Question

Lexa Ltd. issued 50,000 equity shares of ₹ 10 each at a premium of ₹ 2 per share. The amount was payable as follows: On application and allotment – ₹ 7 per share (including premium). On first and final call – Balance. The issue was fully subscribed. All the money was duly received except the first and final call on 1,000 equity shares. These shares were forfeited. On forfeiture of these shares, Calls in Arrears Account will be:

• A. credited by ₹ 7,000
• B. debited by ₹ 5,000
• C. credited by ₹ 5,000
• D. debited by ₹ 7,000

Hint:

When shares are forfeited, record the unpaid amount in the Calls in Arrears account, which is credited by the unpaid portion of the calls.

Answer 1

The Correct Option is C

The amount unpaid on these shares for the first and final call is ₹ 5 per share (₹ 7 per share on the first and final call minus ₹ 2 already paid as premium). \[ Calls in Arrears} = 1,000 \times ₹ 5 = ₹ 5,000. \] So, the Calls in Arrears Account will be credited by ₹ 5,000.