Question

Pass the necessary journal entries for forfeiture and reissue of shares in the following cases:
(i) Premier Ltd. forfeited 600 shares of Rs 10 each issued at a premium of Rs 3 per share (payable with allotment) for non-payment of allotment money of Rs 7 per share including premium. The first and final call of Rs 3 per share was not yet made. The forfeited shares were reissued at Rs 13 per share fully paid up.
(ii) Risha Ltd. forfeited 1000 shares of Rs 10 each, Rs 8 per share called up issued at a premium of Rs 2 per share to Atul, for non-payment of allotment money of Rs 6 per share (including premium). Out of these, 800 shares were reissued at Rs 7 per share, Rs 8 paid up.

Hint:

Forfeiture \& Reissue Key Points: - Debit Share Capital with Called-up Face Value. - Debit Securities Premium only if it was due but not received. - Credit Share Forfeiture with the amount actually paid by the shareholder towards face value. - Credit Calls-in-Arrears/Specific Call account with the total unpaid amount. - On Reissue: Bank Dr (Amount Received), Share Forfeiture Dr (Discount, if any), To Share Capital Cr (Paid-up Value). - Transfer to Capital Reserve: (Forfeited Amount per share - Discount on Reissue per share) * No. of Shares Reissued.

Answer 1

Case (i) Premier Ltd.
Analysis: * Shares = 600, Face Value = Rs10, Premium = Rs3 (on Allotment)
* Allotment Due = Rs7 (incl. premium = Rs3 + Face Value Rs4). Unpaid.
* Call not made = Rs3. Called-up Face Value = Rs10 - Rs3 = Rs7.
* Application money = Called-up FV - Allotment FV = Rs7 - Rs4 = Rs3. (Paid).
* Forfeited Amount = Rs3 per share. Premium was due but not received.
Journal Entries (Premier Ltd.):
\begin{longtable}{|p{1.5cm}|p{8cm}|r|r|} \hline Date & Particulars & Dr. (Rs) & Cr. (Rs)
\hline \endfirsthead \hline \endfoot \hline \endlastfoot (Forfeiture) & Equity Share Capital A/c (600 x Rs7) \hspace{1.0cm} Dr. & 4,200 &
& Securities Premium A/c (600 x Rs3) \hspace{1.3cm} Dr. & 1,800 &
& \indent To Share Forfeiture A/c (600 x Rs3) & & 1,800
& \indent To Equity Share Allotment A/c (Calls-in-Arrears) (600 x Rs7) & & 4,200
& \textit{(Being 600 shares forfeited for non-payment of allotment money, premium also debited as unpaid)} & &
\hline (Reissue) & Bank A/c (600 x Rs13) \hspace{3.0cm} Dr. & 7,800 &
& \indent To Equity Share Capital A/c (600 x Rs10) & & 6,000
& \indent To Securities Premium A/c (600 x Rs3) & & 1,800
& \textit{(Being 600 forfeited shares reissued at Rs13 per share, fully paid up)} & &
\hline (Transfer) & Share Forfeiture A/c \hspace{3.0cm} Dr. & 1,800 &
& \indent To Capital Reserve A/c & & 1,800
& \textit{(Being gain on reissue of forfeited shares transferred to Capital Reserve [Forfeited amount Rs1,800 - Discount Nil])} & &
\hline \end{longtable} Case (ii) Risha Ltd.
Analysis: * Shares = 1000, Face Value = Rs10, Called-up = Rs8, Premium = Rs2 (assume on Allotment). * Allotment Due = Rs6 (incl. premium = Rs2 + Face Value Rs4). Unpaid. * Called-up FV = Rs8. * Application money = Called-up FV - Allotment FV = Rs8 - Rs4 = Rs4. (Paid). * Forfeited Amount = Rs4 per share. Premium was due but not received. * Reissue: 800 shares at Rs7, Rs8 paid up. Discount on reissue = Rs8 - Rs7 = Rs1 per share. Journal Entries (Risha Ltd.):
\begin{longtable}{|p{1.5cm}|p{8cm}|r|r|} \hline Date & Particulars & Dr. (Rs) & Cr. (Rs)
\hline \endfirsthead \hline \endfoot \hline \endlastfoot (Forfeiture) & Equity Share Capital A/c (1000 x Rs8) \hspace{0.8cm} Dr. & 8,000 &
& Securities Premium A/c (1000 x Rs2) \hspace{1.1cm} Dr. & 2,000 &
& \indent To Share Forfeiture A/c (1000 x Rs4) & & 4,000
& \indent To Equity Share Allotment A/c (Calls-in-Arrears) (1000 x Rs6) & & 6,000
& \textit{(Being 1000 shares forfeited for non-payment of allotment money, premium also debited as unpaid)} & &
\hline (Reissue) & Bank A/c (800 x Rs7) \hspace{3.2cm} Dr. & 5,600 &
& Share Forfeiture A/c (800 x Rs1 discount) Dr. & 800 &
& \indent To Equity Share Capital A/c (800 x Rs8) & & 6,400
& \textit{(Being 800 forfeited shares reissued at Rs7 per share, Rs8 paid up)} & &
\hline (Transfer) & Share Forfeiture A/c \hspace{3.0cm} Dr. & 2,400 &
& \indent To Capital Reserve A/c & & 2,400
& \textit{(Being gain on reissue transferred to Capital Reserve [(Amt Forfeited Rs4 - Discount Rs1) x 800 shares])} & &
\hline \end{longtable}