T.S. Grewal Class 12 Vol 2 Chapter 1 Q.65 - Share Capital

Question 65

Max Ltd. forfeited 500 shares of ₹100 each for non-payment of the first call of ₹20 per share and the final call of ₹25 per share. 250 of these shares were reissued at ₹50 per share, fully paid-up. Pass the necessary Journal entries for forfeiture and reissue, and prepare the Share Forfeiture Account. (CBSE 2020)

Solution

JOURNAL (Books of Max Ltd.)

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Share Capital A/c (500 × ₹100)    Dr.		50,000
	To Share Forfeited A/c			27,500
	To Share First Call A/c			10,000
	To Share Final Call A/c			12,500
	(500 shares forfeited for non-payment of the first and final calls)
	Bank A/c (250 × ₹50)    Dr.		12,500
	Share Forfeited A/c    Dr.		12,500
	To Share Capital A/c (250 × ₹100)			25,000
	(250 forfeited shares reissued at ₹50 per share, fully paid)
	Share Forfeited A/c    Dr.		1,250
	To Capital Reserve A/c			1,250
	(Forfeited amount on the 250 reissued shares transferred to Capital Reserve)

SHARE FORFEITURE ACCOUNT

Particulars	₹	Particulars	₹
To Share Capital A/c (discount on reissue)	12,500	By Share Capital A/c (forfeited amount)	27,500
To Capital Reserve A/c	1,250
To Balance c/d (remaining 250 not-yet-reissued shares)	13,750
Total	27,500	Total	27,500

Working Note: Forfeited amount per share = 27,500 ÷ 500 = ₹55. For the 250 reissued shares = 250 × ₹55 = ₹13,750, less the ₹12,500 discount on reissue = ₹1,250 transferred to Capital Reserve.