In a Journal Entry of Forfeiture of Shares, Share Capital Account will be :-

When shares are forfeited due to non-payment of call money, the Share Capital Account needs to be reduced as the shareholder ceases to be a member of the company.

Journal Entry for Forfeiture:

Share Capital A/c                         Dr.

    To Share Forfeiture A/c

    To Calls in Arrear A/c

The Share Capital Account is debited by the called-up value (not paid-up value or face value) of the forfeited shares.

Understanding the amounts:

• Called-up value = Total amount called by the company on shares (Application + Allotment + Calls made)
• Paid-up value = Amount actually received from the shareholder
• Face value = Nominal value of the share

For example: If a share of ₹10 has ₹8 called up (but shareholder paid only ₹5 before default):

• Share Capital A/c is debited by ₹8 (called-up value)
• Share Forfeiture A/c is credited by ₹5 (amount received)
• Calls in Arrear A/c is credited by ₹3 (outstanding amount)

The Share Capital Account always represents the called-up capital, hence it must be reduced by the called-up value when shares are cancelled.

Correct Option: 3