Question

State, whether the following statements are True or False.

Share forfeited balance is transferred to Capital Reserve Account.

Answer 1

True

Explanation: On forfeiture, the amount received on such shares is transferred to the Share Forfeiture Account. Later, when the forfeited shares are reissued at a discount, the amount of discount is set off against the Share Forfeiture Account and the balance is transferred to the Capital Reserve Account. Only when the forfeited shares are reissued, the amount in the Share Forfeiture Account is transferred to the Capital Reserve Account.