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CA Foundation · Accounting · Company Accounts

Verma Ltd. forfeited 100 equity shares of ₹10 each, ₹8 called up, on which the shareholder had paid only ₹5 per share (including premium of ₹2 per share that was already received). Which entry correctly records the forfeiture?

The correct entry debits Share Capital ₹800 and credits Share Forfeiture ₹300 and Calls-in-Arrears ₹500. Premium already received is not reversed, so only the capital paid, ₹3 per share, goes to forfeiture, while the unpaid ₹5 per share is cleared from arrears.

  1. AShare Capital A/c Dr ₹1,000; to Share Forfeiture A/c ₹500; to Calls-in-Arrears ₹500
  2. BShare Capital A/c Dr ₹800; Securities Premium A/c Dr ₹200; to Share Forfeiture A/c ₹500; to Calls-in-Arrears ₹500
  3. CShare Capital A/c Dr ₹800; to Share Forfeiture A/c ₹300; to Calls-in-Arrears ₹500Correct
  4. DShare Capital A/c Dr ₹800; to Share Forfeiture A/c ₹500; to Calls-in-Arrears ₹300

Explanation

Share capital called up is ₹8 × 100 = ₹800. Total called-up with premium is ₹10 per share = ₹1,000, so unpaid is ₹500 (₹5 × 100). Premium of ₹200 was already received and stays in Securities Premium (not debited) as it was credited. Amount paid on capital = ₹3 per share = ₹300 is credited to forfeiture. Debit: Share Capital ₹800 and Securities Premium ₹200 only if premium unpaid; here it is paid, so it is not reversed. Hence the correct entry is capital ₹800 Dr, forfeiture ₹300, calls-in-arrears ₹500.

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