Accountancy Part AAccounting for Shares

A company forfeited 100 Equity shares of ₹10 each issued at a premium…

A company forfeited 100 Equity shares of ₹10 each issued at a premium of 20% for non payment of final call of ₹5 including the premium. Show the journal entry for forfeiture of shares.

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Share capital A/c Dr ₹1000, Securities Premium Reserve A/c Dr ₹ 200, To Share Final call A/c ₹500, To Share Forfeiture A/c ₹700

The premium of 20% (₹2 a share) is part of the unpaid final call, so it was never received and must be cancelled along with the share capital.

Share capital called up = 100 × ₹10 = ₹1,000 (debited)

Premium not received = 100 × ₹2 = ₹200 (Securities Premium Reserve debited)

Final call unpaid = 100 × ₹5 = ₹500 (credited)

Amount received on the shares = ₹1,000 + ₹200 − ₹500 = ₹700, credited to Share Forfeiture Account

NCERT (2026-27 edition):
Do it Yourself

Extract from the NCERT textbook

NCERT (2026-27 edition):
Forfeiture of Shares issued at a Premium – “… In case, however, if the premium amount has not been received, either wholly or partially, in respect of the shares forfeited, the Securities Premium Reserve Account will also be debited with the amount of premium not received along with the Share Capital Account at the time forfeiture.”