Question

JK Ltd. forfeited 6,000 equity shares of ₹10 each issued at a premium of ₹2 per share for the non-payment of first call of ₹2 per share. The second and final call of ₹2 per share had not yet been made. The forfeited shares were reissued at a discount of ₹3 per share fully paid up.
Pass necessary journal entries for the above transactions in the books of the company. Also prepare ‘Share Forfeiture Account’.

Hint:

Share Forfeiture Account holds the amount received before forfeiture. Any unused balance after reissue goes to Capital Reserve.

Answer 1

Face value of share = ₹10
Premium = ₹2
Total issue price = ₹12
Called-up till forfeiture = ₹10 (including premium of ₹2)
Unpaid amount = First call ₹2
Paid-up amount = Application + Allotment + Premium = ₹10 – ₹2 = ₹8

Step 1: Forfeiture Entry
\begin{verbatim} Share Capital A/c Dr. 60,000 Securities Premium A/c Dr. 12,000 To Share Forfeiture A/c 48,000 To Calls in Arrears A/c 24,000 (Being 6,000 shares forfeited for non-payment of first call) \end{verbatim} Step 2: Reissue Entry (at ₹3 discount)
Reissue price = ₹10 – ₹3 = ₹7
\begin{verbatim} Bank A/c Dr. 42,000 Share Forfeiture A/c Dr. 18,000 To Share Capital A/c 60,000 (Being forfeited shares reissued at a discount of ₹3) \end{verbatim} Step 3: Transfer of Gain to Capital Reserve
Forfeiture amount = ₹48,000
Used for discount = ₹18,000
Balance = ₹30,000
\begin{verbatim} Share Forfeiture A/c Dr. 30,000 To Capital Reserve A/c 30,000 (Being profit on reissue transferred to capital reserve) \end{verbatim}