A company forfeits 200 shares of Rs. 10 each on which Rs. 600 had been received. It can allow a maximum discount of Rs. 600 on their reissue. Assuming that the company reissues these shares for Rs. 1,800 as fully paid up. What will be the journal entry for the treatment of remaining forfeited amount after adjustment of discount ?

Share Forfeiture A/c Dr. 400
To Capital Reserve A/c 400

Correct answer: Option (1) → Share Forfeiture A/c Dr. 400; To Capital Reserve A/c 400

Concept: Reissue of forfeited shares – the surplus in the Share Forfeiture Account is transferred to Capital Reserve, per Accounting for Share Capital.

Amount already received (forfeited) = Rs. 600, which is the maximum discount allowable on reissue.
Shares reissued for Rs. 1,800 (face value 200 × 10 = Rs. 2,000) ⇒ discount allowed on reissue = 2,000 – 1,800 = Rs. 200.
Balance left in Share Forfeiture A/c = 600 – 200 = Rs. 400, a capital profit transferred to Capital Reserve.
Entry: Share Forfeiture A/c Dr. 400; To Capital Reserve A/c 400.