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

When shares are forfeited due to non-payment of calls, the journal entry recorded is:

Share Capital A/c ... Dr. (Called-up amount)

To Share Forfeiture A/c (Amount already received)

To Calls-in-Arrears A/c (Amount not received)

The Share Capital Account is debited by the called-up value of the forfeited shares, not the face value or issue price.

Understanding the difference:

If shares of face value ₹10 are issued and only ₹7 per share has been called up (say ₹3 on application, ₹2 on allotment, and ₹2 on first call), then:

• Called-up value = ₹7 per share
• Uncalled amount = ₹3 per share

At forfeiture, Share Capital Account will be debited only by ₹7 (the called-up amount), because this is the amount that was originally credited to the Share Capital Account. The uncalled ₹3 was never part of the Share Capital Account.

The Share Capital Account can only be reduced by the amount that was actually recorded in it, which is the called-up value, not the full face value or the issue price.

Correct Option: 3