A company forfeited 100 equity shares of ₹10 each issued at a premium of 20% for non-payment of the final call of ₹5 including the premium. Show the journal entry for the forfeiture of shares.
Answer & explanation
Correct answer: option 2
The correct answer is option 2-
Share Capital A/c Dr. ₹1,000
Securities premium reserve A/c Dr. ₹200
To Share Final Call A/c ₹500
To Share Forfeiture A/c ₹700
Face value = ₹10
Premium is 20% = 10 x 20/100
= ₹2
Non payment of final call include premium of ₹2 means ₹3 is remaining amount.
As the securities premium reserve is not received so it will be debited.
Journal entry for forfeiture is-
Share Capital A/c Dr. ₹1,000 (100 x 10) Called up amount
Securities premium reserve Dr. ₹200 (100 x 2) premium cancelled
To Share Final Call A/c ₹500 (100 x 5) Amount not received
To Share Forfeiture A/c ₹700 (100 x 7) Amount received