Arrange the following in correct sequence of Accounting for Share Cap…

Arrange the following in correct sequence of Accounting for Share Capital:

(A) Forfeiture of shares for non-payment of call
(B) Money received on allotment
(C) Profit on reissue of forfeited shares accounts transferred to capital reserve
(D) Money received on application

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → (D), (B), (A), (C)

Each step in accounting for share capital depends on the one before it:

(D) Money received on application — applications come in with the application money after the prospectus is issued.
(B) Money received on allotment — shares are allotted only after the applications (and the minimum subscription) are received, and then allotment money is called.
(A) Forfeiture of shares for non-payment of call — a shareholder can default only on an amount already called, so forfeiture comes after allotment and calls.
(C) Profit on reissue of forfeited shares transferred to capital reserve — this is possible only after the forfeited shares are reissued, so it is the last step.

NCERT (2026-27 edition):
Issue of Shares – “… • Receipt of Applications: When prospectus is issued to the public, prospective investors intending to subscribe the share capital of the company would make an application along with the application money and deposit the same with a scheduled bank as specified in the prospectus.”

NCERT (2026-27 edition):
Allotment of Shares – “If minimum subscription has been received, the company may proceed for the allotment of shares after fulfilling certain other legal formalities.”

NCERT (2026-27 edition):
Forfeiture of Shares – “It may happen that some shareholders fail to pay one or more instalments, viz. allotment money and/or call money. In such circumstances, the company can forfeit their shares, i.e. cancel their allotment and treat the amount already received thereon as forfeited to the company within the framework of the provisions in its articles.”

NCERT (2026-27 edition):
Termes Used in the Chapter – “… Once all the forfeited shares have been reissued, any credit balance on Share forfeiture account is transferred to Capital Reserve representing profit on forfeiture of shares.”