Practicing Success
The Balance of share forfeiture account is shown in the balance sheet under which of the following head till the forfeited shares are reissued? |
Share Capital Reserve and Surplus Current Liabilities Miscellaneous Income |
Share Capital |
The correct answer is option 1- Share Capital. When a shareholder defaults in paying allotment money or call money the company has the power to forfeit the shares. Now whatever amount is received by the company on forfeiting the shares is an capital receipt for the company. The balance of shares forfeited account is shown as an addition to the total paid-up capital of the company under the head ‘Share Capital’ under title ‘Equity and Liabilities’ of the Balance Sheet till the forfeited shares are reissued. |