The correct order of the following events is:(A) Forfeiture of shares…

The correct order of the following events is:

(A) Forfeiture of shares

(B) Capital Reserve

(D) Reissue of shares

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → (C), (A), (D), (B)

The four events follow one another, because each one can happen only after the one before it.

(C) Calls in arrears — first, a shareholder fails to pay the amount called on his shares.

(A) Forfeiture of shares — next, the company cancels the shares of the defaulting shareholder, and the money he had already paid is kept in Share Forfeiture A/c.

(D) Reissue of shares — then, only shares already forfeited can be reissued to new holders.

(B) Capital Reserve — last, the gain left in Share Forfeiture A/c on the reissued shares is a capital profit and is transferred to Capital Reserve.

NCERT (2026-27 edition):
Calls in Arrears – “It may happen that shareholders do not pay the call amount on due date. When any shareholder fails to pay the amount due on allotment or on any of the calls, such amount is known as ‘Calls in Arrears’/‘Unpaid Calls’.”

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):
Reissue of Shares – “… 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.”