CS Executive · Corporate Accounting and Financial Management · Accounting for Share Capital
Chitra Ltd forfeited 500 shares of Rs 10 each issued at Rs 2 premium, on which the holder had paid application, allotment (including premium) and Rs 3 in all, while the final call was unpaid. Shares were re-issued at Rs 8 per share fully paid up. Total received before forfeiture was Rs 9 per share including the premium. What is the Capital Reserve?
Capital Reserve is Rs 2,500. The Rs 2 premium received stays in Securities Premium, so forfeited capital is Rs 7 per share, or Rs 3,500. The re-issue discount of Rs 2 per share is Rs 1,000, leaving Rs 2,500.
- ARs 2,500Correct
- BRs 2,000
- CRs 1,500
- DRs 3,500
Explanation
Premium Rs 2 was received, so it stays in Securities Premium. Capital received is 9 - 2 = Rs 7 per share, so Forfeiture Account is 500 x 7 = Rs 3,500. Re-issue at Rs 8 against Rs 10 face gives discount 500 x 2 = Rs 1,000. Capital Reserve = 3,500 - 1,000 = Rs 2,500.
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