Reissue of Forfeited Shares and its accounting entries

Reissue of Forfeited Shares and its accounting entries-min

Reissue of Forfeited shares means selling again the shares which are forfeited previously due to non-payment of calls by the shareholder(s). 

What is the reissue of forfeited shares?

Reissue of forfeited shares means selling of already issued shares to some other person or business. Reissue word does not mean to issue forfeited shares again in the share market rather than it means shares are sold to another person or company. Once shares were issued can’t issue again in the share market, just the company or owner of shares can sell these shares to other owners. 

The Company may be selling these shares as per terms and conditions decided. The reissue of shares can be sold on a par, at a premium, or a discount. however, the amount of the discount should be up to the total balance of share forfeited balance and the amount of discount will be adjusted from the balance of the forfeited account. 

Accounting Journal Entries of Reissue of Forfeited Shares: 

The accounting journal entries of the reissue of forfeited share can be recorded on the basis of the types of reissue i.e. at par, at a premium, or on discount. theses are shown as following: 

  1. Reissued at Par
  2. Reissued at Discount 
  3. Reissued at Premium

1. When the Reissued at Par:

When the shares are reissued at par then the following journal entry will be recorded in the books: 

Date   Particulars
L.F. Debit Credit
           
  Bank A/c Dr.   *****  
  To Share Capital A/c       *****
  (Being forfeited shares are issued)      
           

The amount will be calculated as the following: 

Bank A/c: The amount received against the reissued of shares.

Share Capital A/c: The total called up capital will be recorded in this column. 

2. When the Reissued at Premium:

When the shares are reissued at par then the following journal entry will be recorded in the books: 

Date   Particulars
L.F. Debit Credit
           
  Bank A/c Dr.   *****  
  To Share Capital A/c       *****
  To Security Premium A/c       ***
  (Being forfeited shares are issued at a premium)      
           

The amount will be calculated as the following: 

Bank A/c: The amount received against the reissued of shares.

Share Capital A/c: The total called up capital will be recorded in this column. 

Share Premium A/c: The amount charged extra from the total called up capital. 

3. When the Reissued on Discount:

When the shares are reissued at par then the following journal entry will be recorded in the books: 

Date   Particulars
L.F. Debit Credit
           
  Bank A/c Dr.   *****  
  Share Forfeited A/c Dr.   ***  
  To Share Capital A/c       *****
  (Being forfeited shares are issued at a Discount)      
           

The amount will be calculated as the following: 

Bank A/c: The amount received against the reissued of shares.

Share Forfeited A/c: The amount charged less than the total called up capital which will be deducted from the Balance of shares forfeited account. 

Share Capital A/c: The total called up capital will be recorded in this column. 

Accounting Treatment Balance of Share Forfeited account: 

The balance of the share forfeited account will be transferred to the Capital reserve account after reissuing of shares. 

Date   Particulars
L.F. Debit Credit
           
  Share Forfeited A/c Dr.   ***  
  To Capital Reserve A/c       *****
  (Being balance of share forfeited account transferred to capital reserve a/c)      
          b

Share Forfeited A/c: The balance of the share forfeited account left after deduction of discount amount. 

Capital Reserve A/c: The balance of the Share Forfeited account transferred to the capital reserve account.

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References: –

    1. mca.gov.in
    2. Class +2 Accountancy by Sultan Chand

 

 

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