Q.(OR) A holds 290 shares of Rs. 100 each on which he has paid Rs. 10 per share on application.
B holds 640 shares of Rs. 100 each on which he has paid Rs. 10 and Rs. 20 per share on application and allotment respectively.
C holds 870 shares of Rs. 100 each and has paid Rs. 10 on application, Rs. 20 an allotment and Rs. 30 on first call.
They all fail to pay their arrears and the second call of Rs. 20 per share. Shares are forfeited and reissued at Rs. 110 per share as fully paid.
Journalise the above transactions in the books of the company.
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Start your 14-day free trial to unlock the full solution →1,800 shares (A 290, B 640, C 870) called up to Rs.80 are forfeited for non-payment of arrears and the second call; reissued at Rs.110 (fully paid, above face value), so the complete Rs.74,300 Share Forfeiture balance is pure profit, transferred wholly to Capital Reserve.
Step 1 — Amount called up and received, per shareholder:
Called-up total (Application 10 + Allotment 20 + First Call 30 + Second Call 20) = Rs.80 per share
A: 290 shares, paid only Application (Rs.10) ⟹ Received = 290 × 10 = Rs.2,900; Called-up = 290 × 80 = Rs.23,200; Unpaid = Rs.20,300
B: 640 shares, paid Application + Allotment (Rs.30) ⟹ Received = 640 × 30 = Rs.19,200; Called-up = 640 × 80 = Rs.51,200; Unpaid = Rs.32,000
C: 870 shares, paid Application + Allotment + First Call (Rs.60) ⟹ Received = 870 × 60 = Rs.52,200; Called-up = 870 × 80 = Rs.69,600; Unpaid = Rs.17,400
Total shares forfeited = 290 + 640 + 870 = 1,800 shares
Total called-up value = 23,200 + 51,200 + 69,600 = Rs.1,44,000
Total received (⟶ Share Forfeiture) = 2,900 + 19,200 + 52,200 = Rs.74,300
Total unpaid (⟶ Calls in Arrears) = 20,300 + 32,000 + 17,400 = Rs.69,700
Check: 74,300 + 69,700 = 1,44,000 ✓
Step 2 — Forfeiture Journal Entry:
Share Capital A/c Dr 1,44,000
To Share Forfeiture A/c 74,300
To Calls in Arrears A/c 69,700
(Being 1,800 shares of Rs.100 each, called up to Rs.80, forfeited — A 290, B 640, C 870 shares — for non-payment of arrears and the second call)
Step 3 — Reissue at Rs.110 per share, fully paid:
Since the shares are reissued as fully paid (Rs.100) at a price of Rs.110 — i.e. Rs.10 above face value — there is no discount to absorb from the Share Forfeiture Account; instead, the reissue itself earns a Rs.10 per share premium.
Bank A/c Dr 1,98,000 (1,800 × 110)
To Share Capital A/c 1,80,000 (1,800 × 100) …
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