Question

Pass journal entries for the forfeiture and re-issue in the following case:

C Ltd. forfeited 7,000 shares of ₹10 each fully called-up on which the holder has paid application money @ ₹3 and allotment money @ ₹2 per share. Out of these, 3,000 shares were re-issued as fully paid @ ₹7 per share.

Answer 1

Journal entries In the books of C Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Share capital (7,000 × ₹10) A/c     ...Dr.		70,000
	To share forfeited A/c (7,000 × ₹5)			35,000
	To Calls in arrears A/c (7,000 × ₹5)			35,000
	(Being 7,000 shares forfeited for non-payment of ₹5 per share)
2.	Bank A/c (3,000 × ₹7)     ...Dr.		21,000
	Share Forfeiture A/c (3,000 × ₹3)     ...Dr.		9,000
	To Share Capital A/c (3,000 × ₹10)			30,000
	(Being 3,000 shares re-issued at ₹7 per share fully paid)
3.	Share Forfeiture A/c     ...Dr.		6,000
	To Capital Reserve A/c			6,000
	(Being profit on reissue of 3,000 shares transferred to Capital Reserve)

Working note:

1) Amount received on 7,000 forfeited shares: ₹35,000

2) Reissued 3,000 shares → ₹5 forfeited × 3,000 = ₹15,000

3) Less: Discount on reissue (3,000 × ₹3) = ₹9,000

4) Transferred to Capital Reserve = ₹6,000