Question

The Balance in the Share Forfeited Account relating to reissue of forfeited shares will be treated as:

• A. Capital Profit
• B. Revenue Profit
• C. Capital Loss
• D. Revenue Reserve

Answer 1

The Correct Option is A

When shares are forfeited, the balance in the Share Forfeited Account reflects the amount received on those shares, including any premium paid. Upon reissuing these forfeited shares, the amount received is credited to the Share Forfeited Account.

The balance in the Share Forfeited Account, after reissuing the forfeited shares, represents a gain since no further liability is attached to the reissued shares, and the amounts previously credited to the account are considered capital in nature.

The balance remaining in the Share Forfeited Account, after reissue, is typically treated as Capital Profit because it arises from the reissue of shares and is not related to the operating activities of the company.

Therefore, the correct answer is (A): Capital Profit

Answer 2

The balance in the Share Forfeited Account represents the amount collected from share- holders whose shares were forfeited. When the forfeited shares are reissued, this amount is treated as capital profit and transferred to the Capital Reserve Account. This is because the amount received from forfeited shares is considered a gain on capital transactions and not regular business revenue.