Question

Journalise the given transaction in the books of Indian Oil Ltd, if $400$ shares of Rs.$50$ each issued at par were forfeited for non-payment of final call of Rs.$10$ per share. These shares were reissued at Rs. $45$ per share fully paid-up. Record the the journal entry for transferring the balance in forfeiture amount to capital reserve.

• A. Debit Share Forfeiture A/c and Credit Capital Reserve A/c with Rs. $14,000$.
• B. Debit Capital Reserve A/c and Credit Share Forfeiture A/c with Rs. $16,000$.
• C. Debit Share Forfeiture A/c and Credit Capital Reserve A/c with Rs. $16,000$.
• D. Debit Capital Reserve A/c and Credit Share Forfeiture A/c with Rs. $14,000$.

Answer 1

Answer: (A)

Debit Share Forfeiture A/c and Credit Capital Reserve A/c with Rs. $14,000$.

• When shares which have been issued at par are forfeited, the entry will be:
  

Share Capital A/c Dr. (400 x 50) 20,000

To Share Allotment A/c (400 x 10) 4,000

To Share Forfeiture A/c (400 x 40) 16,000

• When these shares are issued at Rs. 45 as fully paid up, the entry will be:
  

Bank A/c Dr. (400 x 45) 18,000

Share Forfeiture A/c Dr. (400 x 5) 2,000

To Share Capital A/c (400 x 50) 20,000

• So, the entry for recording the transferring of balance in forfeiture A/c to the capital reserve will be:
  

Share Forfeiture A/c Dr. (16,000 - 2,000) 14,000

To Capital Reserve 14,000