(A) Asha Ltd. forfeited 100 equity shares of ₹ 20 each fully called-up for non-payment of the first call of ₹ 3 per share and final

Question

Pass Journal Entries for the forfeiture and reissue of shares in the following cases:

(A) Asha Ltd. forfeited 100 equity shares of ₹ 20 each fully called-up for non-payment of the first call of ₹ 3 per share and final call of ₹ 5 per share. 80 shares of these were re-issued at ₹ 15 per share as fully paid.

(B) Bhakti Ltd. forfeited 100 equity shares of ₹ 10 each, ₹ 6 called-upon which the shareholder paid application and allotment of ₹ 5 per share. Of these 80 shares were reissued as fully paid-up for ₹ 16 per share.

(C) Konark Ltd. forfeited 50 shares of ₹ 10 each, ₹ 8 called-up. The shareholder failed to pay the first call of ₹ 3 per share. Later on, 30 shares of these were re-issued at ₹ 7 per share.

Answer 1

Journal Entries [For Asha Ltd.]

Working Notes for A:

1. Out of 100 forfeited shares, 80 shares were re-issued accordingly Equity Share Capital A/c is debited and credited.

2. To find the proportionate amount for Forfeiture A/c:

For 100 shares-share forfeiture amount = ₹ 1,200

∴ 80 shares – share forfeiture amount = ₹ 960 Now, out of this ₹ 960 we used ₹ 400 from Share Forfeiture A/c at the time of re-issue of shares.

So, balance of Share Forfeiture A/c = ₹ 960 – ₹ 400 = ₹ 560

Journal Entries [For Bhakti Ltd.]

Working Notes for B:

1. Out of 100 forfeited shares, 80 shares were re-issued accordingly Equity Share Capital A/c is debited for ₹ 600 and credited for ₹ 480.

2. The proportionate amount debited to Forfeiture A/c:

For 100 shares-share forfeiture amount debited = ₹ 500 1 Qn

∴ 80 shares – share forfeiture amount = ₹ \(\frac{80}{100}\times\frac{500}{1}\) = ₹ 400

Now, shares were re-issued at ₹ 6 per share which is a called-up amount.

∴ The proportionate amount for Forfeiture A/c ₹ 400 will be transferred to Capital Reserve A/c.

Journal Entries (For Konark Ltd.)

Working Note for C:

The proportionate amount debited to Forfeiture A/c:

For 50 shares – share forfeiture amount debited is ₹ 250

∴ 30 shares-share forfeiture amount = ₹ \(\frac{30}{50}\times250\) = ₹ 150

Out of this ₹ 30 used for re-issue of forfeited shares.

∴ Balance of Share Forfeiture A/c = ₹ 150 – ₹ 30 = ₹ 120.