When the shares are forfeited by the company, the share capital account is debited with:
Answer & explanation
Correct answer: option 2
The correct answer is option 2- Amount called up on the shares forfeited till the date of forfeiture.
Accordingly, share capital account is debited with the amount called-up in respect of shares are forfeited and crediting the respective unpaid calls account’s or calls in arrears account with the amount already received.
Journal entry on forfeiture of shares-
Share Capital A/c Dr. (Called up amount)
To Share forfeiture A/c (Received amount)
To Share Allotment/Call A/c ( Not received amount)