Accountancy Part AAccounting for Shares

Profit on reissue of shares is transferred to:

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → Capital reserve

When forfeited shares are reissued, the amount left in the Share Forfeiture Account for those shares (after any discount on reissue) is a gain that comes from a capital transaction, not from trading. It is therefore a capital profit and is transferred to Capital Reserve, never to the Statement of Profit and Loss or to General Reserve.

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.”