Question

Pass necessary Journal entries for forfeiture and reissue of shares in the following case:

Neon Ltd. forfeited 2,000 shares of ₹ 10 each issued at a premium of ₹ 2 per share for non-payment of allotment money of ₹ 5 per share (including premium). The first and final call of ₹ 2 per share was not yet made. Out of these, 1,500 shares were reissued at ₹ 7 per share, ₹ 8 paid-up.

Answer 1

Journal Entries
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Share Capital A/c   ...Dr.		16,000
	Securities Premium A/c   ...Dr.		4,000
	To Shares Allotment A/c			10,000
	To Share Forfeiture A/c			10,000
	(2,000 shares forfeited for non-payment of allotment money)
2.	Bank A/c   ...Dr.		10,500
	Share Forfeiture A/c   ...Dr.		1,500
	To Share Capital A/c			12,000
	(1,500 forfeited shares reissued @ ₹ 7 per share as ₹ 8 paid-up)
3.	Share Forfeiture A/c Dr.		6,000
	To Capital Reserve A/c			6,000
	(Gain on reissue transferred to Capital Reserve)

Working Note:

Face value per share: ₹ 10

Premium per share: ₹ 2

First and Final Call of ₹ 2 per share was not yet made.

Therefore, called-up capital per share:

₹ 10 − ₹ 2 = ₹ 8

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

Capital portion of allotment:

₹ 5 − ₹ 2 = ₹ 3

Application money received towards capital:

₹ 8 − ₹ 3 = ₹ 5

Forfeiture of 2,000 Shares:

Share Capital called-up:

2,000 × ₹ 8 = ₹ 16,000

Securities Premium not received:

2,000 × ₹ 2 = ₹ 4,000

Allotment unpaid:

2,000 × ₹ 5 = ₹ 10,000

Amount credited to Share Forfeiture A/c:

2,000 × ₹ 5 = ₹ 10,000

Reissue of 1,500 Shares:

Reissued as ₹ 8 paid-up at ₹ 7 per share.

Cash received:

1,500 × ₹ 7 = ₹ 10,500

Share Capital credited:

1,500 × ₹ 8 = ₹ 12,000

Discount on reissue:

₹ 12,000 − ₹ 10,500 = ₹ 1,500

Forfeited amount relating to 1,500 shares:

`10,000 xx (1,500)/(2,000) = 7,500`

Capital Reserve:

₹ 7,500 − ₹ 1,500 = ₹ 6,000