Class 12 accounts | share capital questions

 Journal Entries for Forfeiture and Reissue of Shares

In this blog, we will solve some complex share forfeiture and reissue problems by breaking down each step clearly. Share forfeiture and reissue are critical parts of Class 12 Accounts under the chapter Issue of Shares. Here, we will focus on journal entries, detailed calculations, and unique approaches to tackle the given questions.

Class 12th account question share capital Vikram Ltd and Hans Ltd


Case 1: Vikram Ltd. and Hans Ltd.

(a) Vikram Ltd.: Forfeiture and Reissue of Shares

Given Data:

1. Rahul applied for 6,000 shares but was allotted 5,000 shares.

2. Paid only application money: ₹3 per share.

3. Failed to pay allotment (₹5/share) and first and final call (₹2/share).

4. Out of forfeited shares, 3,000 shares were reissued at ₹12 per share as fully paid.

Step 1: Calculation of Amounts Involved

1. Application Money Received: ₹3 x 5,000 = ₹15,000.

2. Total Amount Called-up: ₹3 (application) + ₹5 (allotment) + ₹2 (call) = ₹10 per share.

3. Unpaid Amount:

Allotment Money = ₹5 x 5,000 = ₹25,000.

First and Final Call = ₹2 x 5,000 = ₹10,000.

Step 2: Journal Entries

1. Forfeiture of Shares

Forfeiture happens due to non-payment of allotment and call money:

Explanation:

Share Capital A/c = Total called-up money: ₹10 x 5,000 = ₹50,000.

Share Forfeiture A/c = Application money already received = ₹15,000.

Unpaid Allotment = ₹25,000; Unpaid Call = ₹10,000.

2. Reissue of 3,000 Forfeited Shares

Reissued at ₹12 per share as fully paid-up:

Explanation:

Bank A/c = ₹12 x 3,000 = ₹36,000 (cash received).

Share Capital A/c = Reissued shares fully paid-up = ₹10 x 3,000 = ₹30,000.

Share Forfeiture A/c = ₹4,000 to adjust the discount (₹30,000 - ₹36,000).

3. Transfer of Remaining Forfeiture Balance to Capital Reserve

The remaining forfeiture amount from the reissued shares is transferred to Capital Reserve:

Calculation:

Total Forfeiture = ₹15,000.

Discount on reissued shares = ₹4,000.

Remaining = ₹15,000 - ₹4,000 = ₹11,000.

(b) Hans Ltd.: Forfeiture and Reissue of Shares

Given Data:

1. 3,000 shares forfeited for non-payment of first call ₹2/share.

2. Issued at ₹10 with a premium of ₹2/share (total called up = ₹10 + ₹2 = ₹12/share).

3. Final call of ₹3/share not yet called.

4. Out of forfeited shares, 2,000 shares reissued at ₹10 as fully paid-up.

Step 1: Journal Entries

1. Forfeiture of Shares

Explanation:

Share Capital = ₹10 x 3,000 = ₹30,000.

Securities Premium forfeited = ₹2 x 3,000 = ₹6,000.

Calls in Arrears (First Call) = ₹2 x 3,000 = ₹6,000.

Forfeited Shares A/c retains the amount received = ₹28,000.

2. Reissue of 2,000 Shares

Explanation:

Bank A/c = ₹10 x 2,000 = ₹20,000 (cash received).

Share Capital = Fully paid-up = ₹12 x 2,000 = ₹24,000.

Discount = ₹4,000 adjusted from Share Forfeiture A/c.

3. Transfer to Capital Reserve

Calculation:

Total Forfeiture = ₹28,000.

Discount on reissue = ₹4,000.

Remaining = ₹28,000 - ₹4,000 = ₹24,000.

Conclusion

The forfeiture and reissue of shares involve key steps like calculating unpaid amounts, forfeiting shares, and adjusting discounts. By carefully passing journal entries, students can master this concept easily. These solutions follow a clear structure and ensure accurate accounting.

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