Question

Assertion (A): When the shares are forfeited, Share Capital Account is debited with the amount called-up and credited to (i) respective unpaid calls account, i.e., Calls-in-Arrears and (ii) Share Forfeiture Account with the amount already received on shares.

Reason (R): When the shares are forfeited, all entries relating to the shares forfeited, except those relating to securities premium, already recorded in accounting records must be reversed.

In the context of above two statements, which of the below options is correct?

Options

• Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of Assertion (A).

• Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A).

• Assertion (A) is false but Reason (R) is true.

• Both Assertion (A) and Reason (R) are false.

Answer 1

Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A).