AccountancyNEB 2075 (old course)
A company forfeited 80 shares of Rs. 10 each, issued at 10% discount, for non payment of final call of Rs. 3 per share. Out of these shares 60 shares were re issued at Rs. 8 per share as fully paid.…
3A company forfeited 80 shares of Rs. 10 each, issued at 10% discount, for non-payment of final call of Rs. 3 per share. Out of these shares 60 shares were re-issued at Rs. 8 per share as fully paid.
Required: Entries for forfeiture; re-issue and transfer of share.
Answer
Journal Entries for Forfeiture, Re-issue, and Transfer of Shares
1. Entry for Forfeiture of Shares
When 80 shares of Rs. 10 each (issued at a 10% discount) are forfeited for non-payment of the final call of Rs. 3 per share, the following entry is passed:
| Particulars | L.F. | Amount (Rs.) |
|---|---|---|
| Share Capital A/c (80 shares × Rs. 10) | Dr. | 800 |
| Securities Premium A/c (80 shares × Rs. 1) | Dr. | 80 |
| Calls in Arrears A/c (80 shares × Rs. 3) | Dr. | 240 |
| To Share Forfeiture A/c | 1120 |
Explanation:
- Share Capital A/c: Rs. 800 (80 shares × Rs. 10)
- Securities Premium A/c: Rs. 80 (80 shares × Rs. 1 discount)
- Calls in Arrears A/c: Rs. 240 (80 shares × Rs. 3 final call)
- Share Forfeiture A/c: Rs. 1120 (Total amount forfeited)
2. Entry for Re-issue of 60 Shares at Rs. 8 per Share (Fully Paid)
When 60 of the forfeited shares are re-issued at Rs. 8 per share (fully paid), the following entry is passed:
| Particulars | L.F. | Amount (Rs.) |
|---|---|---|
| Bank A/c | Dr. | 480 |
| Share Forfeiture A/c | Dr. | 120 |
| To Share Capital A/c (60 shares × Rs. 10) | 600 | |
| To Securities Premium A/c | 120 |
Explanation:
- Bank A/c: Rs. 480 (60 shares × Rs. 8)
- Share Forfeiture A/c: Rs. 120 (60 shares × Rs. 2, as Rs. 8 - Rs. 6 already paid = Rs. 2)
- Share Capital A/c: Rs. 600 (60 shares × Rs. 10)
- Securities Premium A/c: Rs. 120 (60 shares × Rs. 2, as Rs. 8 - Rs. 6 = Rs. 2 premium)
3. Entry for Transfer of Rs. 2 per Share to Capital Reserve
After re-issuing 60 shares, the remaining amount in Share Forfeiture A/c (Rs. 240 - Rs. 120 = Rs. 120) is transferred to Capital Reserve:
| Particulars | L.F. | Amount (Rs.) |
|---|---|---|
| Share Forfeiture A/c | Dr. | 120 |
| To Capital Reserve A/c | 120 |
Explanation:
- Share Forfeiture A/c: Rs. 120 (remaining balance)
- Capital Reserve A/c: Rs. 120 (transferred as per accounting standards)
Final Result:
- Total amount forfeited: Rs. 1120
- Amount re-issued: Rs. 480 (Bank) + Rs. 120 (Share Forfeiture)
- Amount transferred to Capital Reserve: Rs. 120
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