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Question

Show the forfeiture and reissue entries under each of the following cases:

(i) X Ltd. forfeited 300 shares of ₹ 10 each, ₹ 8 called-up held by Mr. A for non-payment of second call money of ₹ 3 per share. These shares were reissued to Mr. Z for ₹ 10 per share as fully paid-up.
(ii) Y Ltd. forfeited 400 shares of ₹ 10 each, fully called-up, held by Mr. B for non-payment of final call money of ₹ 4 per share. These shares were reissued to Mr. T at ₹ 12 per share as fully paid-up.
(iii) Light Ltd. forfeited 250 shares of ₹ 10 each, fully called-up held by Mr. C for non-payment of allotment money of ₹ 3 per share and first and final call money of ₹ 4 per share. These shares were reissued @ ₹ 8 per share as fully paid-up to Mr. P.

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Solution

(i)

Books of X Limited

Journal

Date

Particulars

L.F.

Debit

Amount

(₹​)

Credit

Amount

(₹​)

Share Capital

Dr.

2,400

To Share Forfeiture A/c

1,500

To Calls-in-Arrears A/c

900

(300 shares of ₹ 10 each on which had called ₹ 8, forfeited for non-payment of second call ₹ 3 per share)

Bank A/c

Dr.

3,000

To Share Capital A/c

3,000

(300 shares of ₹ 10 each re-issued)

Share Forfeiture A/c

Dr.

1,500

To Capital Reserve A/c

1,500

(Balance in Share Forfeiture Account after re-issue transferred to Capital Reserve)

Working Notes-

Share Forfeiture Credit (at the time of forfeiture of shares)

1,500

Less: Share Forfeiture Debit (at the time of re-issue shares)

NIL

Balance in Share Forfeiture after re-issue of shares

1,500

Capital Reserve = Balance in Share Forfeiture of re-issued shares

= ₹ 1,500

(ii)

Books of Y Limited

Journal

Date

Particulars

L.F.

Debit

Amount

(₹​)

Credit

Amount

(₹​)

Share Capital A/c

Dr.

4,000

To Share Forfeiture A/c

2,400

To Calls-in-Arrears A/c

1,600

(400 shares of ₹ 10 forfeited for the non-payment of final call ₹ 4 per share)

Bank A/c

Dr.

4,800

To Share Capital A/c

4,000

To Securities Premium A/c

800

(400 shares of ₹10 each re-issued at ₹ 12 per share as fully paid-up)

Share Forfeiture A/c

Dr.

2,400

To Capital Reserve A/c

2,400

(Balance of Share Forfeiture after re-issue transferred to Capital Reserve)

Working Notes-

Share Forfeiture Credit (at the time of forfeiture of shares)

2,400

Less: Share Forfeiture Debit (at the time of re-issue shares)

NIL

Balance in Share Forfeiture after re-issue of shares

2,400

Capital Reserve = Balance in Share Forfeiture of re-issued shares

= ₹ 2,400

(iii)

Books of Light Limited

Journal

Date

Particulars

L.F.

Debit

Amount

(₹​)

Credit

Amount

(₹​)

Share Capital A/c

Dr.

2,500

To Share Forfeiture A/c (250×3)

750

To Calls-in-Arrears A/c

1,750

(250 shares of ₹ 10 each forfeited for the non-payment ₹ 7 per share)

Bank A/c

Dr.

2,000

Share Forfeiture A/c

Dr.

500

To Share Capital A/c

2,500

(250 shares of ₹ 10 each re-issued for ₹ 8 per share as fully paid-up )

Share Forfeiture A/c

Dr.

250

To Capital Reserve A/c

250

(Balance in Share Forfeiture Account after re-issue transferred to Capital Reserve)

Working Notes-

Share Forfeiture Credit (at the time of forfeiture of shares)

750

Less: Share Forfeiture Debit (at the time of re-issue shares)

500

Balance in Share Forfeiture after re-issue of shares

250

Capital Reserve = Balance in Share Forfeiture of re-issued shares = ₹ 250


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