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Question

A company forfeited 2000 shares of Rs. 10 each(which were issued at par) held by Mr. John for non-payment of allotment money of Rs. 4 per share. The called up value per share was Rs. 9. On forfeiture, the amount debited to share capital will be ___________.

A
Rs. 10,000
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B
Rs. 8,000
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C
Rs. 2000
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D
Rs. 18,000
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Solution

The correct option is D Rs. 18,000
The company debits a certain amount to the share capital at the time of forfeiture of shares which is always the called up value. And the called up value is that amount which any company demands from its shareholders periodically every year.
The share capital is debited because the called up amount which the company was expecting from was shareholders has not been deposited and thus they have to reduce the capital balance by debiting share capital account.

Share capital amount can be calculated as under:
ShareCapitalAmount=Calledupvaluepershare×No.ofshares
Substitute values in the above equation
ShareCapitalAmount=Rs9×2000shares=Rs18,000
The amount debited to share capital is Rs18,000.

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