Based on following passage answer questions below
A Ltd with an Authorised Capital of ₹10,00,000 is divided into shares of ₹10 each, issued 50,000 shares at a premium of ₹2 per share payable as follows
on Application ₹3 per share
on Allotment ₹5 per share (including premium)
on First and Final call Balance amount
Application were received for 60,000 shares and the directors allotted shares to all on proportionate basis. All money received except first and final call from Hari who had applied for 1200 shares. His shares were forfeited and later half of his forfeited shares were reissued at ₹8 per share as fully paid up.
The balance, if any, left in the share forfeited account relating to reissued shares, should be transferred to....
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Capital reserve Account
After the reissue, what is left in the Share Forfeiture Account on the reissued shares is a gain from a capital transaction, not from trading. A capital profit is not distributed; it is transferred to Capital Reserve.
Why the other options are incorrect
Option (1) Forfeited shares account — Incorrect. The balance is in this account already; the question is where it goes from here.
Option (2) Share Capital Account — Incorrect. Share Capital is credited at the full face value on reissue; the forfeiture gain is not share capital.
Option (3) Reserve Capital Account — Incorrect. Reserve capital is uncalled capital kept for winding up; it is not an account to which profits are carried.
NCERT (2026-27 edition): |