The balance of the share forfeiture account is shown in the balance sheet under the item :

When shares are forfeited due to non-payment of call money by shareholders, the company retains the amount already received from such defaulting shareholders. This amount is credited to Share Forfeiture Account.

The Share Forfeiture Account represents a capital reserve that arises from share capital transactions. It is not available for distribution as dividend.

Balance Sheet Presentation:

As per Schedule III of the Companies Act, 2013, the Share Forfeiture Account is shown as an addition to Share Capital in the Balance Sheet under the head "Equity and Liabilities".

The format appears as:

Particulars | Amount (₹)

Equity Share Capital | xxx

Add: Share Forfeiture Account | xxx

Total Share Capital | xxx

This treatment is logical because:

• Share forfeiture arises from share capital transactions
• The forfeited amount originally belonged to share capital
• It remains part of the company's capital structure

The Share Forfeiture Account is not shown under:

• Reserves and Surplus (though it's a reserve in nature, it's specifically shown with share capital)
• Current Liabilities (it's not a liability)
• Unsecured Loans (it's not borrowed money)

Correct Option: 2 (Share capital)