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CSEET · Fundamentals of Accounting · Introduction to Company Accounts

Gupta Ltd forfeited 200 shares of Rs 10 each, fully called, on which Rs 6 per share had been received. All 200 shares were re-issued at Rs 8 per share as fully paid. What amount is transferred to Capital Reserve?

Rs 800 is transferred to Capital Reserve. The forfeiture account holds Rs 1,200 (200 x Rs 6); the discount allowed on re-issue is Rs 400 (200 x Rs 2). The remaining gain of Rs 800 is a capital profit and goes to Capital Reserve.

  1. ARs 400
  2. BRs 800Correct
  3. CRs 1,200
  4. DRs 1,600

Explanation

Forfeiture balance = 200 x 6 = Rs 1,200. Loss on re-issue = discount 200 x (10-8) = Rs 400. Capital reserve = 1,200 - 400 = Rs 800. Rs 400 ignores the deduction of discount from the balance, while Rs 1,200 ignores the discount entirely.

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