Question

a company forfeited 100 share of rupees 10 each issued at 20% premium to be paid at the time of allotment on which first call money of rupees 3 was not received the final call money of rupees 2 is not yet called.these share where subsequently Re issue at rupees 7 per share as rupees 8 Paid up​

Answer 1

Capital Resreve Rs.400

Explanation:

This Question is Related to forfeited of Shares

We Can Understand the Concept of Forfeiture through an example

Some one not paid the amount on time , then company forfeit the amount

Now, We try to learn the Entry for Forfeiture of Shares through below Concept

(i) Basic rule of Accounts (a) Increase in Assets (Debit, (b) Increase in Liability (credited) (c) Income will be credited

(ii) at the time of Issue Share capital is credited, but at the time of forfeiture of Shares , shares are Cancelled so Share capital is Debited with called up amount,(uncalled amount can not come here)

Company forfeit the paid up amount by Share holders So It's Company Income it will be credited by the name of Share forfeiture Account

At the time of issue of Shares Share final call is less credited by amount 200(Acc. to Question) but now it will be more credited by amount 200

to reversify the effect.

then the amount remain in share forfeiture that is long term profit

transfer to capital reserve and it will be credited according  to rule (above discuused)

Now the main Journal Entry For Forfeiture of shares

When Shares are Forfeit              Dr.(Rs.)    Cr.(Rs.)

Share Capital   A/C    Dr.             800

            To Share Forfeiture A/C                 500

            To Share First call A/C                     300

(Being Shares are forfeited)

When Shares are Re-issue

Bank   A/C    Dr.                              700

Share Forfeiture    A/C  Dr.            100

         To Share Capital A/C                          800  

(Being Shares are Reissue)

When Share forfeiture amount transfer to capital Reserve

Shares forfeiture A/C   Dr.             500

        To Capital Reserve A/C                     500

(Being Share forfeiture amount transfer to capital Reserve)

Calculation of Capital Reserve:

Profit on 100 Shares =500

Profit on 1 shares       = 500/100

Profit on   100 Shares = 500/100X100

                                     =500-100*

                                    = 400

400 transfer to capital Reserve

calculation of capital reserve can be understand through following example

20 pencils cost=100

1 Pencil cost   =100/20

5 pencil cost=100/20×5

                     =25

so capital Reserve calculation is so easy

* 100 minus, because Share forfeit amount use on Reissue and balance amount transfer to capital Reserve

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