Consider the given statements below related to issue of shares and se…

Consider the given statements below related to issue of shares and select the correct statements:

(A) The profit on the reissue of forfeited shares is not transferred to the General Reserve.

(B) Paid up capital is that portion of the called up capital which has actually been received from the shareholders.

(D) Calls in Arrears are shown on the Assets side of the balance sheet.

Choose a pair of correct statements from the given options below.

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → (A) and (B) only

(A) The profit on the reissue of forfeited shares is not transferred to the General Reserve. Correct. It is a capital profit, so it goes to Capital Reserve, not to General Reserve, which holds revenue profits.

(B) Paid up capital is that portion of the called up capital which has actually been received from the shareholders. Correct. It is called up capital less calls in arrears.

(C) Shares can be forfeited for failure to repay the loan to the bank. Incorrect. Shares are forfeited when a shareholder does not pay allotment or call money due on those shares. A bank loan is a debt of someone else and has nothing to do with it.

(D) Calls in Arrears are shown on the Assets side of the balance sheet. Incorrect. Calls in arrears are deducted from subscribed capital in the share capital note, on the Equity and Liabilities side.

NCERT (2026-27 edition):
Share Capital of a Company – “… Paid up Capital: It is that portion of the called up capital which has been actually received from the shareholders. When the shareholders have paid all the called amount, the called up capital is the same to the paid up capital. If any of the shareholders has not paid amount on calls, such an amount may be called as ‘calls in arrears’. Therefore, paid up capital is equal to the called-up capital minus call in arrears.”

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’. 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.”