Answer: Share capital called up ₹ 5,00,000, calls in arrears ₹ 10,000, paid-up capital ₹ 4,90,000. OR: Current Ratio 3 : 1, Gross Profit Ratio 50%, Net Profit Ratio 25%.
Working notes
- Application money received = 60,000 × ₹ 3 = ₹ 1,80,000. Required on 50,000 shares = ₹ 1,50,000; excess ₹ 30,000 (on 10,000 shares) is adjusted towards allotment because allotment is pro-rata to all applicants.
- Allotment due = 50,000 × ₹ 5 = ₹ 2,50,000; cash received = ₹ 2,50,000 – ₹ 30,000 = ₹ 2,20,000.
- First and final call due = 50,000 × ₹ 2 = ₹ 1,00,000; Rahul’s arrears = 5,000 × ₹ 2 = ₹ 10,000; received ₹ 90,000.
Journal entries in the books of Finolex Co. Ltd.
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|
| — | Bank A/c ............ Dr.
To Equity Share Application A/c
(Being application money received on 60,000 shares @ ₹ 3) | 1,80,000 |
1,80,000 |
| — | Equity Share Application A/c ............ Dr.
To Equity Share Capital A/c
To Equity Share Allotment A/c
(Being application money on 50,000 shares transferred to capital and excess adjusted towards allotment) | 1,80,000 |
1,50,000
30,000 |
| — | Equity Share Allotment A/c ............ Dr.
To Equity Share Capital A/c
(Being allotment money due on 50,000 shares @ ₹ 5) | 2,50,000 |
2,50,000 |
| — | Bank A/c ............ Dr.
To Equity Share Allotment A/c
(Being balance allotment money received after adjusting excess application money) | 2,20,000 |
2,20,000 |
| — | Equity Share First and Final Call A/c ............ Dr.
To Equity Share Capital A/c
(Being first and final call due on 50,000 shares @ ₹ 2) | 1,00,000 |
1,00,000 |
| — | Bank A/c ............ Dr.
Calls in Arrears A/c ............ Dr.
To Equity Share First and Final Call A/c
(Being call money received except on 5,000 shares held by Mr. Rahul) | 90,000
10,000 |
1,00,000 |
Extract of Balance Sheet (Share Capital): Issued and subscribed 50,000 equity shares of ₹ 10 each, fully called up ₹ 5,00,000; less calls in arrears ₹ 10,000; paid up ₹ 4,90,000. Bank balance = ₹ 1,80,000 + ₹ 2,20,000 + ₹ 90,000 = ₹ 4,90,000.
OR (Ratios)
- Current Assets = Debtors 2,50,000 + Stock 1,50,000 + Cash in hand 2,00,000 = ₹ 6,00,000.
- Current Liabilities = Creditors 1,20,000 + Bills payable 50,000 + Bank overdraft 30,000 = ₹ 2,00,000.
- Current Ratio = Current Assets ÷ Current Liabilities = 6,00,000 ÷ 2,00,000 = 3 : 1.
- Gross Profit Ratio = Gross Profit ÷ Net Sales × 100 = 8,00,000 ÷ 16,00,000 × 100 = 50%.
- Net Profit Ratio = Net Profit ÷ Net Sales × 100 = 4,00,000 ÷ 16,00,000 × 100 = 25%.
A current ratio of 3 : 1 is above the standard 2 : 1, so short-term liquidity is good.
