Competent Ltd. issued a prospectus inviting applications for 50,000 Equity Shares of ₹ 10 each, payable ₹ 5 as per application (including ₹ 2 as premium), ₹ 4 as per allotment and the balance towards first and final call.
Applications were received for 65,000 shares, Application money received on 5,000 shares was refunded with letter of regret and allotments were made on pro-rata basis to the applicants of 60,000 shares.
Mr. Sharma, to whom 700 shares were allotted, failed to pay the allotment money, and his shares were forfeited by the Directors on his subsequent failure to pay the call money.
All the forfeited shares were subsequently sold to Mr. Jain credited as fully paid-up for ₹ 9 per share.
You are required to set out the Journal entries and the relevant entries in the Cash Book.
[Ans.: Capital Reserve – ₹ 2,100.]