The account which is not used in journal entry of the forfeiture of s…

The account which is not used in journal entry of the forfeiture of shares is:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Capital reserve account

The forfeiture entry reverses the entries for the forfeited shares: Share Capital is debited with the called-up amount, Securities Premium is debited if premium due was not received, and the credits go to the calls in arrears (unpaid calls) and to Share Forfeiture Account (amount received). Capital Reserve comes in only later, when the forfeited shares are reissued and the profit on them is transferred, so it is not used in the forfeiture entry.

Option (1) Share capital account — Used in the entry. It is debited with the called-up value of the forfeited shares.

Option (3) Securities premium account — Used in the entry. It is debited where the premium on the forfeited shares has not been received.

Option (4) Calls in arrears account — Used in the entry. It is credited with the calls the shareholder failed to pay.

NCERT (2026-27 edition):
Forfeiture of Shares – “… It may be noted here that when the shares are forfeited, all entries relating to the forfeited shares must be reversed except the entry relating to share premium received, if any. Accordingly, the share capital is debited to the extent to called-up capital and credited to (i) respective unpaid calls account i.e., calls in arrears and (ii) share forfeiture account with the amount already received on shares.”

NCERT (2026-27 edition):
Forfeiture of Shares – “… In case, however, if the premium amount has not been received, either wholly or partially, in respect of the shares forfeited, the Securities Premium Reserve Account will also be debited with the amount of premium not received along with the Share Capital Account at the time forfeiture.”

NCERT (2026-27 edition):
Termes Used in the Chapter – “… Once all the forfeited shares have been reissued, any credit balance on Share forfeiture account is transferred to Capital Reserve representing profit on forfeiture of shares.”