Arrange the following events (in relation to the issue of shares) in…

Arrange the following events (in relation to the issue of shares) in a logical order.

(A) Transfer to capital reserve.
(B) Forfeiture of share.
(C) Calls in arrears.
(D) Re issue of share.

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → (C), (B), (D), (A)

The four events follow one shareholder who does not pay, from the default to the final capital profit:

(C) Calls in arrears — the shareholder fails to pay an instalment (allotment or call) when it is due. Everything else starts from here.
(B) Forfeiture of shares — after due notice, the directors cancel his shares; the amount he had paid is credited to the Share Forfeiture Account.
(D) Re-issue of shares — the forfeited shares are sold again, at par, premium or a discount not exceeding the amount forfeited.
(A) Transfer to capital reserve — the forfeited amount left over on the re-issued shares is a capital profit and is transferred to Capital Reserve.

NCERT (2026-27 edition):
Forfeiture of Shares – “It may happen that some shareholders fail to pay one or more instalments, viz. allotment money and/or call money. In such circumstances, the company can forfeit their shares, i.e. cancel their allotment and treat the amount already received thereon as forfeited to the company within the framework of the provisions in its articles.”

NCERT (2026-27 edition):
Reissue of Forfeited Shares – “The directors can either cancel or re-issue the forefeited shares. In most cases, they reissue such shares which may be at par, at premium or at a discount. Forfeited shares may be reissued as fully paid at a par, premium, discount.”

NCERT (2026-27 edition):
Reissue of Forfeited Shares – “… The balance, if any, left in the Share-Forfeited Account relating to reissued Shares, should be treated as capital profit and transferred to Capital Reserve Account.”