Q.Ajita Ltd. issued 2,00,000 equity shares of ₹ 10 each at a premium of ₹ 2 per share payable as:
₹ 3 on application
₹ 5 on allotment (including ₹ 2 premium)
₹ 4 on first and final call
Application were received for 2,40,000 equity shares and pro-rota allotment was made to all the applicants.
The excess application money was adjusted with allotment Premo who was allotted 400 shares failed to pay the first and final call and her shares were forfeited.
Pass Journal entries in the Books of Ajita Ltd.

When a shareholder fails to pay a call (or allotment) after due notice, the company may forfeit the shares under its Articles of Association — cancelling the membership and keeping the money already received.

Entries on forfeiture

• Share Capital A/c is debited with the full called-up amount on the shares.
• The unpaid allotment/call accounts are credited to cancel the outstanding demand.
• The amount already received is credited to the Forfeited Shares (Shares Forfeited) A/c.

Re-issue and transfer

• Forfeited shares can be re-issued at a discount, but that discount (debited to Forfeited Shares A/c) can never exceed the amount originally forfeited on those very shares.
• The surplus on re-issued shares (amount forfeited − re-issue discount) is a capital profit → transferred to Capital Reserve.
• Any balance for shares not yet re-issued stays in the Forfeited Shares A/c, shown as an addition to paid-up capital.

Quick example

X holds 100 shares of ₹10 each, has paid ₹6 per share, but fails the first & final call of ₹4. The shares are forfeited and later re-issued at ₹8 per share, fully paid.

1. Forfeiture: Share Capital A/c Dr ₹1,000 (100 × 10); To Calls A/c ₹400; To Forfeited Shares A/c ₹600 (100 × 6). …