Page 58 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Unit 2: Forfeiture of Shares

Premium on shares has not been received and stands credited to Securities Premium A/c Notes
as due but not paid

When a share is forfeited on which the amount of premium has been made due but has not been
received, either wholly or partially, the Securities Premium A/c will be cancelled. At the time of
making due, Securities Premium A/c will be credited. The journal entry will be as follows:
Share Capital A/c Dr

Securities Premium A/c Dr
To Share Forfeited A/c
To Unpaid call A/c.
(Forfeiture of shares originally issued at premium due to non payment of dues).

Forfeiture of shares issued at discount
Discount on issue of shares is a loss to the company. When shares issued at a discount are
forfeited for non payment of dues, the discount allowed on such shares is written back. At the
time of issue of shares, Discount on issue of Shares A/c is debited and when forfeited, this
account is credited to cancel the discount allowed on such shares. In this case the following
journal entry is made:
Share Capital A/c Dr.
To Share Forfeited A/c

To Discount on Issue of Shares A/c
To Unpaid call A/c
(Forfeiture of shares originally issued at discount for non payment of dues).
Illustration 5:

The Evergrowing Ltd. invited applications for 20000 shares of 50 each at a discount of 10%
payable as follows:
On application 10 per share

On allotment 20 per share
On call 15 per share
Whole of the issue was subscribed and paid for except the calls money on 200 shares which were
forfeited by the company.
Make journal entry for forfeiture of shares.
Solution:
Share Capital A/c (200 50) Dr. 10000

To Shares forfeited A/c (200 30) 6000
To Discount on Issue of Shares A/c (200 5) 1000
To Share First and Final call A/c (200 15) 3000
(Forfeiture of 200 shares of 50 each issued at discount of 10% on nonpayment of call money)

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