Accountancy Part AAccounting for Shares

Profit on reissue of forfeited shares should be treated as:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Capital profit

The gain left in Share Forfeiture Account on reissue arises from dealing in the company’s own share capital, not from its business operations, so it is a capital profit and is taken to Capital Reserve.

NCERT (2026-27 edition):
Reissue of Forfeited Shares – “… 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.”