Accountancy Part AAccounting for Shares

In a Journal Entry of Forfeiture of Shares, Share Capital Account wil…

In a Journal Entry of Forfeiture of Shares, Share Capital Account will be :-

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Debited by the called up value of the number of the shares forfeited

Forfeiture cancels the shares, so the share capital credited on them so far is reversed. Only the amount called up on those shares had been credited to Share Capital, so Share Capital is debited with the called-up value, not with the issue price or the face value. The premium already received is not reversed.

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.”