Question

JJK Ltd. forfeited 100 shares of ₹ 10 each (₹ 8 called-up) issued at a premium of ₹ 2 per share to Rahul on which he had paid application money of ₹ 5 per share, for non-payment of allotment money of ₹ 5 per share (including premium). Out of these, 70 shares were reissued to Sanjay for ₹ 7 per share as ₹ 8 called-up for ₹ 7 per share. Give necessary Journal entries relating to forfeiture and reissue of shares.

Answer 1

Journal Entries in the Books of JJK Ltd.
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Share Capital A/c   ...Dr.		800
	Securities Premium A/c   ...Dr.		200
	To Shares Allotment A/c			500
	To Share Forfeiture A/c			500
	(100 shares forfeited for non-payment of allotment money including premium)
2.	Bank A/c   ...Dr.		490
	Share Forfeiture A/c   ...Dr.		70
	To Share Capital A/c			560
	(70 forfeited shares reissued @ ₹ 7 per share as ₹ 8 called-up)
3.	Share Forfeiture A/c   ...Dr.		280
	To Capital Reserve A/c			280
	(Gain on reissue transferred to Capital Reserve)

Working Note:

Face value per share: ₹ 10

Called-up amount per share: ₹ 8

Premium per share: ₹ 2

Application money paid = ₹ 5 per share

Allotment money = ₹ 5 per share, including premium ₹ 2.

Therefore, capital portion of allotment:

₹ 5 − ₹ 2 = ₹ 3

1. Forfeiture of 100 Shares

Share Capital called-up:

100 × ₹ 8 = ₹ 800

Securities Premium not received:

100 × ₹ 2 = ₹ 200

Allotment money unpaid:

100 × ₹ 5 = ₹ 500

Amount received and forfeited:

100 × ₹ 5 = ₹ 500

2. Reissue of 70 Shares

70 shares were reissued for ₹ 7 per share as ₹ 8 called-up.

Cash received:

70 × ₹ 7 = ₹ 490

Share Capital credited:

70 × ₹ 8 = ₹ 560

Discount on reissue:

₹ 560 − ₹ 490 = ₹ 70

Forfeited amount relating to 70 shares:

`500 xx 70/100 = 350`

Capital Reserve:

₹ 350 − ₹ 70 = ₹ 280