A company forfeited certain number of shares of Face Value ₹ 10 each, for non-
payment of final call money of ₹ 4. These shares were reissued at a discount of
₹ 5 and amount of ₹ 4500 was transferred to capital Reserve account. Pass the
necessary journal entries to show the above transactions and prepare Share
forfeited account.
Let's break down the given information and pass the necessary journal entries for the forfeiture and reissue of shares.
Let’s assume that a certain number of shares were forfeited for non-payment of final call money. The forfeited shares are not specified in the problem, but we can calculate it based on the amount transferred to the capital reserve (₹4,500).
Thus:
So, 500 shares were forfeited.
Journal Entry for Forfeiture:
Share Capital A/c Dr. ₹5,000
To Share Forfeited A/c ₹5,000
(Being forfeiture of 500 shares for non-payment of final call money of ₹4 each)
Now, for the final call money, we will adjust that:
Share First and Final Call A/c Dr. ₹2,000
To Share Forfeited A/c ₹2,000
(Being final call money of ₹4 each on 500 shares forfeited)
To reissue the forfeited shares at a discount of ₹5:
Bank A/c Dr. ₹2,500
Share Forfeited A/c Dr. ₹2,500
To Share Capital A/c ₹5,000
(Being 500 forfeited shares reissued at ₹5 each)
For the Capital Reserve Transfer (Discount + Final Call adjustment): The difference of ₹4,500 (reissue discount and final call adjustment) is transferred to Capital Reserve.
Share Forfeited A/c Dr. ₹4,500
To Capital Reserve A/c ₹4,500
(Being the amount transferred to Capital Reserve account)
Now, let’s prepare the Share Forfeited Account, which will show all the amounts related to the forfeiture and reissue of shares.
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| Date | Particulars | Amount |
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| | To Share Capital A/c | ₹5,000 |
| | To Share First Call A/c | ₹2,000 |
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| By Bank A/c | ₹2,500 (Reissue of shares) | ₹2,500 |
| By Capital Reserve A/c | ₹4,500 |
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| Total | | ₹7,500 |
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Forfeiture of shares (₹5,000 + ₹2,000):
Share Capital A/c Dr. ₹5,000
To Share Forfeited A/c ₹5,000
Share First and Final Call A/c Dr. ₹2,000
To Share Forfeited A/c ₹2,000
Reissue of forfeited shares:
Bank A/c Dr. ₹2,500
Share Forfeited A/c Dr. ₹2,500
To Share Capital A/c ₹5,000
Transfer to Capital Reserve:
Share Forfeited A/c Dr. ₹4,500
To Capital Reserve A/c ₹4,500
These journal entries and the Share Forfeited Account reflect the entire process of forfeiting and reissuing the shares at a discount.
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