Share Forfeiture

Given and interpretation.
- Face value per share = ₹10; Securities premium = ₹2 (assumed received earlier on allotment).
- Final call unpaid = ₹3 per share; hence \emph{called-up capital} on forfeiture = full ₹10; \emph{amount received on capital} per share = ₹7. Step 1: Forfeiture entry for 6,000 shares.
General rule on forfeiture (for non-payment of calls already due): Here: Called-up per share = ₹10 ⇒ debit ₹60,000 (6,000×10).
Unpaid = Final Call ₹3 ⇒ credit ₹18,000 (6,000×3).
Amount received on \emph{capital} = ₹7 per share ⇒ credit Share Forfeiture ₹42,000 (6,000×7). Premium was already collected, so no entry for Securities Premium on forfeiture.
Step 2: Re-issue of 300 forfeited shares at ₹8 as fully paid.
Issue price = ₹8 for a ₹10 paid-up share ⇒ \emph{discount on re-issue} = ₹2 per share (₹600 total). Such discount is debited to \underline{Share Forfeiture A/c}, limited to the amount available therein. Entry:
Step 3: Transfer capital profit on re-issue to Capital Reserve.
Amount originally forfeited per share (related to capital) = ₹7. After using ₹2 as discount, surplus per re-issued share = ₹5. Transfer for 300 shares = .
Step 4: Prepare Share Forfeiture Account.
[2pt] Thus, ₹39,900 remains in Share Forfeiture A/c relating to the 5,700 shares not yet re-issued (to be transferred to Capital Reserve when re-issued).
Final Answer: % Quciktip

Step 1: Meaning of Share Forfeiture.
When a shareholder fails to pay allotment or call money, their shares may be forfeited. The amount already received from such shareholders is transferred to the “Share Forfeiture A/c”.
Step 2: Nature of balance.
The balance in this account represents capital profit, because it arises from forfeiture of shares and not from regular trading activities.
Step 3: Presentation in Balance Sheet.
Since it is treated as capital profit, it is shown under the head “Reserves and Surplus” in the Balance Sheet until reissue of shares.
Step 4: Conclude.
Thus, the balance of Share Forfeiture A/c is shown under Reserves and Surplus.
Final Answer:

Step 1: Meaning of forfeiture.
If a shareholder fails to pay call money, his shares may be forfeited.
Step 2: Effect.
Forfeited shares reduce the company’s paid-up capital, because the shareholder’s contribution is cancelled.
Step 3: Conclude.
Authorised capital remains unchanged, only paid-up capital decreases.
Final Answer: