Accountancy Part AAccounting for Shares

Discount allowed on reissue of forfeited shares should be debited to:

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Share Forfeiture Account

When forfeited shares are reissued at a discount, the discount is met out of the amount already forfeited on those shares, so it is debited to Share Forfeiture Account. The discount cannot be more than the amount forfeited on the shares reissued.

NCERT (2026-27 edition):
Reissue of Forfeited Shares – “The directors can either cancel or re-issue the forefeited shares. In most cases, they reissue such shares which may be at par, at premium or at a discount. Forfeited shares may be reissued as fully paid at a par, premium, discount. 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’.”