Question

Balance of Share Forfeited Account on the forfeited share not yet re-issued is:

• A. Shown in the Shareholder's Fund
• B. Transferred to Capital Reserve
• C. Transferred to Capital Redemption Reserve
• D. Transferred to General reserve

Hint:

Balance in Share Forfeited Account before re-issue is shown as part of Shareholders' Fund, not immediately transferred to capital reserves.

Answer 1

The Correct Option is A

Step 1: Understanding Share Forfeiture
When shares are forfeited due to non-payment of calls or allotment money, the amount received on those shares is credited to the Share Forfeited Account.
Step 2: Treatment of Share Forfeited Account Balance
If the forfeited shares are not yet re-issued, the balance in the Share Forfeited Account is shown as a part of the Shareholders’ Fund under the heading Capital Reserve or sometimes disclosed separately.
Only when the forfeited shares are re-issued, the amount transferred to Capital Reserve is the profit (if any) on the re-issue.
Step 3: Conclusion
Therefore, the balance on forfeited shares not yet re-issued remains shown within the Shareholders’ Fund.