Question

Select the most appropriate answer from the alternatives given below and rewrite the sentence :

When shares are forfeited, share capital account is ______________.
a) debited
b) credited
c) adjusted
d) none of these

Answer 1

When shares are forfeited, share capital account is debited.

Explanation: When the shares are forfeited, share capital account is debited, since the money received on the shares being forfeited is to be cancelled. When money is received on the shares, share capital account is credited. Therefore, on forfeiture, share capital account is debited.