(a) On 1st April, 2021, Hitesh Ltd. took over assets of ₹ 8,00,000 and liabilities of ₹ 40,000 of Pranjal Ltd.

Question

Q. (a) On 1st April, 2021, Hitesh Ltd. took over assets of ₹ 8,00,000 and liabilities of ₹ 40,000 of Pranjal Ltd. at an agreed value of ₹ 8,30,000. Hitesh Ltd. paid the amount to Pranjal Ltd. as follows :

(i) Gave an acceptance payable after 3 months for ₹ 2,00,000, and

(ii) Issued 10% Debentures of ₹ 100 each at a discount of 10% to Pranjal Ltd. in satisfaction of the balance amount of purchase consideration. Pass the necessary journal entries to record the above transaction in the books of Hitesh Ltd.

(OR)

(b) Disha Ltd. forfeited 500 shares of ₹ 100 each issued at 10% premium, ₹ 90 called up, on which the shareholders did not pay ₹ 30 per share on allotment (including premium) and first call of ₹ 20 per share. Out of these, 300 shares were reissued for ₹ 80 per share, fully paid up. Pass necessary journal entries for forfeiture and reissue of shares.

CBSECBSE Class XII Board 2023Subjective· 3mImportance★★★★★

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Part (a)Concept understanding — Purchase Consideration

What is Purchase Consideration? Start with an everyday intuition

Imagine you want to buy a small shop from its owner. You don't just pay for the goods on the shelves — you also pay for the shop's name, its customer base, the furniture, the pending bills, and maybe even the goodwill. The total amount you agree to pay the seller for everything — all assets, all liabilities, the whole business — is the purchase consideration.

In simple terms: when one business buys another business (not just its products), the lump sum paid is purchase consideration. It is the price of the entire business as a going concern.

The precise meaning (as per NCERT / Class 12)

Purchase Consideration is the agreed amount payable by the purchasing company to the vendor company (the one being sold) for the acquisition of its business.

It is not the same as the net assets (assets minus liabilities). It is a negotiated figure — often different from the book value of net assets. If the purchase consideration is higher than the net assets, the difference is goodwill. If lower, it is capital reserve.

Why does it matter?

Because the entire accounting entry for the purchase of a business hinges on this one number. You cannot record the acquisition without first determining:

How much to pay the old firm
Whether goodwill arises or capital reserve is created
How to settle the payment (cash, shares, debentures, or a mix)

In board exams, the most common mistake is confusing purchase consideration with net assets. They are not the same.

Methods of calculating Purchase Consideration

NCERT prescribes four methods. You need to know all, but the Net Assets Method is the most frequently tested.

Method	Basis
Net Assets Method	Purchase consideration = Agreed value of assets taken over – Agreed value of liabilities taken over
Net Payment Method	Purchase consideration = Total of all payments made by the purchasing company (cash, shares, debentures) to the vendor
Lump Sum Method	A single fixed amount agreed upon, no breakup
Intrinsic Value / Share Exchange Method	Based on the number of shares issued and their intrinsic value

Note

In the Net Assets Method, you use agreed values, not book values. If the vendor's machinery is worth ₹5,00,000 in the books but both parties agree it is worth ₹6,00,000, you take ₹6,00,000.

Accounting Treatment — The Journal Entry

When the purchasing company acquires the business, it records the following:

Step 1: Record the assets and liabilities taken over

The journal entry in the books of the purchasing company is:

Sundry Assets A/c                     Dr.   [Agreed value of assets taken over]
Goodwill A/c (if PC > Net Assets)     Dr.   [Difference]
    To Sundry Liabilities A/c                     [Agreed value of liabilities taken over]
    To Vendor (or Business Purchase) A/c          [Purchase Consideration]
    To Capital Reserve A/c (if PC < Net Assets)   [Difference]

Watch out

Goodwill and Capital Reserve cannot both appear in the same entry. Only one of them arises — the difference between purchase consideration and net assets.

Step 2: Discharge of purchase consideration

When the purchasing company pays the vendor:

Vendor (or Business Purchase) A/c     Dr.   [Purchase Consideration]
    To Bank A/c (if paid in cash)
    To Share Capital A/c (if shares issued)
    To Debentures A/c (if debentures issued)

The format / proforma for the Net Assets Method

In your exam, you will often be asked to compute purchase consideration using the Net Assets Method. Here is the standard working note format:

Net Assets Method - Computation of Purchase Consideration

Particulars	Amount (₹)
Assets taken over (at agreed values)
Goodwill	xx,xxx
Land & Building	xx,xxx
Plant & Machinery	xx,xxx
Stock	xx,xxx
Debtors	xx,xxx
Cash at Bank	xx,xxx
Total Assets (A)	X,XX,XXX
Less: Liabilities taken over (at agreed values)
Sundry Creditors	(xx,xxx)
Bills Payable	(xx,xxx)
Outstanding Expenses	(xx,xxx)
Total Liabilities (B)	(X,XX,XXX)

Part (b)Concept understanding — Forfeiture Conditions

Forfeiture of Shares – The First Meeting

Think of a situation where you book a seat for a concert, pay a deposit, but then don't show up on the day. The organiser keeps your deposit because you broke the promise. That's the everyday intuition behind forfeiture of shares.

A company invites people to buy its shares. You agree to buy, say, 100 shares at ₹10 each. You pay the application money (₹2) and allotment money (₹3). But when the company later asks for the final call (₹5), you don't pay. The company has already spent money on your behalf — printing share certificates, maintaining records, planning for your capital. You've broken your promise. So the company forfeits (cancels) your shares and keeps the money you've already paid.

What Exactly Is Forfeiture?

Note

Forfeiture is the cancellation of partly-paid shares by a company because the shareholder failed to pay the call money due. The company keeps the amount already received and the shareholder loses all rights in those shares.

The NCERT Class 12 Accountancy textbook (Part II, Chapter 1) defines forfeiture as: "Forfeiture of shares refers to the cancellation of the shares of a shareholder who fails to pay the amount due on allotment or on any of the calls."

The key point: forfeiture happens only when shares are partly paid. If a shareholder has paid the full amount, the company cannot forfeit — it can only sell the shares in the market to recover any dues.

Why Does Forfeiture Matter?

For the company, forfeiture serves two purposes:

Discipline – It forces shareholders to honour their payment commitments.
Recovery – The company can later reissue the forfeited shares to someone else, often at a discount, and recover the unpaid amount.

For the shareholder, forfeiture means losing the money already paid. That's why companies follow a strict legal procedure — a board resolution, a notice to the defaulter, and a 14-day grace period — before forfeiting.

Accounting Treatment – The Core Logic

When shares are forfeited, the company has received some money but the shares are no longer with the original holder. The accounting question is: What do we do with the money already received?

The answer: The money received (application, allotment, and any calls paid) becomes the company's gain — but it's not profit yet. It's kept in a special account called Share Forfeiture Account.

Here's the journal entry:

Date	Particulars	Dr (₹)	Cr (₹)
	Share Capital A/c (called-up amount per share × number of shares forfeited)	Dr
	To Share Forfeiture A/c (amount already received per share × number of shares)
	To Calls-in-Arrears A/c (amount not received per share × number of shares)
	(Being forfeiture of X shares for non-payment of call money)

Let's break this down with a concrete example from NCERT.

Example (NCERT-style)

A company issued 1,000 shares of ₹10 each, payable as:

Application: ₹2
Allotment: ₹3
First Call: ₹3
Final Call: ₹2

Mr. X, who held 100 shares, paid application and allotment but failed to pay the first call and final call. The company forfeited his shares.

Step 1: Calculate the amounts

Called-up amount per share = ₹10 (all calls made)
Amount received per share = ₹2 (application) + ₹3 (allotment) = ₹5
Amount not received per share = ₹3 (first call) + ₹2 (final call) = ₹5

Step 2: Journal entry

Particulars	Dr (₹)	Cr (₹)
Share Capital A/c (100 shares × ₹10)	1,000
To Share Forfeiture A/c (100 shares × ₹5)		500
To Calls-in-Arrears A/c (100 shares × ₹5)		500
(Being forfeiture of 100 shares of Mr. X)

What does this entry do?

Share Capital A/c is debited – because the shares are cancelled, the company's share capital reduces by the called-up amount.
Share Forfeiture A/c is credited – with the amount already received. This is a liability (or a reserve) because the company may later reissue these shares.
Calls-in-Arrears A/c is credited – because the unpaid amount is no longer due from Mr. X. The Calls-in-Arrears account is cleared.

The Share Forfeiture Account – A Temporary Home

The Share Forfeiture Account is not a profit account. It's a temporary account that holds the money received from the defaulting shareholder. This money will be used later when the forfeited shares are reissued.

Important

The amount in Share Forfeiture Account is not distributed as dividend until the shares are reissued. It remains a reserve until then.

Reissue of Forfeited Shares …

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Part (a)

Working: Purchase consideration = ₹8,30,000. Net assets = ₹8,00,000 − ₹40,000 = ₹7,60,000. Goodwill = ₹8,30,000 − ₹7,60,000 = ₹70,000. Balance after acceptance = ₹8,30,000 − ₹2,00,000 = ₹6,30,000. Debentures at 10% discount → issue price ₹90; No. of debentures = ₹6,30,000 ÷ ₹90 = 7,000; face value = ₹7,00,000; discount = ₹70,000.

Journal Entries in the books of Hitesh Ltd.

Date	Particulars	Debit (₹)	Credit (₹)
2021 Apr 1	Sundry Assets A/c Dr.	8,00,000
	Goodwill A/c Dr.	70,000
	To Sundry Liabilities A/c		40,000
	To Pranjal Ltd. A/c		8,30,000
	(Assets & liabilities taken over; goodwill recorded)
Apr 1	Pranjal Ltd. A/c Dr.	8,30,000
	Discount on Issue of Debentures A/c Dr.	70,000
	To Bills Payable A/c		2,00,000
	To 10% Debentures A/c (7,000 × ₹100)		7,00,000

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Part (a): Hitesh Ltd. records Goodwill ₹70,000 and settles the ₹8,30,000 consideration by a ₹2,00,000 acceptance and 7,000, 10% debentures of ₹100 at a 10% discount (Discount ₹70,000).

Part (b): Disha Ltd. forfeits 500 shares (Share Capital ₹45,000 + Securities Premium ₹5,000 Dr.), reissues 300 at ₹80 fully paid, and transfers ₹9,000 profit to Capital Reserve.

Part (a)

When one company takes over the business of another, the assets taken over are recorded at agreed values, liabilities at their agreed values, and the vendor is credited with the purchase consideration. The difference between purchase consideration and net assets is Goodwill (consideration > net assets) or Capital Reserve (consideration < net assets).

Working Notes

Net assets = Assets ₹8,00,000 − Liabilities ₹40,000 = ₹7,60,000.
Goodwill = Purchase consideration ₹8,30,000 − Net assets ₹7,60,000 = ₹70,000.
Balance payable by debentures = ₹8,30,000 − ₹2,00,000 (acceptance) = ₹6,30,000.
Issue price per debenture = ₹100 − 10% = ₹90; No. of debentures = ₹6,30,000 ÷ ₹90 = 7,000; Face value = ₹7,00,000; Discount = ₹70,000.

Journal Entries in the books of Hitesh Ltd.

Date	Particulars	Debit (₹)	Credit (₹)
2021 Apr 1	Sundry Assets A/c Dr.	8,00,000
	Goodwill A/c Dr.	70,000
	To Sundry Liabilities A/c		40,000
	To Pranjal Ltd. A/c		8,30,000
	(Being assets & liabilities of Pranjal Ltd. taken over)
Apr 1	Pranjal Ltd. A/c Dr.	8,30,000
	Discount on Issue of Debentures A/c Dr.	70,000
	To Bills Payable A/c		2,00,000
	To 10% Debentures A/c		7,00,000
	(Being consideration settled by acceptance ₹2,00,000 and 7,000, 10% debentures of ₹100 each issued at 10% discount)

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Same / Similar Concept — real previous-year questions on the same or a closely similar concept, not this exact question.

Showing the 12 most recent of 81 on this concept.

CBSE 2026Set 67/3/11 markMCQ
$Q. Mogra Ltd. purchased assets of ₹ 14,40,000 from DK Ltd. It issued 9% Debentures of ₹ 100 each at a discount of 4% in full satisfaction of the purchase consideration. The number of debentures issued to DK Ltd. were : (A) 14,400 (B) 15,000 (C) 3,60,000 (D) 1,500$
›Reveal solutionSolution

Mogra Ltd. issued 15,000 debentures of ₹100 each at a4% discount to settle a purchase consideration of ₹14,40,000. The correct answer is option (B).

Concept First: Why This Entry Works

When a company buys assets and pays by issuing debentures, the seller (DK Ltd.) is not paying cash — they are accepting debentures as full payment. The total value of what the seller gives up (the assets) must equal the total value of what they receive (the debentures). This is the purchase consideration.

The tricky part here is the discount. Mogra Ltd. is issuing ₹100 face-value debentures but only receiving ₹96 per debenture in terms of settlement value (because of the 4% discount). So the company must issue more debentures than the face value would suggest, to make up the full ₹14,40,000.

The journal entry follows the golden rule: Debit what comes in (assets), Credit what goes out (debentures and discount). The assets account is debited with the full value of assets acquired. The 9% Debentures account is credited with the face value of debentures issued. The difference — the discount — is debited to a Discount on Issue of Debentures account (a loss for the company).

Watch out

Common Mistake

Many students calculate the number of debentures as ₹14,40,000 ÷ ₹100 = 14,400 debentures. This is wrong because it ignores the discount. The seller is not accepting debentures at face value — they are accepting them at the issue price of ₹96 each. Always divide the purchase consideration by the issue price, not the face value.

Solution

Step 1: Calculate the Issue Price per Debenture

Face value of each debenture = ₹100

Discount = 4% of ₹100 = ₹4

Issue price = ₹100 − ₹4 = ₹96

Step 2: Calculate the Number of Debentures Issued

Number of debentures = Purchase Consideration ÷ Issue Price per Debenture

= ₹14,40,000 ÷ ₹96

= 15,000 debentures

Tip

Shortcut

When the discount is given as a percentage, you can use: Number of debentures = Purchase Consideration ÷ (Face Value × (1 − Discount Rate)). Here: 14,40,000 ÷ (100 × 0.96) = 15,000. …

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CBSE 2026Set 67/4/11 markMCQ

Q. White Ltd. purchased Plant and Machinery worth ₹ 3,96,000 from Nath Ltd. The purchase consideration was paid by issue of 9% Debentures of ₹ 100 each at 10% discount. The number of debentures issued were : (A) 3,960 (B) 4,000 (C) 4,400 (D) 3,600

›Reveal solution

White Ltd. issues 4,400 debentures of ₹100 each at 10% discount to discharge a purchase consideration of ₹3,96,000; the answer is (C) 4,400.

Concept: Purchase Consideration and Issue of Debentures at Discount

When a company acquires an asset and pays for it by issuing debentures (rather than cash), the purchase consideration — the agreed price of the asset — must equal the amount credited to the vendor. If debentures are issued at a discount, the company must issue more debentures than the face value would suggest, because each debenture is accepted by the vendor at less than its nominal (face) value.

Here the debentures have a face value of ₹100 each but are issued at 10% discount, meaning each debenture is issued at ₹90. The vendor (Nath Ltd.) receives debentures whose issue price totals ₹3,96,000, even though the face value (the liability recorded in the books) will be higher.

The accounting treatment is:

Account	Debit	Credit	Rule
Plant and Machinery A/c	₹3,96,000		Asset acquired (debit the receiver / what comes in)
Discount on Issue of Debentures A/c	(to be found)		Loss/expense (debit; it is a capital loss, written off over the life of debentures or against Securities Premium)
9% Debentures A/c		Face value	Liability created (credit)
Nath Ltd. (Vendor) A/c		₹3,96,000	Liability to vendor discharged by issue of debentures

The key relationship:

\text{Issue Price per Debenture} = \text{Face Value} - \text{Discount} = 100 - 10 = ₹90

\text{Number of Debentures} = \frac{\text{Purchase Consideration}}{\text{Issue Price per Debenture}} = \frac{3{,}96{,}000}{90}

Solution

Working Note 1: Calculation of Number of Debentures Issued

Particulars	Amount (₹)
Purchase Consideration (Plant and Machinery)	3,96,000
Face Value per Debenture	100
Discount per Debenture (10% of ₹100)	10
Issue Price per Debenture	90
Number of Debentures = ₹3,96,000 ÷ ₹90	4,400

The vendor Nath Ltd. is paid by issuing 4,400 debentures, each accepted at ₹90 (the discounted price), which exactly equals the purchase consideration of ₹3,96,000.

Working Note 2: Face Value and Discount (for completeness)

Particulars	Amount (₹)
Number of Debentures issued	4,400
Face Value per Debenture	100
Total Face Value of Debentures (Liability)	4,40,000
Total Issue Price (Purchase Consideration)	3,96,000
Discount on Issue of Debentures	44,000

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CBSE 2026Set 67/5/11 markMCQ
$Q. Universal Ltd. took over machinery of ₹ 3,30,000, furniture of ₹ 1,60,000 and liabilities of ₹ 80,000 from Amol Ltd. for a purchase consideration of ₹ 4,50,000. The payment to Amol Ltd. was made by issue of 10% Debentures of ₹ 50 each at a discount of 10%. The number of debentures issued to Amol Ltd. was : (A) 1,000 (B) 4,500 (C) 45,000 (D) 10,000$
›Reveal solutionSolution
The number of 10% debentures issued is 10,000 (Option D). The purchase consideration of ₹4,50,000 is settled by issuing debentures of face value ₹50 each at a 10% discount, meaning each debenture is issued at ₹45.

Concept First: Purchase Consideration and Settlement

When one company (Universal Ltd.) takes over the business of another (Amol Ltd.), the buying company must pay a purchase consideration — the agreed price for the net assets acquired. This consideration can be paid in cash, or by issuing shares or debentures of the buying company.

The key accounting principle here is that the purchase consideration is the total amount payable to the selling company, regardless of the form of payment. It is not the same as the net assets taken over (assets minus liabilities). The purchase consideration is a negotiated figure — in this case, ₹4,50,000 — while the net assets acquired are ₹3,30,000 (machinery) + ₹1,60,000 (furniture) - ₹80,000 (liabilities) = ₹4,10,000. The difference of ₹40,000 is capital reserve or goodwill, depending on the agreement.

Now, the question focuses on how Universal Ltd. settles this ₹4,50,000 consideration. They issue 10% Debentures of ₹50 each at a discount of 10%. This means:

Face value of each debenture = ₹50

Discount = 10% of ₹50 = ₹5

Issue price per debenture = ₹50 - ₹5 = ₹45

The selling company (Amol Ltd.) receives debentures worth the purchase consideration amount. So, the number of debentures issued is simply:

Number of debentures = Purchase Consideration / Issue Price per Debenture

Watch out

Common Pitfall

Students often mistakenly divide the purchase consideration by the face value (₹50) instead of the issue price (₹45). Remember: when debentures are issued at a discount, the company receives less than the face value per debenture. The selling company gets debentures whose total issue price equals the purchase consideration, not whose total face value equals it.

Solution

Calculation of Number of Debentures

Particulars Amount (₹)
Purchase Consideration 4,50,000
Face Value of each Debenture 50
Discount @ 10% 5
Issue Price per Debenture (₹50 - ₹5) 45
Number of Debentures Issued (₹4,50,000 / ₹45) 10,000

Tip

Shortcut

If the issue price is ₹45 per debenture, then for every ₹45 of consideration, 1 debenture is issued. For ₹4,50,000, the number is simply 4,50,000 ÷ 45 = 10,000.

Journal Entry in the Books of Universal Ltd.

Date Particulars L.F. Debit (₹) Credit (₹)
Machinery A/c Dr. 3,30,000
Furniture A/c Dr. 1,60,000
To Liabilities A/c 80,000
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Particulars	Amount (₹)
Purchase Consideration	4,50,000
Face Value of each Debenture	50
Discount @ 10%	5
Issue Price per Debenture (₹50 - ₹5)	45
Number of Debentures Issued (₹4,50,000 / ₹45)	10,000

CBSE 2026Set 67/5/11 markMCQ

Q. At the time of forfeiture of shares, ‘Share Capital Account’ is debited with : (A) Paid-up amount on forfeited shares (B) Called-up amount on forfeited shares (C) Face value of shares forfeited (D) Unpaid amount on forfeited shares

›Reveal solution

At the time of forfeiture, Share Capital Account is debited with the called-up amount on the forfeited shares — option (B).

The Concept: Why the Called-Up Amount?

When a company forfeits shares, it cancels the shareholder’s membership. The accounting entry must reverse the original credit that was made to Share Capital Account when the shares were issued.

Think about what happened when the shares were first allotted. The company made this entry:

Particulars	Debit (₹)	Credit (₹)
Bank A/c (amount received)	Dr.
Share Forfeiture A/c (amount not received)	Dr.
To Share Capital A/c (called-up amount)		Cr.

The Share Capital Account was credited with the called-up amount — not the face value, not the paid-up amount, and certainly not the unpaid amount. It was credited with the amount the company had called from shareholders, because that is the legal liability the shareholder accepted.

Now, when shares are forfeited, we must reverse that credit. The rule is simple: whatever was credited to Share Capital at allotment must be debited back at forfeiture. That amount is the called-up value per share multiplied by the number of shares forfeited.

Watch out

A common mistake is to debit Share Capital with the paid-up amount (the amount actually received). But that would leave the unpaid calls still sitting in the Share Capital Account — incorrect. The called-up amount is the full amount the company demanded; the unpaid portion is already in Share Forfeiture Account (or Calls-in-Arrears Account) and is removed separately.

The Journal Entry at Forfeiture

The standard entry is:

Date	Particulars	L.F.	Debit (₹)	Credit (₹)
	Share Capital A/c (called-up amount)		Dr.
	To Share Forfeiture A/c (amount already received)
	To Calls-in-Arrears A/c (amount not yet received)
	(Being forfeiture of shares for non-payment of calls)

Notice: Share Capital is debited with the called-up amount. The credit goes partly to Share Forfeiture Account (the money already collected) and partly to Calls-in-Arrears Account (the money still owed but now cancelled).

Tip

If the company has not maintained a separate Calls-in-Arrears Account, the unpaid amount is directly credited to the respective call account (e.g., First Call A/c, Final Call A/c). The principle remains the same — Share Capital is debited with the called-up amount.

Why Not the Other Options? …

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CBSE 2026Set MARCH1 markMCQ
$Q. When shares are forfeited then amount called up on forfeited shares is _____.$
(a) debited to share forfeiture account
(b) credited to share forfeiture account
(c) credited to share capital account
(d) debited to share capital account
›Reveal solutionSolution

On forfeiture, the called-up amount on forfeited shares is debited to Share Capital A/c, so the answer is (d).

When shares are forfeited for non-payment of calls, the forfeiture entry is:

Account Dr / Cr
Share Capital A/c (amount called up on forfeited shares) Dr
To Share Forfeiture A/c (amount already received) Cr

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CBSE 2026Set ANNUAL1 markMCQ
$Q. Rashmi Limited forfeited 1500 equity shares of ₹ 10 each issued at 10% premium, on which first call of ₹ 2 per share was not received and final call ₹ 1 per share was not made. How much amount will be credited in Share Forfeiture A/c? A) ₹ 15,000 B) ₹ 13,500 C) ₹ 3,000 D) ₹ 10,500$
›Reveal solutionSolution

The Share Forfeiture Account is credited with ₹10,500 - option (D).

Face value ₹10 per share, issued at 10% premium (premium ₹1). A typical call pattern totalling face value is: Application + Allotment (including premium) + First call ₹2 + Final call ₹1.

Per share received towards SHARE CAPITAL before forfeiture:

Item Amount per share (₹)
Face value 10
Less: First call (not received) (2)
Less: Final call (not made / not called) (1)
Capital actually received per share 7
…

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CBSE 2026Set ANNUAL1 markMCQ
$Q. Read the following and give answers (Q. No. xi to xiv): "Vishakha Limited had purchased a plant of ₹ 2,97,000 from Snehlata Limited. It was agreed that purchase consideration is to be paid by issuing 8% debentures of ₹ 1,000 each at discount of 10%." How many numbers of 8% debentures will be issued in above question? A) 330 B) 297 C) 270 D) 275$
›Reveal solutionSolution

330 debentures must be issued to settle the ₹2,97,000 purchase consideration - option (A).

Issue price per debenture = Face value - Discount = ₹1,000 - 10% of ₹1,000 = ₹1,000 - ₹100 = ₹900.

…

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CBSE 2026Set ANNUAL1 markMCQ
$Q. (Based on the passage: "Vishakha Limited had purchased a plant of ₹ 2,97,000 from Snehlata Limited. It was agreed that purchase consideration is to be paid by issuing 8% debentures of ₹ 1,000 each at discount of 10%.") Which account will be credited on purchase of the plant? A) Snehlata Ltd.'s A/c B) Vishakha Ltd.'s A/c C) Plant A/c D) 8% Debenture A/c$
›Reveal solutionSolution

The vendor Snehlata Ltd.'s Account is credited on purchase of the plant - option (A).

When assets are bought from a vendor, the entry is:

Plant A/c ... Dr (asset acquired)

To Vendor's (Snehlata Ltd.'s) A/c (amount payable)

…

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CBSE 2026Set ANNUAL1 mark
$Q. Fill in the blank: The balance of __________ account is capital gain for the company. (Share forfeiture/General Reserve)$
›Reveal solutionSolution

The balance of the Share Forfeiture Account is a capital gain for the company.

When shares are forfeited, the amount already received on them is credited to the Share Forfeiture Account. Any balance remaining after the shares are re-issued represents a capital profit (gain) retained by the company and is transferred to the Capital Reserve. A General Reserve, by contr …

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CBSE 2026Set ANNUAL1 mark
$Q. When shares are issued at premium and the premium is realised, which accounts will be debited at the time of their forfeiture?$
›Reveal solutionSolution
When the premium has been realised, forfeiture debits only the Share Capital Account.

The treatment of the premium on forfeiture depends on whether it was received:

If the premium was ALREADY received, it stays in the Securities Premium Account and is not cancelled. Only the Share Capital Account is debited (with the called-up value), the Share Forfeiture Account is credited with the amount received, and any unpaid calls are credited to Calls-in-Arrears. …
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$Q. Where is the balance of the Share Forfeiture Account shown till the share is re-issued?$
›Reveal solutionSolution

The Share Forfeiture balance is added to Subscribed capital under Share Capital until the shares are re-issued.

Until the forfeited shares are re-issued, the amount standing in the Share Forfeiture Account is disclosed in the Notes to Accounts on Share Capital and added to the Subscribed and Paid-up Capital. It thus appears on the Equity and Liabilities side of the Balance Sheet under Shareholders' Funds -> Share Capital. Once the shares are re-issued, this balance (net of any …

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$Q. Which shares a company can reissue?$
›Reveal solutionSolution
A company can reissue forfeited shares.

When a shareholder fails to pay any call money due on his shares (allotment money, first call, or final call) despite proper notice, the Board of Directors may cancel his shares — this is called Forfeiture of Shares. On forfeiture:

The shareholder's name is removed from the Register of Members.

All money already received on those shares (towards application, allotment and any calls actually paid) is credited to a Share Forfeiture Account and is forfeited (generally not refunded).

The shares themselves become the company's own property again, available for reissue. …
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Particulars	Debit (₹)	Credit (₹)
Machinery A/c Dr.	3,30,000
Furniture A/c Dr.	1,60,000
To Liabilities A/c		80,000

Account	Dr / Cr
Share Capital A/c (amount called up on forfeited shares)	Dr
To Share Forfeiture A/c (amount already received)	Cr

Item	Amount per share (₹)
Face value	10
Less: First call (not received)	(2)
Less: Final call (not made / not called)	(1)
Capital actually received per share	7
…

Q.(a) On 1st April, 2021, Hitesh Ltd. took over assets of ₹ 8,00,000 and liabilities of ₹ 40,000 of Pranjal Ltd. at an agreed value of ₹ 8,30,000. Hitesh Ltd. paid the amount to Pranjal Ltd. as follows :

Part (a)

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