Question

Share forfeited account is shown on the liability side of the balance sheet _____________.

• A. Under the heading of 'Reserve and surplus'
• B. By adding to the paid up capital
• C. Under the heading 'Current Liabilities, and provisions
• D. Under the heading of "Miscellaneous'

Answer 1

Answer: (A)

Under the heading of 'Reserve and surplus'

Share forfeited is shown under the head Reserves and surplus on the liability side of balance sheet. Share forfeited is created when the company cancels the shares of a shareholder because of non payment of allotment or call money if so permitted by its articles. It is a capital gain for the company and hence will be shown in the reserves and surplus account.