Transcript Forfeiture of Shares

TOPIC :FORFEITURE AND REISSUE OF SHARES
Forfeiture of shares means cancelling the
share for non payment of calls due, if any
shareholder does not pay the amount of a
call the company may exercise the power to
forfeit those shares.
FORFEITURE OF SHARES WHICH ARE ISSUED AT PAR
In this case share capital account is debited with the
called-up value of forfeited shares .unpaid calls are
credited with due amount which is not paid by
shareholders and forfeited shares account is credited
by the amount paid by shareholder. Journal entries of
forfeited shares which are issued at par as below.

Share capital a/c
To Share Forfeited a/c
To unpaid calls a/c
Dr.(with called-up amount)
(with amount already received)
(with amount due but not paid)
When premium amount has not been received:
The amount of the premium credited to the security
premium account but not received is debited for the
premium in respect of the forfeiture shares. Journal
entry in that case be.
Share capital a/c-------------Dr(amount called-up less
premium)
Securities premium a/c-----Dr(premium amount called-up
but not received)
To share forfeited a/c(amount received so far)
To unpaid calls a/c (amount not received)
FORFEITURE OF SHARES WHICH ARE
ISSUED AT PREMIUM
In this case two conditions arises that is the premium
amount has been received or not.
A) When Premium amount has been received:
The amount received towards premium account will
not be cancelled that is will not be debited at the time
of forfeiture of shares. The journal entry in that case
be.
Share capital a/c-----Dr(amount called-up less premium)
To share forfeited a/c(amount received so far)
To unpaid calls a/c (amount not received)
FORFEITURE OF SHARES WHICH ARE
ISSUED AT DISCOUNT
When shares issued at a discount are forfeited the
discount on issue of shares account is credited with the
discount allowed on the issue of the shares. The
journal entries in that case as below.
Share capital a/c------------Dr(called-up amount)
To discount on issue of shares a/c(original discount)
To forfeited a/c(Amount actually received)
To unpaid calls a/c (Amount not received)
REISSUE OF FORFEITED SHARES
 Forfeited shares can be issued at any rate of discount the
only condition is that the amount of discount allowed on the
reissue of forfeited shares must not exceeds the amount
forfeited on such shares. The journal entry in that case is
Bank a/c------------------Dr(with the amount
received on reissue)
Share forfeited a/c-------Dr(discount allowed on
reissue)
To Share capital a/c(with the amount credited
as paid up)
If the forfeited shares are reissued at a price higher than
that of paid up value the excess of reissue price over paid
up value should be credited to the security premium
account. The journal entry in that case as below.
Bank a/c------------Dr
To share capital a/c
To security premium a/c
TRANSFER OF BALANCE IN THE FORFEITED
SHARES ACCOUNT
If after reissue of all the shares there is still a balance
left in forfeited shares account such balance is capital
profit and therefore it is transferred to the capital
reserve account. The journal entry in that case as
below.
Share forfeited a/c--------------Dr
To Capital Reserve a/c
HOME ASSIGNMENT
What do you mean by forfeiture of shares
What are journal entries relating to forfeited of share
which are actually issued at par, Premium and
Discount
Questions from previous question papers which are
related to this topic
Questions relating to reissues of shares from T.S
Grawal refresher of accountancy
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