Question

Arti Ltd. invited applications for 2,00,000 equity shares of ₹ 10 each payable ₹ 4 on application, ₹ 3 on allotment and balance on first and final call. The shares were subscribed and due amounts were received except first and final call on 9,000 shares held by Pawan. Ramesh holding 4,000 shares paid call money on his shares along with allotment money. Shares of Pawan were forfeited. Later, 2/3rd of the forfeited shares were reissued as fully paid-up and ₹ 36,000 were transferred to Capital Reserve.

Pass the Journal entry for forfeiture and reissue of shares.

Answer 1

Journal Entries in the books of Arti Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Share Capital A/c (9,000 × ₹ 10)   ...Dr.		90,000
	To Forfeited Shares A/c			63,000
	To Shares First and Final Call A/c (9,000 × ₹ 3)			27,000
	(9,000 shares forfeited for non-payment of first and final call of ₹ 3 per share)
2.	Bank A/c (6,000 × ₹ 9) (WN)   ...Dr.		54,000
	Forfeited Shares A/c   ...Dr.		6,000
	To Share Capital A/c (6,000 × ₹ 10)			60,000
	(6,000 shares reissued for ₹ 54,000, i.e., @ ₹ 9 per share)
3.	Forfeited Shares A/c   ...Dr.		36,000
	To Capital Reserve A/c			36,000
	(Gain on reissue transferred to Capital Reserve being the amount forfeited on 6,000 shares)

Working Note:

Amount forfeited on 6,000 shares (6,000 × ₹ 7)	₹ 42,000
Less: Amount transferred to Capital Reserve	₹ 36,000
Loss/Discount on Reissue of 6,000 shares	₹ 6,000

Loss on Reissue per share = ₹ 1, So, forfeited shares are reissued at ₹ 9 per share, i.e., ₹ 10 – ₹ 1.