At the time of forfeiture, share capital account is:

Debited with called up value

The correct answer is option 3- Debited with called up value.

When journal entry for forfeiture of shares is done, the Share Capital Account will be debited by the called up value of the shares forfeited.

Forfeiture of Shares issued at Par:
Share Capital A/c..........(Called up amount) Dr.
     To Share Forfeiture A/c...........(Paid up amount)
     To Share Allotment A/c (Amount not received)
     To Calls in arrears A/c (Amount not received)
(shares forfeited for non-payment of allotment money and calls made)