Determine the amount to be transferred to Capital Reserve on reissue…

Eicher Ltd. issued 50,000 shares of ₹10 each at a premium of ₹5 per share payable as follows:

On application	₹3 per share
On allotment	₹5 (including ₹3 Premium)
On First Call	₹5 (including ₹2 Premium)
On Final Call	Balance amount

Application were received for 72,000 shares. Directors allotted 50,000 shares to the applicants applying for 65,000 shares, the remaining applications being refused. Money overpaid on application was utilised towards sum due on allotment. All the money was duly received with the exception of first call from Rahul, who applied for 2,600 shares. Due to non payment of 1^st call his share were forfeited immediately. Later on these share were re-issued at minimum issue price.

On the basis of following case study, answer the question.

Determine the amount to be transferred to Capital Reserve on reissue of Rahul's Shares.

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → Nil

On reissue, the discount allowed comes out of the amount forfeited, and only the balance left is a capital profit transferred to Capital Reserve.

Shares allotted to Rahul = 2,600 × 10/13 = 2,000

Capital money paid by Rahul before forfeiture:
Application = ₹3 per share
Allotment (capital part) = ₹5 − ₹3 premium = ₹2 per share
Amount forfeited = 2,000 × ₹5 = ₹10,000

The minimum issue price is the price at which the discount on reissue equals the amount forfeited (₹5 per share). So the whole ₹10,000 is used up by the discount:
Capital Reserve = ₹10,000 − ₹10,000 = Nil

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.”