Based on following passage answer questions below
A Ltd with an Authorised Capital of ₹10,00,000 is divided into shares of ₹10 each, issued 50,000 shares at a premium of ₹2 per share payable as follows
on Application ₹3 per share
on Allotment ₹5 per share (including premium)
on First and Final call Balance amount
Application were received for 60,000 shares and the directors allotted shares to all on proportionate basis. All money received except first and final call from Hari who had applied for 1200 shares. His shares were forfeited and later half of his forfeited shares were reissued at ₹8 per share as fully paid up.
Identify the account to which the discount allowed on the reissue of forfeited shares should be debited.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Forfeited shares account
The money already received on forfeited shares sits in the Share Forfeiture Account. When those shares are reissued below face value, the discount is met out of that amount, so it is debited to the Share Forfeiture (Forfeited Shares) Account. The discount cannot be more than the amount forfeited on those shares.
Why the other options are incorrect
Option (1) Bank Account — Incorrect. Bank is debited only with the cash actually received on reissue.
Option (3) Capital reserve Account — Incorrect. Capital Reserve receives only what is left in the forfeiture account after the discount.
Option (4) Securities premium reserve Account — Incorrect. Securities premium is used only for purposes allowed by law; a reissue discount is not one of them.
NCERT (2026-27 edition): |