Question:
Poonam Ltd. forfeited 2,00,000 equity shares of ₹10 each issued at a premium of ₹5 per share for the non-payment of the first call of ₹2 per share. The second and final call of ₹3 per share was not yet made. The forfeited shares were reissued at a discount of ₹1 per share fully paid up. Pass necessary journal entries for the above transactions in the books of Poonam Ltd. Also prepare Share Forfeiture Account.
Poonam Ltd. forfeited 2,00,000 equity shares of ₹10 each issued at a premium of ₹5 per share for the non-payment of the first call of ₹2 per share. The second and final call of ₹3 per share was not yet made. The forfeited shares were reissued at a discount of ₹1 per share fully paid up. Pass necessary journal entries for the above transactions in the books of Poonam Ltd. Also prepare Share Forfeiture Account.
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When shares are forfeited and reissued, only the paid-up amount is transferred to Share Forfeiture A/c. Reissue gain is transferred to Capital Reserve.
Updated On: Jul 19, 2025
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Solution and Explanation
Face Value of Share = ₹10, Premium = ₹5, Issue Price = ₹15
Calls Made = Application (₹5) + Allotment (incl. premium) (₹5 + ₹5) + First Call (₹2)
Calls Not Paid = First Call ₹2 per share
Journal Entries:
(i) Forfeiture of 2,00,000 shares for non-payment of first call:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Share Capital A/c (2,00,000 × 10) | $20,00,000$ | |
| To Share Forfeiture A/c (6 paid + premium) | $18,00,000$ | |
| To Share First Call A/c (2,00,000 × 2) | $4,00,000$ |
(ii) Reissue of 2,00,000 forfeited shares at ₹14:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Bank A/c (2,00,000 × 14) | $28,00,000$ | |
| Share Forfeiture A/c (2,00,000 × 1) | $2,00,000$ | |
| To Share Capital A/c (2,00,000 × 10) | $20,00,000$ | |
| To Securities Premium A/c (2,00,000 × 5) | $10,00,000$ |
(iii) Transfer of gain on reissue to Capital Reserve:
| Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|
| Share Forfeiture A/c | $16,00,000$ | |
| To Capital Reserve A/c | $16,00,000$ |
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