Q.Why are the shares forfeited ?

Max discount on reissue = amount forfeited (₹8); minimum reissue price = ₹10 − ₹8 = ₹2. Option (c).

When forfeited shares are reissued, the company may allow a discount, but the discount must not exceed the amount already forfeited on those shares (otherwise capital would be lost).

• Face value = ₹10; amount already paid (and now forfeited) = ₹8.
• Maximum permissible discount = ₹8. …

At the time of forfeiture, the Share Capital Account is debited with the called-up amount.

When shares are forfeited for non-payment of calls (Company Accounts, TN HSC Commerce), the company must remove the capital that was created on those shares. The Share Capital Account is created only to the extent of the amount called up, so it is debited with the called-up amount on the forfeited shares. The amount already received is credited to Forfeited Shares (Share …

The balance remaining in the Forfeited Shares Account after reissue is a capital profit and is transferred to the Capital Reserve account.

When shares are forfeited, the amount already received is credited to the Forfeited Shares Account. On reissue, any discount allowed on the reissued shares is first met out of this account; whatever remains is a profit that arose from a capital transaction (dealing in the company's own shares), not from trading.

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