Sunena, a shareholder holding 500 shares of Rs. 10 each, did not pay the allotment money of Rs. 4 per share (including a premium of Rs. 2) and the first and final call of Rs. 3. Her shares were forfeited after the first and final call. Choose the correct journal entry for forfeiture of the shares.
Sunena, a shareholder holding 500 shares of Rs. 10 each, did not pay the allotment money of Rs. 4 per share (including a premium of Rs. 2) and the first and final call of Rs. 3. Her shares were forfeited after the first and final call. Choose the correct journal entry for forfeiture of the shares.
Solution
Looking at the given information:
- 500 shares of Rs. 10 each (Face value)
- Allotment money not paid: Rs. 4 per share (includes Rs. 2 premium)
- First and final call not paid: Rs. 3 per share
Calculating amounts for forfeiture entry:
Allotment money Rs. 4 consists of:
- Regular allotment: Rs. 2 per share
- Premium: Rs. 2 per share
Since the face value is Rs. 10 per share and unpaid amounts are Rs. 2 (allotment) + Rs. 3 (call) = Rs. 5, the amount already received = Rs. 10 - Rs. 5 = Rs. 5 per share
This Rs. 5 per share was likely received on application and will go to Share Forfeiture A/c.
Journal Entry amounts:
Debit Side:
- Share Capital A/c = 500 × Rs. 10 = Rs. 5,000
- Securities Premium A/c = 500 × Rs. 2 = Rs. 1,000 (to cancel the premium reserve)
Credit Side:
- Share Allotment A/c = 500 × Rs. 4 = Rs. 2,000 (cancels both regular allotment Rs. 1,000 + premium portion Rs. 1,000. The premium portion was originally credited here when allotment was called)
- Share First and Final Call A/c = 500 × Rs. 3 = Rs. 1,500
- Share Forfeiture A/c = 500 × Rs. 5 = Rs. 2,500 (amount already received on application)
Total Debits = Rs. 5,000 + Rs. 1,000 = Rs. 6,000
Total Credits = Rs. 2,000 + Rs. 1,500 + Rs. 2,500 = Rs. 6,000 ✓
This matches Option 4.
Related questions:
2026: 29 May Shift 2
2022: 8 Aug Shift 2
2022: 8 Aug Shift 2
2026: 31 May Shift 1
2023: 29 May Shift 2