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Reissue of Forfeited Shares

Reissue of forfeited shares is not the allotment of shares, but it is only a re-sale. A company can reissue forfeited shares in accordance with the provisions contained in the articles. The forfeited shares can be reissued at a discount, but the maximum discount should not exceed the amount available in the share forfeiture account.
  • When shares are reissued at a loss, then such a loss should be debited to the share forfeiture account. If the loss on reissue is less than the amount forfeited, then the excess should be transferred to the capital reserve account.
  • If the shares are reissued at a price more than face value, then the excess should be credited to the securities premium account.
  • When only a portion of shares is reissued, only the profit made on the reissue of such shares must be transferred to the capital reserve account. The journal entries to be passed on reissue are as follows:



Illustration 10 (Reissue of Forfeited Shares at a Discount)

 

A Ltd. forfeited 200 shares of ₹ 10 each, fully called-up on which ₹ 7 have been received and final call of ₹ 3 per share remains unpaid. These shares were later on reissued for ₹ 8 per share, fully paid-up. Pass journal entries for recording the forfeiture and reissue of shares.
 

Solution:

 




 

Illustration 11 (Reissue of Forfeited Shares at a Premium and At Par)

 

A Ltd. forfeited 400 shares of ₹ 10 each on which ₹ 8 per share have been received and the balance remains due but not paid. These shares were reissued as follows:

  • At the rate of ₹ 10 per share, that is, at par
  • At the rate of ₹ 12 per share, that is, at premium

Pass the necessary journal entries for the reissue of the shares.
 

Solution:





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