excess amount paid over the called up value of a share is known as calls in advance.
(ii) It is the excess money paid on application or allotment or calls. Such excess amount can be returned or adjusted towards future payment.
(iii) If the company decides to adjust such amount towards future payment, the excess amount may also be transferred to a separate account called call in advance.
(iv) Calls in advance does not form part of the company's share capital and no dividend is payable on such amount.
(v) In the balance sheet, it should be shown under current liabilities.

(a) When shares are issued at par:

In the books of Rajan Ltd Journal entries

Date	Particulars		L.F	Debit Rs.	Credit Rs.
	Machinery A/c	Dr.		6,00,000
	To Jagan Traders A/c				6,00,000
	(Purchase of machinery)
	Jagan Traders A/c	Dr.		6,00,000
	To Equity share capital A/c				6,00,000
	(Issue of 60,000 shares of Rs.10 each fully paid)

(b) When shares are issued at a premium of 50%

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Machinery A/c	Dr.		6,00,000
	To Jagan Traders A/c				6,00,000
	(Purchase of machinery)
	Jagan Traders A/c	Dr		6,00,000
	To Equity share capital A/c (40,000 × 10)				4,00,000
	To Securities premium A/c (40,000 × 5)				2,00,000
	(Issue of 40,000 shares of  Rs.10 each at a premium of 50%)

Tutorial note
Computation of number of shares to be issued
Total amount = Rs. 6,00,000
Face value of the shares = Rs. 10
Premium = 50%; Therefore, premium amount = 10 × 50% = Rs. 5
Issue price = Face value + premium = 10 + 5 = Rs.15 
Number of equity shares to be issued = \(\frac{Total\ amount}{Issue\ price}=\frac{6,00,000}{15}\)  = 40,000 shares

(i) Issued at par

In the books of Sara Company Journal entries

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Bank A/c (10,000 x10)	Dr.		1,00,000
	To Equity share application A/c				1,00,000
	(Application money received)
	Equity share application A/c	Dr.		1,00,000
	To Equity share capital A/c				1,00,000
	(Application money transferred to share capital)

(ii) Issued at a premium

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Bank A/c (10,000 × 12)	Dr.		1,20,000
	To Equity share application A/c				1,20,000
	(Application money received)
	Equity share application A/c	Dr.		1,20,000
	To Equity share capital A/c (10,000 × 10)				1,00,000
	To Securities premium A/c (10,000 × 2)				20,000
	(Application money transferred to share capital)

In the books of Gemini Ltd. Journal entries

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Equity share capital A/c (20 × 7)	Dr.		140
	To Equity share first call A/c (20 × 2)				40
	To Forfeited shares A/c (20 × 5)				100
	(Forfeiture of 120 shares, Rs.7 called up)
	Bank A/c (15 × 6)	Dr.		90
	Forfeited shares A/c			15
	To Equity share capital A/c (15 × 7)				105
	(Reissue of 15 forfeited shares @ Rs.6 per share)
	Forfeited shares A/c	Dr		60
	To Capital reserve A/c				60
	(Gain on reissue of forfeited shares transferred to capital reserve account)

Note:
Computation of transfer to capital reserve

Forfeited amount for reissued shares of 15	= \(\frac{100}{20}\times\)15	= 75
Less: Loss on reissue		15
Transfer to capital reserve		60

Remaining balance in shares forfeited account Rs. 25 will appear in the balance sheet. Accountancy.

In the books of Maruthu Ltd. Journal entries

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Equity share capital A/c (150 × 10)	Dr.		1,500
	To Equity share final call A/c (150 × 4)				600
	To Forfeited shares A/c (150 × 6)				900
	(50 shares forfeited)
	Bank A/c (100 × 9)	Dr.		900
	Forfeited shares A/c (100 × 1)			100
	To Equity share capital A/c (100 × 10)				1,000
	(100 forfeited shares reissued @ Rs.9 per share)
	Forfeited shares A/c	Dr.		500
	To Capital reserve A/c				500
	(Gain on reissue of forfeited shares transferred to capital reserve account)

Working note:
Forfeited amount for 150 shares = Rs.900
Forfeited amount for 100 shares = \(\frac{900}{150}\) x 100 = Rs.600
Gain or loss = Amount forfeited – loss on reissue
= 600 - 100
Net gain = Rs.500

In the books of Anu Company Journal entries

Date	Particulars		L.F.	Debit Rs.	Credit Rs.
	Equity share capital A/c (200 × 10)	Dr.		2,000
	To Equity share final call A/c (200 × 3)				600
	To Forfeited shares A/c (200 × 7)				1,400
	(200 shares forfeited)
	Bank A/c (200 × 6)	Dr		1,200
	Forfeited shares A/c (200 × 4)	Dr		800
	To Share capital A/c (200 × 10)				2,000
	(Forfeited shares reissued)
	Forfeited shares A/c (1,400-800)	Dr.		600
	To Capital reserve A/c				600
	(Gain on reissue of forfeited shares transferred to capital reserve account)