Question

Ashoka Limited Company, which had issued equity shares of Rs. 20 each at a premium of Rs. 4 per share, forfeited 1,000 shares for non-payment of the final call of Rs. 2 per share. 400 of the forfeited shares were reissued at Rs.14 per share out of the remaining shares of 200 shares reissued at Rs.20 per share. Give journal entries for the forfeiture and reissue of shares and show the amount transferred to capital reserve and the balance in the Share Forfeiture Account.

Answer 1

Journal Entries in the books of Ashoka Limited
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Share Capital A/c   ...Dr.		20,000
	To Final Call A/c			2,000
	To Share Forfeiture A/c			18,000
	(1,000 Shares of 20 per share forfeited for nonpayment of the Share Final Call money @ ₹ 2 per share)
2.	Bank A/c (400 × 14)   ...Dr.		5,600
	Share Forfeiture A/c (400 × 6)   ...Dr.		2,400
	To Share Capital A/c			8,000
	(400 shares @ ₹20 per share reissued for ₹14 per share fully paid-up)
3.	Bank A/c   ...Dr.		4,000
	To Share Capital A/c			4,000
	(200 shares @ ₹20 per share reissued for ₹20 per share fully paid-up)
4.	Share Forfeiture A/c   ...Dr.		8,400
	To Capital Reserve			8,400
	(Balance of 600 shares in Share Forfeiture Account transferred to Capital Reserve Account, after reissue)

Working Notes:

Total initial balance credited to Share Forfeiture Account = 1,000 shares × 18

= 18,000

Reissue Price per share = Rs. 14

Discount Allowed on Reissue per share = 20 − 14

= Rs 6

Total Reissue Discount = 400 shares × 6

= 2,400

Net Gain Transferred to Capital Reserve = (400 × 18) − 2,400

= 7,200 − 2,400

= 4,800

Amount of 400 shares transferred to Capital Reserve Account, after reissue 

= 400 Shares @ ₹ 12 per share

= Rs 4,800

Amount of 200 shares transferred to Capital Reserve Account, after reissue

= 200 × 18

= ₹ 3,600

Total amount transferred to the Capital Reserve Account for 600 shares

= Capital Reserve for 400 shares + capital reserve for 200 shares 

= 4,800 + 3,600

= 8,400