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CA Foundation · Accounting · Company Accounts

Iyer Ltd. issued 1,000 equity shares of ₹10 each at a premium of ₹3, payable: application ₹3, allotment ₹6 (including premium), first and final call ₹4. A holder of 100 shares failed to pay allotment and the call, and the shares were forfeited. Of these, 60 shares were re-issued at ₹9 per share fully paid. What is the Capital Reserve after this re-issue?

Capital Reserve is ₹120. Only ₹3 per share application money was received, giving a forfeiture credit of ₹180 for the 60 re-issued shares. The re-issue discount of ₹1 per share, ₹60 in total, is set off, leaving ₹120 transferred to Capital Reserve.

  1. A₹60
  2. B₹120Correct
  3. C₹180
  4. D₹0

Explanation

Allotment of ₹6 includes premium ₹3, so premium was not received and Securities Premium is debited ₹3 per share on forfeiture. Amount paid is only application ₹3, so forfeiture credit is ₹3 per share (capital paid). Forfeiture on 100 shares = ₹300; on 60 shares = ₹180. Re-issue at ₹9 fully paid gives discount of ₹1 per share = ₹60. Capital reserve = ₹180 − ₹60 = ₹120.

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