Arrange the following steps in correct order. (A) Calls in Arrears(B)…

Arrange the following steps in correct order.

(A) Calls in Arrears
(B) Reissue of shares
(C) Making calls
(D) Gain on Reissue transferred to Capital Reserve
(E) Forfeiture of shares

Choose the correct answer from the options given below.

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → (C), (A), (E), (B), (D)

Each step can happen only after the one before it:

(C) Making calls — first: the company calls up the balance due on the shares.

(A) Calls in Arrears — second: some shareholders fail to pay the call money.

(E) Forfeiture of shares — third: the shares of defaulting shareholders are cancelled and the money received on them is forfeited.

(B) Reissue of shares — fourth: the forfeited shares are reissued, at par, premium or a discount within the forfeited amount.

(D) Gain on Reissue transferred to Capital Reserve — last: the balance left in Share Forfeiture Account on the reissued shares is a capital profit.

NCERT (2026-27 edition):
Calls in Arrears – “It may happen that shareholders do not pay the call amount on due date. When any shareholder fails to pay the amount due on allotment or on any of the calls, such amount is known as ‘Calls in Arrears’/‘Unpaid Calls’.”

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 Shares – “… Reissue of Shares: The management of a company is vested with the power to reissue the shares once forfeited by it, subject of course, to the terms and conditions in the articles of association relating to the same. The shares can be reissued even at a discount provided the amount of discount allowed does not exceed the credit balance of Share forfeiture account relating to shares being reissued. Therefore, discount allowed on the reissue of forfeited shares is debited to Share forfeiture account.”

NCERT (2026-27 edition):
Reissue of Shares – “… Once all the forfeited shares have been reissued, any credit balance on Share forfeiture account is transferred to Capital Reserve representing profit on forfeiture of shares.”