Accountancy Part AAccounting for Shares

In a Journal Entry of Forfeiture of Shares, Securities Premium Accoun…

In a Journal Entry of Forfeiture of Shares, Securities Premium Account may be debited, when :-

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → Share are issued at premium and calls in arrears include premium

On forfeiture, every entry for the forfeited shares is reversed except the premium already received. If the shares were issued at a premium and the unpaid amount (calls in arrears) includes the premium, that premium was credited to Securities Premium but never received, so Securities Premium Account is debited along with Share Capital. Shares issued at par carry no premium at all, and premium already received is never debited.

NCERT (2026-27 edition):
Forfeiture of Shares – “… 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.”