Accountancy Part AAccounting for Shares

Arrange the following in correct order in the process of Issue and Fo…

Arrange the following in correct order in the process of Issue and Forfeiture of shares:

(A) Issue of prospectus
(B) Allotment of shares
(C) Calls in arrears
(D) Receipt of applications
(E) Forfeiture of shares

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 4

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

Shares are issued in a fixed order: the company first invites the public, then receives applications, allots shares, makes calls, and only if a call is unpaid can it forfeit the shares.

(A) Issue of prospectus — first: the prospectus invites the public to subscribe.
(D) Receipt of applications — second: investors apply with the application money on the basis of the prospectus.
(B) Allotment of shares — third: once minimum subscription is received, shares are allotted.
(C) Calls in arrears — fourth: after allotment and calls, any amount a shareholder fails to pay becomes calls in arrears.
(E) Forfeiture of shares — last: the shares of a shareholder who does not pay the calls are forfeited.

NCERT (2026-27 edition):
Issue of Shares

Extract from the NCERT textbook

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.”