Accountancy Part AAccounting for Shares

A company forfeited 100 equity shares of ₹10 each issued at a premium…

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

The final call of ₹5 includes the premium of ₹2, which was never received. So on forfeiture the Securities Premium Reserve is debited along with the called-up Share Capital.

Share Capital (fully called up) = 100 × ₹10 = ₹1,000 (Dr)

Securities Premium Reserve not received = 100 × ₹2 = ₹200 (Dr)

Final call unpaid = 100 × ₹5 = ₹500 (Cr)

Amount already received = 100 × (₹12 − ₹5) = ₹700 (Cr Share Forfeiture)

NCERT (2026-27 edition):
Do it Yourself

Extract from the NCERT textbook

NCERT (2026-27 edition):
Forfeiture of Shares issued at a Premium – “… In case, however, if the premium amount has not been received, either wholly or partially, in respect of the shares forfeited, the Securities Premium Reserve Account will also be debited with the amount of premium not received along with the Share Capital Account at the time forfeiture.”