Arrange in correct sequence with respect to the issue of shares by co…

Arrange in correct sequence with respect to the issue of shares by company.

A. Allotment of shares
B. Forfeiture of shares
C. Application for shares received by the company
D. Reissue of shares
E. Transfer to Capital Reserve

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → C, A, B, D, E

The events follow the life of a share issue, from the first money received to the closing of the forfeiture balance.

C. Application for shares received by the company — investors apply with the application money.

A. Allotment of shares — once minimum subscription is received, shares are allotted.

B. Forfeiture of shares — a shareholder who fails to pay allotment or call money may have the shares forfeited.

D. Reissue of shares — the directors may reissue the forfeited shares.

E. Transfer to Capital Reserve — the balance left in Share Forfeiture Account on the reissued shares is a capital profit, transferred to Capital Reserve.

NCERT (2026-27 edition):
Issue of Shares

Extract from the NCERT textbook

NCERT (2026-27 edition):
Forfeiture of Shares – “It may happen that some shareholders fail to pay one or more instalments, viz. allotment money and/or call money. In such circumstances, the company can forfeit their shares, i.e. cancel their allotment and treat the amount already received thereon as forfeited to the company within the framework of the provisions in its articles.”

NCERT (2026-27 edition):
Reissue of Forfeited Shares – “The directors can either cancel or re-issue the forefeited shares. In most cases, they reissue such shares which may be at par, at premium or at a discount. 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.”