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Question

At the time of forfeiture of shares which were originally issued at a discount, the accounting entry will be
I. A Debit Share capital account with the called-up value of shares forfeited.
II. A Credit Share forfeiture account with the amount received on forfeited shares.
III. A Credit Discount on issue of shares with the amount of discount allowed on forfeited shares,
IV. A Credit Calls-in-arrears with the amount due but not paid on forfeited shares.

A
Both (I) and (IV)
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B
Both (IV) and (III)
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C
Both (I) and (II)
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D
(I), (II), (III), and (IV)
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Solution

The correct option is D (I), (II), (III), and (IV)
When Forfeiture of shares Issued at ParIn this case, The company debits the Share Capital Account with the amount called-up up to the date of forfeiture on shares.
It credits the Shares Allotment Amount or Shares Call Account with amount called-up on forfeited shares but due from the shareholders.

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