Question

Ravi Ltd. issued 50,000 shares of ₹10 each payable as ₹2 on application, ₹3 on allotment, ₹2.5 on first call, and ₹2.5 on the second and final call. All the amount was duly received except for the second and final call on 800 shares. These shares were forfeited. Out of these, 600 shares were re-issued as fully paid up in such a way that ₹2,100 were transferred to the capital reserve.
Pass the journal entry for forfeiture of shares:

[2 marks]

• A. $$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Debit (₹)}& \text{Credit (₹)}\\ & & & & & \\ & \text{Share Capital A/c}& \text{Dr.}& & \text{2,000}& \\ & \text{To Share Forfeiture A/c}& & & & \text{2,000}\\ & & & & & \end{array}$$
• B. $$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Debit (₹)}& \text{Credit (₹)}\\ & & & & & \\ & \text{Share ForfeitureA/c}& \text{Dr.}& & \text{2,000}& \\ & \text{To Share Capital A/c}& & & & \text{2,000}\\ & & & & & \end{array}$$
• C. $$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Debit (₹)}& \text{Credit (₹)}\\ & & & & & \\ & \text{Share Capital A/c}& \text{Dr.}& & \text{8,000}& \\ & \text{To Share Forfeiture A/c}& & & & \text{6,000}\\ & \text{To Calls-in-arrears A/c}& & & & \text{2,000}\\ & & & & & \end{array}$$
• D. $$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Debit (₹)}& \text{Credit (₹)}\\ & & & & & \\ & \text{Share Forfeiture A/c}& \text{Dr.}& & \text{6,000}& \\ & \text{Calls-in-arrears A/c}& \text{Dr.}& & \text{2,000}& \\ & \text{To Share Capital A/c}& & & & \text{8,000}\\ & & & & & \end{array}$$

Answer 1

The correct option is C $$\begin{array}{cccccc}\text{Date}& \text{Particulars}& & \text{L.F.}& \text{Debit (₹)}& \text{Credit (₹)}\\ & & & & & \\ & \text{Share Capital A/c}& \text{Dr.}& & \text{8,000}& \\ & \text{To Share Forfeiture A/c}& & & & \text{6,000}\\ & \text{To Calls-in-arrears A/c}& & & & \text{2,000}\\ & & & & & \end{array}$$

₹8,000 worth of shares has been forfeited so the share capital account is debited. Out of which ₹6,000 is received from the shareholder so it is transferred to the share forfeiture account and ₹2,000 is not received so it is transferred to calls in arrears account.