Read the following case study and answer the question.
Surya Ltd issued 10,000 equity shares of ₹50 each at a premium of 10%. The company received application for 13,000 shares. The amount was payable as: on application 30%, on allotment 30% plus Premium, on 1st call 10% and Balance on final call. Allotment was made pro-rata for all applicants. Excess application money received is to be adjusted on allotment. Company received all money called except from Manan, an applicant, of 390 shares, Manan Paid only application money. His shares were forfeited and 70% of the forfeited shares were reissued as fully paid for ₹40 each.
Gain on Re-issue of the shares will be transferred to
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Capital Reserve
When forfeited shares are reissued, the discount allowed is debited to the Share Forfeiture Account. The balance left in that account for the reissued shares is a capital profit, so it is transferred to the Capital Reserve Account.
Option (1) Share Capital — Incorrect. Share Capital is credited with the paid-up value of the reissued shares; the gain is a profit, not capital.
Option (2) Securities Premium Reserve — Incorrect. That reserve takes only premium received over face value; these shares were reissued below face value.
Option (4) General Reserve — Incorrect. General reserve is built from revenue profits; a capital profit cannot be taken there.
NCERT (2026-27 edition): |