Gain on re-issue of shares will be transferred to:

Anticraft Ltd. invited applications for 2,00,000 shares of ₹10 each at ₹2 premium, payable as ₹3 on application, ₹6 on allotment (including premium) and ₹3 on call. Public had applied for 2,70,000 shares out of which applications for 20,000 shares were rejected and remaining were allotted on pro-rata basis. Rahul who has been allotted 8000 shares failed to pay allotment and call money. His shares were forfeited and later on 6,000 of these shares were re-issued @ ₹8 per share as fully paid-up.

Based on the above information, answer Questions.

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Capital Reserve Account

When forfeited shares are reissued, the balance left in the Share Forfeiture Account on those shares (after any discount allowed on reissue) is a capital profit. A capital profit is not available for dividend, so it is transferred to the Capital Reserve Account.

Here Rahul paid only ₹3 per share (application). The 6,000 shares are reissued at ₹8 as fully paid, a discount of ₹2 per share, which is less than the ₹3 forfeited, so a gain of ₹1 per share remains and goes to Capital Reserve.

Option (1) Securities Premium Account — Incorrect. It is credited only with premium received on issue of shares, not with a gain on reissue.

Option (2) Reserve Capital Account — Incorrect. Reserve capital is uncalled capital kept for winding up; it is not an account for capital profits.

Option (4) Profit & Loss Account — Incorrect. The gain is a capital profit, not a revenue profit, so it does not go to the Statement of Profit and Loss.

NCERT (2026-27 edition):
Reissue of Forfeited Shares – “… Forfeited shares may be reissued as fully paid at a par, premium, discount. In this context, it may be noted that the amount of discount allowed cannot exceed the amount that had been received on forfeited shares at the time of initial issue, and that the discount allowed on reissue of forfeited shares should be debited to the ‘Forfeited Share Account’. The balance, if any, left in the Share-Forfeited Account relating to reissued Shares, should be treated as capital profit and transferred to Capital Reserve Account.”

Based on the above information, answer Questions.

Gain on re-issue of shares will be transferred to:

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Capital Reserve Account

Option (1) Securities Premium Account — Incorrect. It is credited only with premium received on issue of shares, not with a gain on reissue.

Option (2) Reserve Capital Account — Incorrect. Reserve capital is uncalled capital kept for winding up; it is not an account for capital profits.

Option (4) Profit & Loss Account — Incorrect. The gain is a capital profit, not a revenue profit, so it does not go to the Statement of Profit and Loss.