Accountancy Part AAccounting for Shares

After forfeiture of share, the amount transferred to capital reserve…

After forfeiture of share, the amount transferred to capital reserve is........

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Profit on forfeiture minus loss on reissue of forfeited share

On forfeiture, the amount already received on the shares is credited to Share Forfeiture Account; this is the profit on forfeiture. If the shares are reissued at a discount, the discount (the loss on reissue) is debited to the same account. What is left for the reissued shares, that is profit on forfeiture minus loss on reissue, is the capital profit transferred to Capital Reserve.

NCERT (2026-27 edition):
Reissue of Forfeited Shares – “… In this context, it may be noted that the amount of discount allowed cannot exceed the amount that had been received on forfeited shares at the time of initial issue, and that the discount allowed on reissue of forfeited shares should be debited to the ‘Forfeited Share Account’. The balance, if any, left in the Share-Forfeited Account relating to reissued Shares, should be treated as capital profit and transferred to Capital Reserve Account.”