Company AccountsQ-2 | Bonus Issue and Right IssueQuestion 5249 of 112
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Following is the extract of the Balance Sheet of Substance Ltd. as at 31st March, 2024 Authorised capital 45,000 12% Preference shares of ₹ 10 each 4,50,000 4,50,000 Equity shares of 10 each 45,00,000 Issued and Subscribed capital: 49,50,000 36,000 12% Preference shares of 10 each fully paid 3,60,000 4,05,000 Equity shares of 10 each, 8 paid up 32,40,000 Reserves and surplus: General Reserve 5,40,000 Capital Reserve (profit realized on sale of plant) 1,80,000 Securities premium 1,12,500 Profit and Loss Account 9,00,000 On 1st April, 2024, the Company has made final call @ ₹ 2 each on 4,05,000 equity shares. The call money was received by 20th April, 2024. Thereafter, the company decided to capitalize its reserves by way of bonus at the rate of one share for every four shares held. Company decides to use Capital Reserve for bonus issue as it has been realized in cash. Show necessary journal entries in the books of the company and prepare the extract of the Balance Sheet as on 30th April, 2024 after bonus issue. [MTP Jan. 2025]

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Detailed Solution & Explanation

Journal Entries in the books of Substance Ltd. Date Particulars L.F. Amount (Dr.) Amount (Cr.) 1-4- 2024 Equity share final call A/ c Dr. To Equity share capital A/ c (For final calls of 2 per share on 4,05,000 equity shares due as per Board's Resolution dated .... ) 8,10,000 8,10,000 20-4- 2024 Bank A/c Dr. To Equity share final call A/ c (For final call money on 4,05,000 equity shares received) 8,10,000 8,10,000 Securities Premium A/ c Dr. Capital Reserve A/ c Dr. General Reserve A/ c Dr. Profit & Loss A/ c Dr. To Bonus to Shareholder's A/ c (For making provision for bonus issue of one share for every four shares held) 1,12,500 1,80,000 5,40,000 1,80,000 10,12,500 Bonus to Shareholder's A/ c Dr. To Equity Share Capital A/ c (For issue of bonus shares) 10,12,500 10,12,500 Extract of Balance Sheet as at 30th April, 2024 (after bonus issue) Authorised capital 45,000 12% Preference shares of ₹ 10 each 4,50,000 5,06,250 Equity shares of ₹ 10 each (W.N.) 50,62,500 Issued and subscribed capital 36,000 12% Preference shares of 10 each, fully paid 3,60,000 5,06,250 Equity shares of 10 each, fully paid 50,62,500 (Out of above, 1,01,250 equity shares @ 10 each were issued by way of bonus) Reserves and surplus Profit and Loss Account 7,20,000 W.N.: The authorised capital has been increased by sufficient number of shares. (5,06,250 - 4,50,000) = 56,250 shares UNIT – 5 (Redemption of Preference Shares) DESCRIPTIVE QUESTIONS

About This Chapter: Partnership & Companies

Paper

Paper 1: Accounting

Weightage

15-20%

Key Topics

Admission, Retirement, Death, Shares, Debentures

This chapter covers Admission, Retirement, Death, Shares, Debentures and is part of Paper 1: Accounting in the CA Foundation exam.

View Official ICAI Syllabus

Exam Strategy Tip

This topic carries 15-20% weightage. Focus on understanding core concepts rather than memorizing.

Key Concepts to Understand

Profit and Loss Account

The second part of the final accounts that records all indirect incomes and indirect expenses to determine the Net Profit or Net Loss for the accounting period. It starts with Gross Profit from the Trading Account.

Balance Sheet

A statement showing the financial position of a business at a particular date, listing all assets on one side and all liabilities and capital on the other side. It is not an account but a statement.

Reserves and Surplus

Accumulated profits and specific provisions retained in the business rather than distributed to shareholders. Reserves are appropriations of profit (General Reserve, Capital Reserve), while Surplus is the undistributed balance in the P&L Account.

Related Comparison Tables

Revenue Expenditure vs Capital Expenditure: AccountsTrading Account vs P&L Account: Final Accounts ExplainedSLM vs WDV Depreciation: CA Foundation Accounts

More Questions from Company Accounts

Reserve Capital

Cumulative preference shares

Minimum subscription

Reserve Capital and Capital Reserve carry the same meaning.

As per Table F, the Minimum rate of interest that can be charged on calls- in-Arrear and that can be allowed on calls-in-advance are 10% p.m. and 12% p.m. respectively.

Re-issue of forfeited shares is allotment of shares but not a sale. [May 2018, 2 Marks]

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