Question

Record the journal entries for forfeiture and reissue of shares in the following case:

Basak Ltd. forfeited 20 shares of ₹ 10 each, ₹ 7 called-up on which the shareholder had paid application and allotment money of ₹ 5 per share. Out of these, 15 shares were reissued to Naresh as ₹ 7 per share paid-up for ₹ 8 per share.

Answer 1

Journal Entries
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Share Capital A/c   ...Dr.		140
	To Calls-in-Arrears A/c			40
	To Share Forfeiture A/c			100
	(20 shares forfeited on which ₹ 5 per share had been paid)
2.	Bank A/c   ...Dr.		120
	To Share Capital A/c			105
	To Securities Premium A/c			15
	(15 forfeited shares reissued for ₹ 8 per share as ₹ 7 paid-up)
3.	Share Forfeiture A/c   ...Dr.		75
	To Capital Reserve A/c			75
	(Gain on reissue transferred to Capital Reserve)

Working Note:

20 shares of ₹ 10 each, ₹ 7 called-up.

Amount paid per share = ₹ 5

Amount forfeited:

20 × ₹ 5 = ₹ 100

Unpaid amount:

20 × (₹ 7 − ₹ 5) = ₹ 40

Out of 20 shares, 15 shares were reissued as ₹ 7 paid-up for ₹ 8 per share.

Cash received:

15 × ₹ 8 = ₹ 120

Share Capital credited:

15 × ₹ 7 = ₹ 105

Premium on reissue:

₹ 120 − ₹ 105 = ₹ 15

Forfeited amount relating to 15 shares:

₹ 100 × `15/20` = ₹ 75

Since there is no discount on reissue:

Capital Reserve = ₹ 75​