Surya Limited invited applications for 15,000 shares for ₹10 each at a premium of 20% per share. The amount was payable as under:
On application ₹4 On allotment ₹6
On first call ₹1 On final call-Balance
Applications were received for 36,000 shares and pro-rata allotment was made to all the applicants. Directors have not made the final call. Mr. Ritesh, the holder of 300 shares, did not pay anything after application money. Directors forfeited these shares and re-issued them at ₹6 per share.
On the basis of following case, answer the Question.
The profit on reissue of shares would be transferred to:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Capital Reserve
When forfeited shares are reissued, the balance left in the Share Forfeiture Account on those shares (after any discount on reissue) is a capital profit. It is transferred to Capital Reserve, not to a revenue reserve.
NCERT (2026-27 edition): |