Give answer on the basis of Information given below.

Poonam Ltd. invited application for 5,00,000 shares of ₹10 each @10% premium payable as follows:

Application - ₹3
Allotment - ₹5 [including premium]
1^st and final call - balance

Applications were received for 6,60,000 shares. Application for 60,000 shares were rejected and pro-rata allotment was made as follows:

(a) 4,00,000 shares - full
(b) 2,00,000 shares - 50%

Mr. Aman, who was allotted 500 shares under category (a), paid full amount along with allotment money. Whereas another shareholder, Mr. Rahul who was allotted 1000 shares under category (b) failed to pay the allotment money. His shares were subsequently forfeited. These shares were reissued at ₹14 per share for ₹7 paid up. Final call has not yet been made.

Amount transferred to capital Reserve will be:

₹6,000

The correct answer is Option (2) - ₹6,000.

Entry on forfeiture of shares-
Share Capital A/c (1,000 x 7) ₹7,000
Securities premium reserve A/c (1,000 x 1) ₹1,000
    To Share forfeiture A/c ₹6,000
    To Share Allotment A/c ₹2,000

Entry on reissue-
Bank A/c Dr. (1,000 x 7)    ₹14,000
       To Securities premium A/c               ₹7,000
       To Share Capital A/c (1,000 x 14)    ₹7,000

Entry on transfer to capital reserve-
Share forfeiture A/c Dr. ₹6,000
           To Capital reserve A/c    ₹6,000

As no forfeiture balance is used in reissue of shares so full amount of share forfeiture is transferred to capital reserve.