Discount allowed on reissue of forfeited shares should be debited to:

When forfeited shares are reissued at a discount, the discount is debited to Share Forfeiture Account.

The journal entry for reissue at discount is:

Bank A/c Dr.

Share Forfeiture A/c Dr. (with discount amount)

To Share Capital A/c

The Share Forfeiture Account contains the amounts forfeited from the original shareholders. When reissuing these shares at a discount, this discount is treated as a reduction from the forfeited amount rather than as a new loss or expense.

This is because the discount on reissue is compensated by the amount already forfeited from the original shareholder. The balance remaining in Share Forfeiture Account (after adjusting the discount) is eventually transferred to Capital Reserve.

For example, if shares of ₹10 each were forfeited after receiving ₹7, and later reissued at ₹8:

• Forfeited amount = ₹7
• Reissue price = ₹8
• Discount on reissue = ₹10 - ₹8 = ₹2

This ₹2 discount will be debited to Share Forfeiture Account, leaving a balance of ₹5 (₹7 - ₹2) which becomes Capital Reserve.

"Discount on Issue of Shares Account" is used only when fresh shares are issued at discount, not for reissue of forfeited shares.