When journal entry for forfeiture of shares is recorded in the Company's books, the Share Capital Account -

When shares are forfeited due to non-payment of calls, the Share Capital Account needs to be debited to cancel the capital that was originally created for those shares.

The journal entry for forfeiture is:

Share Capital A/c ... Dr (Called up value)

    To Share Forfeiture A/c (Amount already received)

    To Calls in Arrear A/c (Amount not received)

The Share Capital Account is debited by the called up value because:

• Share Capital Account represents only the amount that has been called up on the shares, not the entire face value (unless fully called)
• The capital created at the time of allotment was based on the called up amount
• Therefore, forfeiture must reverse this by debiting the same called up amount

Example: 100 shares of ₹10 each issued, ₹7 per share called up (₹3 on application, ₹2 on allotment, ₹2 on first call), but first call of ₹2 not paid. Only ₹5 received per share.

Share Capital Account originally credited = 100 × ₹7 = ₹700 (called up value)

On forfeiture, Share Capital Account debited = ₹700 (called up value), not ₹1,000 (face value) or ₹500 (amount received).

The uncalled amount (₹3 per share) was never part of Share Capital, so it cannot be debited during forfeiture.