Question

Pass Journal entries for the forfeiture and re-issue of shares in the following cases.

A) Asha Ltd. forfeited 100 equity shares of ₹ 20 each fully called up for non-payment of first call of ₹ 3 per share and final call of ₹ 5 per share. 80 shares of these were reissued at ₹ 15 per share fully paid

B) Bhakti Ltd. forfeited 100 equity shares of ₹ 10 each, ₹ 6 called-up on which the shareholder paid application and allotment of ₹ 5 per share. Of these 80 shares were re-issued as fully paid-up for ₹ 6 per share.

C) Konark Ltd. forfeited 50 shares of ₹ 10 each, ₹ 8 called-up. The shareholder failed to pay first call of ₹ 3 per share. Later on 30 shares of these were re-issued at ₹ 7 per share.

Answer 1

Journal Entries [For Asha Ltd.]
Date	Particulars	L.F	Debit Amount (₹)	Credit Amount (₹)
(A)(i)	Equity Share Capital A/c (100 equity shares × ₹ 20)   ...Dr.		2,000
	To Equity Share First Call A/c (100 × 3)			300
	To Equity Share Final Call A/c (100 × 5)			500
	To Equity Share Forfeiture A/c			1,200
	(Being forfeiture of 100 equity shares due to non-payment of first call @ ₹ 3 and final call @ ₹ 5 per share)
(ii)	Bank A/c (80 share × ₹ 15)   ...Dr.		1,200
	Equity Share Forfeiture A/c   ...Dr.		400
	To Equity Share Capital A/c (80 share × ₹ 20)			1,600
	(Being re-issue of 80 forfeited shares @ ₹ 15 per share as fully paid-up)
(iii)	Equity Share Forfeiture A/c   ...Dr.		560
	To Capital Reserve A/c			560
	(Being proportion balance of Share Forfeiture A/c transferred to Capital Reserve A/c)
			4,160	4,160

Working Notes: For A :

(1) Out of 100 forfeited shares, 80 shares were re-issued accordingly Equity Share Capital A/c is debited and credited.

(2) To find the proportionate amount for Forfeiture A/c:

For 100 shares – share forfeiture amount = ₹ 1,200

∴ 80 shares – share forfeiture amount =? = ₹ 960

Now, out of this ₹ 960 we used ₹ 400 from Share Forfeiture A/c at the time of re-issue of shares. So, balance of Share Forfeiture A/c = ₹ 960 – ₹ 400 = ₹ 560

Journal Entries [For Bhakti Ltd.]
Date	Particulars	L.F	Debit Amount (₹ )	Credit Amount (₹ )
(B)(i)	Equity Share Capital A/c (100 Share × ₹ 6 called-up)   ...Dr.		600
	To Calls-in-Arrears A/c (100 Share × ₹ 1 (6 − 5) )			100
	To Equity Share Forteifure A/c (100 × ₹ 5)			500
	(Being 100 Equity share forfeited @ ₹ 1 Unpaid amount)
(ii)	Bank A/c (80 × ₹ 6)   ...Dr.		480
	To Equity Share Capital A/c			480
	(Being re-issue of 80 forfeited shares @ ₹ 6 per share as fully paidup)
(iii)	Equity Share Forfeiture A/c   ...Dr.		400
	To Capital Reserve A/c			400
	(Being proportionate balance of Share Forfeiture A/c transferred to Capital Reserve A/c)
			1480	1480

Working Notes: For B :

(1) Out of 100 forfeited shares, 80 shares were re-issued accordingly Equity Share Capital A/c is debited for ₹ 600 and credited for ₹ 480.

(2) The proportionate amount debited to Forfeiture A/c :

For 100 shares – share forfeiture amount debited = ₹ 500	`80/100 xx500/ 1` = ₹ 400
∴ 80 shares – share forfeiture amount =? = ₹ 400

Now, shares were re-issued at L 6 per share which is the called-up amount.

∴ Proportionate amount for Forfeiture A/c ₹ 400 will be transferred to Capital Reserve A/c.

Journal Entries [For Konark Ltd.]
Date	Particulars	L.F	Debit Amount (₹ )	Credit Amount (₹ )
(c)(i)	Equity Share Capital A/c (50 Share × ₹ 8 called-up)   ...Dr.		400
	To Equity Share First Call A/c (50 × ₹ 3)			150
	To Equity Share Forteifure A/c			250
	(Being forfeiture of 50 equity shares due to non-payment of first call @ ₹ 3 per share)
(ii)	Bank A/c (30 × ₹ 7)   ...Dr.		210
	Equity Share Forfeiture A/c   ...Dr.		30
	To Equity Share Capital A/c (30 × ₹ 8)			240
	(Being re-issue of 30 forfeited shares @ ₹ 7 per share)
(iii)	Equity Share Forfeiture A/c   ...Dr.		120
	To Capital Reserve A/c			120
	(Being proportionate balance of Share Forfeiture A/c transferred to Capital Reserve A/c)
			760	760

Working Note: For C :

The proportionate amount debited to Forfeiture A/c :

For 50 shares – share forfeiture amount debited is ₹ 250	`30 /50 xx 250` = ₹ 150
∴30 shares – share forfeiture amount =? = ₹ 150

Out of this ₹ 30 used for re-issue of forfeited shares.

∴ Balance of Share Forfeiture A/c = ₹ 150 – ₹ 30 = ₹ 120.