At the time of forfeiture, share capital account is:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Debited with called up value
Forfeiture cancels the shares, so every entry made for them is reversed. Share capital was credited with the amount called up on those shares, so on forfeiture it is debited with the called-up amount; the unpaid calls are credited, and the amount already received goes to Share Forfeiture Account.
Why the other options are incorrect
Option (1) Debited with face value — Incorrect. If only part of the face value has been called, share capital stands only at the called-up amount, so the face value cannot be debited.
Option (2) Credited with face value — Incorrect. Forfeiture reduces share capital; crediting it would increase it.
Option (4) Credited with called up value — Incorrect. The amount is right but the side is wrong: share capital is debited, not credited, on forfeiture.
NCERT (2026-27 edition): |