Question

X Limited forfeited 1,000 shares of ₹14 each (₹8 called-up) issued at a premium of ₹2 per share to Mr. R, for non-payment of allotment money of ₹5 per share (including premium). Out of these, 700 shares were re-issued to Mr. Sanjay as ₹8 called for ₹7 per share. Give the necessary Journal entries relating to forfeiture and re-issue of shares.

Answer 1

Journal entries In the books of X. Ltd.
Date	Particulars	L.F.	Debit (₹)	Credit (₹)
1.	Share Capital A/c (₹8 × 1,000)     ...Dr.		8,000
	Securities Premium A/c     ...Dr.		2,000
	To Share Allotment A/c			5,000
	To Share Forfeiture A/c (₹3 × 1,000)			3,000
	(Being 1,000 shares forfeited for non-payment of allotment, including premium)
2.	Bank A/c (₹7 × 700)     ...Dr.		4,900
	Share Forfeiture A/c     ...Dr.		700
	To Share Capital A/c (₹8 × 700)			5,600
	(Being 700 shares reissued to Mr. Sanjay at ₹7 as ₹8 called-up)
3.	Share Forfeiture A/c     ...Dr.		1,400
	To Capital Reserve A/c			1,400
	(Being profit on reissue transferred to Capital Reserve)

Final Capital Reserve Calculation

Total Shares Reissued	700
Profit per Share	₹2 (₹3 – ₹1)
Capital Reserve	₹1,400

Capital reserve based on reissue of 700 shares is: ₹1,400

If 1,000 shares were reissued under same terms, then:

₹2 × 1,000 = ₹2,000