When journal entry for forfeiture of shares is recorded in the Company's Accounts books, the Share Capital Account:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Will be debited by the called up value of the shares forfeited
On forfeiture, the entries made for the forfeited shares are reversed. Share Capital Account had been credited with every amount called up on those shares, so it is now debited with the called-up amount; unpaid calls and Share Forfeiture Account are credited.
Option (1) Will be debited by the issue price of the shares forfeited — Incorrect. The issue price includes premium, which is never part of share capital.
Option (2) Will be debited by the face value of the shares forfeited — Incorrect. If some calls have not yet been made, the face value is more than what was credited to share capital.
Option (4) Will be credited by the issue price of the shares forfeited — Incorrect. Forfeiture reduces share capital, so the account is debited, not credited.
NCERT (2026-27 edition): |