Identify the statement that is/are not true from the following.(a) Sh…

Identify the statement that is/are not true from the following.

(a) Shares can be forfeited for non payment of call money.

(b) The profit on forfeited shares is transferred to capital reserve.

(d) Application money should be at least 10% of the face value of the share.

Choose the correct answer from the options given below :

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → (c), (d) only

Forfeiture means cancelling the shares of a shareholder who does not pay the money due on them. The company keeps the amount he has already paid, and the rules below decide where that amount is shown.

(a) Shares can be forfeited for non payment of call money. True. If a shareholder does not pay allotment or call money, the company can cancel his shares and keep what he has already paid.

(b) The profit on forfeited shares is transferred to capital reserve. True. When forfeited shares are reissued, the amount left in the Share Forfeiture Account for those shares is a capital profit, and it is moved to Capital Reserve.

(c) Balance of share forfeiture account is shown in the balance sheet under reserves and surplus. False. Until the shares are reissued, this balance is added to paid-up capital under the head ‘Share Capital’, not shown under Reserves and Surplus.

(d) Application money should be at least 10% of the face value of the share. False. The minimum application money is 5% of the face value, not 10%.

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. These provisions are usually based on Table F which authorise the directors to forefeit the shares for non-payment of calls made.”

Reissue of Forfeited Shares – “… 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.”

Forfeiture of Shares – “… 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.”

Accounting Treatment – “… The following points should be kept in mind while issuing the share capital for public subscription :
1. The application money should be at least 5% of the face value of the share.”