Question

Shri Ganga Ltd. was registered with an authorised capital of ₹ 7,00,000 divided into equity shares of ₹ 10 each. It offered to the public for subscription 50,000 equity shares. The amount was payable as follows: On application: ₹ 4 per share On allotment: ₹ 4 per share On first and final call: Balance The issue was fully subscribed. All the amounts were duly received except the first and final call money on 4,000 equity shares. These shares were forfeited. For 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

• A.
• B.
• C.
• D.

Hint:

When shares are forfeited, the Calls in Arrears account is credited with the unpaid amount on the forfeited shares.

Answer 1

The Correct Option is C

The amount of unpaid calls on these forfeited shares is ₹ 5 per share. \[ Total Calls in Arrears} = 4,000 \times ₹ 5 = ₹ 20,000 \] The Calls in Arrears account will be credited by ₹ 5,000 (for the unpaid portion) from the forfeited shares.