Question

Pass necessary journal entries for the forfeiture and reissue of forfeited shares in the following case:

Avian Ltd. forfeited 10,000 shares of ₹ 10 each on which the first call of ₹ 4 per share was not received, and the second and final call of ₹ 1 per share was not yet called. Out of these, 4,000 shares were reissued to Ajay as fully paid-up for ₹ 9 per share.

Answer 1

In the Books of Avian Ltd. Journal
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
i.	Share Capital A/c (10,000 × ₹ 9)   ...Dr.		90,000	−
	To Share First Call A/c (10,000 × ₹ 4)		−	40,000
	To Share Forfeiture A/c		−	50,000
	(Being forfeiture of 10,000 shares for non-payment of the first call money)
ii.	Bank A/c   ...Dr.		36,000	−
	Share Forfeiture A/с   ...Dr.		4,000	−
	To Share Capital A/c		−	40,000
	(Being 4,000 forfeited shares reissued as fully paid-up for ₹ 9 per share)
iii.	Share Forfeiture A/с   ...Dr.		16,000	−
	To Capital Reserve A/c		−	16,000
	(Being profit on reissue of 4,000 shares transferred to capital reserve account)

Working Note:

Profit on 10,000 shares = ₹ 50,000

Profit on 4,000 shares = `50,000 xx 4000/10000`

= ₹ 20,000

Profit on reissue of 4,000 shares = ₹ 20,000 – ₹ 4,000

= ₹ 16,000