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Accounting Enteries

At the time of passing entry for forfeiture of shares careful about following matters.
 

1. Amount called-up (i.e., amount credited to capital) in respect of forfeited shares.
 

2. Amount already received in respect of those shares.
 

3. Amount due but has not been received in respect of those shares

 

 


Forfeiture Of Shares Which Were Issued At Par:
 

Share capital account………………….Dr.

[No. of shares called-up value per share]

To forfeited shares account

[Amount already received on forfeited shares]

To share allotment account

[If amount due, but not paid]

To share first call

[If amount due, but not paid]

To share final call account

[If amount due, but not paid]


Where all amounts due on allotment, first call and final call have been transferred to calls-in-arrears account, the entry will be:

 

Share capital account………………..Dr.

[No. of shares called-up value per share]

To calls-in-arrears account

[Total amount due, but not paid]

To forfeited shares account

[Amount received]

 
 


Forfeiture of shares which were issued at a discount:

When shares are issued at a discount, the discount account is debited. Therefore, at the time of forfeiture of such share, discount account will be credited to cancel it

 

Share capital account……………Dr.

[No. of shares ´ called-up value per share]

To share allotment account

[If amount due, but not paid]

To share first call account

[If amount due, but not paid]

To share final cal account

[If amount due, but not paid]

To forfeited shares account

[Amount received on forfeited shares]

To discount on issue of shares account

[No. of shares ´ discount per share]

 
 


Forfeiture of shares which were issued at a premium:

If the premium has already received by the company, it cannot be cancelled even if the shares are forfeited in the future.

Re-Issue of Forfeited Shares

A forfeited share in merely a share available to the company for sale and remains vested in the company for that purpose only. Reissue of forfeited shares is not allotment of shares but only a sale.
 

Accounting entries:
 

(A) Bank account

Dr.

[Actual amount received]

Forfeited shares account

Dr.

[Loss on re-issue]

To share capital account


(Being the re-issue of ……shares of Rs…..each as per Board’s resolution No………dead)

 

(B) Forfeited shares account

Dr.

To capital reserve account


(Being the profit on re-issue, transferred to capital reserve)





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