Question

Risha Ltd. forfeited 1,000 shares of ₹ 10 each, ₹ 8 per share called up issued at a premium of ₹ 2 per share to Atul, for non-payment of allotment money of ₹ 6 per share (including premium). Out of these, 800 shares were reissued at ₹ 7 per share, ₹ 8 paid up.

Hint:

For partial reissue, allocate forfeiture amount proportionately to shares reissued.

Answer 1

1. Share Capital A/c Dr. ₹ 8,000
Securities Premium A/c Dr. ₹ 2,000
To Share Forfeiture A/c ₹ 4,000
To Share Allotment A/c ₹ 6,000
(Being forfeiture of 1,000 shares)
2. Bank A/c Dr. ₹ 5,600
To Share Capital A/c ₹ 6,400
To Securities Premium A/c ₹ 1,600
To Share Forfeiture A/c ₹ 600
(Being 800 shares reissued at ₹ 7 fully paid up)
Calculation of loss on reissue:
Face value reissued = 800 × ₹ 8 = ₹ 6,400
Amount received = 800 × ₹ 7 = ₹ 5,600
Loss on reissue = ₹ 800
Adjusted from forfeiture = ₹ 4,000 × (800/1000) = ₹ 3,200
Balance after adjustment = ₹ 3,200 – ₹ 600 = ₹ 2,600 transferred to Capital Reserve.
3. Share Forfeiture A/c Dr. ₹ 2,600
To Capital Reserve A/c ₹ 2,600
(Being profit on reissue transferred to Capital Reserve)