Question

A limited company forfeited 400 shares of Mr. X, who had applied for 600 shares on account of non-payment of allotment money ₹3 + ₹2.50 (premium) and first call ₹2. Only ₹4 per share was received with application. Out of these, 200 shares were re-issued to Mr. Y at ₹8 per share, ₹9 paid-up.
Give journal entries relating to forfeiture and re-issue.

Answer 1

Journal Entries
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Share Capital A/c (400 × ₹7)     ...Dr.		2,800
	Securities Premium A/c (400 × ₹2.50)     ...Dr.		1,000
	To Share Allotment A/c (400 × ₹5.50)			2,200
	To Share First Call A/c (400 × ₹2)			800
	(Being 400 shares forfeited for non-payment of allotment and first call)
2.	Bank A/c (200 × ₹8)     ...Dr.		1,600
	Share Forfeiture A/c (200 × ₹1)     ...Dr.		200
	To Share Capital A/c (200 × ₹9)			1,800
	(Being 200 forfeited shares reissued at ₹8 per share, ₹9 paid-up)
3.	Share Forfeiture A/c     ...Dr.		800
	To Capital Reserve A/c			800
	(Being balance in Share Forfeiture A/c transferred to Capital Reserve)

Working Note:

1) Forfeiture Amount:
Application money received = ₹4 per share
Shares forfeited = 400
Total forfeiture = 400 × ₹4 = ₹1,600

2) Re-issue:
Re-issued = 200 shares at ₹8, ₹9 paid-up
Discount on re-issue = ₹1 per share
Discount = 200 × ₹1 = ₹200

3) Capital Reserve:
Forfeited on 200 shares = 200 × ₹4 = ₹800
Less: Discount = ₹200
Capital Reserve = ₹800 – ₹200 = ₹600