Company Account: Issue of Shares - Practice Question 2

Sometimes, depending on the company issuing the shares, the payment for shares applied for by the buyers may be done on instalmental basis. The company may require that a certain amount be paid on application, another on allotment, and so on until the shares are fully paid for. Where this is the case, the bookkeeping (accounting) entries will take a slightly different style. The following example illustrates this position.

Ekhei-Girls Ltd issued out 1,000,000 ordinary shares of N1 each at N1.85k per share. The shares were payable as listed below

a.    N0.45k on application

b.    N1.05k on allotment (including premium)

c.    N0.35k on first & final call

Cash was paid by buyers and received by Ekhei-Girls as at when due excepting for 20,000 shares that were not paid for when the first & final call was made. The applicants for the 20,000 shares could not pay up their money within the time allowed as stated in the prospectus. The shares were later re-issued at 35k and were fully paid for.

You are required to:

              i.        Show Journal Entries necessary to record the above transactions

             ii.        Transfer the entries into their respective Ledgers

            iii.        Prepare a balance sheet extract for the issue of the shares