R.Ltd invited applications for 15,000 shares of ₹10 each at premium of ₹2 per share. The amount was payable as follows:
On Application ₹4, On allotment ₹5
On Ist call ₹2, and on final call ₹1
Applications were received for 20,000 shares. Application of 2,000 shares were rejected. Mohan, who applied for 3,000 shares was allotted in full and prorata allotment was made to the remaining applicants. All money was fully received with the exception of first call and final call on 3,000 shares held by Hari. These shares were forfeited and subsequently re-issued @ ₹8 per share.
On the basis of the above information answer the question.
Record the journal entry for forfeiture of shares
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Share Capital A/c Dr 30,000, To Share Ist call A/c ₹6,000, To Share final call A/c ₹3,000, To Share forfeiture A/c ₹21,000
Hari has paid the application and allotment money, which included the premium, so Securities Premium Reserve is not touched; only the share capital called up is cancelled.
Share capital called up = 3,000 × ₹10 = ₹30,000 (debited)
First call unpaid = 3,000 × ₹2 = ₹6,000 (credited)
Final call unpaid = 3,000 × ₹1 = ₹3,000 (credited)
Amount paid towards capital = 3,000 × (₹4 + ₹3) = ₹21,000, credited to Share Forfeiture Account