Question

Give the accounting treatment on the forfeiture of Shares.

Answer 1

When shares are forfeited, the paid-up share capital decreases. The journal entries in the books of the company are recorded under two main conditions, as per current accounting standards

(i) When Shares were originally issued at Par (Face Value):

(Share Capital is debited with the total called-up amount, and unpaid calls are credited)

Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Share Capital A/c   ...Dr.		Called-up Amount
	To Share Allotment A/c			Unpaid Amount
	To Share Calls A/c			Unpaid Amount
	To Share Forfeiture A/c			Paid-up Amount
	(Being shares forfeited for non-payment of calls)

(ii) When Shares were originally issued at a Premium (If Premium NOT received):

Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Share Capital A/c   ...Dr.		Called-up Amount
	Securities Premium A/c   ...Dr.		Unpaid Amount
	To Share Allotment A/c			Unpaid Allotment
	To Share Calls A/c			Unpaid Calls
	To Share Forfeiture A/c			Paid-up Amount
	(Being premium shares forfeited)