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

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.

Nil

The correct answer is Option (4) - Nil.

On forfeiture this journal entry will be passed-

Share Capital A/c Dr.                          ₹16,000 (called up amount)
Securities Premium Reserve A/c Dr.     ₹4,000 (called up premium that is not received)
                     To Share I^st call A/c                    ₹10,000 ( Not received on call)
                     To Share forfeiture A/c                ₹10,000 (amount received)

Minimum reissue is the price which is not received on shares so here 5 is not received. On reissue the journal entry will be passed as follows-

Bank A/c  Dr. (2000 x 5)   10,000
Share forfeiture A/c Dr. (2000 x 5) 10,000
          To Share Capital A/c                 20,000 (2000 x 10) 

As whole amount is used in the reissue of shares so No amount is transferred to capital reserve.