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. \( \text{Credited by ₹ 7,000} \)
• B. \( \text{Debited by ₹ 5,000} \)
• C. \( \text{Credited by ₹ 5,000} \)
• D. \( \text{Debited by ₹ 7,000} \)

Hint:

When shares are forfeited, the unpaid amount is credited to the Calls in Arrears Account to reflect the reversal of the dues.

Answer 1

The Correct Option is C

1. Amount Payable on First and Final Call: Balance amount = ₹ 12 (total) - ₹ 7 (application and allotment) = ₹ 5. 2. Shares Forfeited: Number of shares forfeited = 1,000. 3. Unpaid Amount Calculation: Total unpaid amount = \( 1,000 \times ₹ 5 = ₹ 5,000. \) 4. Treatment in Calls in Arrears Account: When shares are forfeited, the unpaid amount is credited to the Calls in Arrears Account: \[ \text{Calls in Arrears Account Credited} = ₹ 5,000. \]