Question

Record the journal entries for forfeiture and reissue of shares in the following case:

Y Ltd. forfeited 90 shares of ₹ 10 each, ₹ 8 called-up issued at a premium of ₹ 2 per share to 'R' for non-payment of allotment money of ₹ 5 per share (including premium). Out ofthese, 80 shares were reissued to Sanjay as ₹ 8 called-up for ₹ 10 per share.

Answer 1

Journal Entries
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Share Capital A/c   ...Dr.		720
	Securities Premium A/c   ...Dr.		180
	To Shares Allotment A/c			450
	To Share Forfeiture A/c			450
	(90 shares forfeited for non-payment of allotment money including premium)
2.	Bank A/c   ...Dr.		800
	To Share Capital A/c			640
	To Securities Premium A/c			160
	(80 forfeited shares reissued for ₹ 10 per share as ₹ 8 called-up)
3.	Share Forfeiture A/c   ...Dr.		400
	To Capital Reserve A/c			400
	(Gain on reissue transferred to Capital Reserve)

Working Note:

90 shares of ₹ 10 each, ₹ 8 called-up, issued at a premium of ₹ 2 per share.

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

Therefore, capital portion of allotment:

₹ 5 − ₹ 2 = ₹ 3

Capital amount already received per share:

₹ 8 − ₹ 3 = ₹ 5

Amount credited to Share Forfeiture A/c:

90 × ₹ 5 = ₹ 450

Unpaid allotment:

90 × ₹ 5 = ₹ 450

Since premium was not received, Securities Premium A/c is debited:

90 × ₹ 2 = ₹ 180

Out of 90 shares, 80 shares were reissued as ₹ 8 called-up for ₹ 10 per share.

Cash received:

80 × ₹ 10 = ₹ 800

Share Capital credited:

80 × ₹ 8 = ₹ 640

Premium on reissue:

₹ 800 − ₹ 640 = ₹ 160

Forfeited amount relating to 80 shares:

`450 xx 80/90 = 400`

Therefore:

Capital Reserve = ₹ 400