There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the options given below.
Assertion (A): Shares that have been forfeited and reissued, gain (profit) if any, is shown under reserve capital.
Reason (R): Gain (profit) on the reissue of forfeited shares is transferred to Capital Reserve and shown under Reserves and Surplus in the Balance Sheet.
Answer & explanation
Correct answer: option 4
Forfeited shares can be re-issued. Any amount of profit on re-issue is a capital receipt and should be transferred to capital reserve account because this profit is a capital gain for the company.