Question

Sonal was holding 50 equity share at Rs. 20 each of Bittu Ltd. issued at 10%
premium. She paid Rs. 6 on application, Rs. 6 on allotment, but could not pay
the first call Rs. 5 and final call Rs. 5. Her shares were forfeited. Make Journal
entry for forfeiture of shares.
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Answer 1

Answer:

When shares which have been issued at premium are forfeited, we first find out the amount by which share capital A/c has been credited in respect of such forfeited shares and debit the share capital with such amount.

In this case, the share capital A/ c must have been credited by 800 x 10 =8,000 as the shares are forfeited after the first and final call, which means that the entry for making due the amount to be received was passed by the whole amount (i.e. the share capital A/c had been credited with the amount due at the time of application + allotment + first and final call). Similarly, the share premium A/c will be debited by the amount it was credited earlier, 800 x 2 =1,600. And, share allotment A/c will be credited by the amount it was debited earlier with respect to allotment including premium (800 x 4 = 3,200) and first and final call (800 x 3 = 2,400) and share forfeiture A/c will be credited with the amount of share application money (800 x 5 = 4,000).

Therefore, the entry will be:

Share Capital A/c            8,000

Securities Premium A/c   1,600

  To Share Allotment A/c        3,200

  To Share First call A/c        2,400

  To Share Forfeiture A/c       4,000

Explanation:

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