Page 63 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Accounting for Companies-I

Notes 6. If the forfeited shares, which were previously issued at discount, are reissued at discount
“Discount on Issue of Shares Account” will be re-recorded with the proportionate amount
the shares reissued.
If the discount on reissue of forfeited shares is more than the original discount, this loss
due to excess of discount will be debited to forfeited shares account. The journal entry
will be:
Bank Account Dr.
Discount on Issue of Shares A/c Dr. (with original discount)
Forfeited Shares Account Dr. (excess over original discount)
To Share Capital Account
If the forfeited shares previously issued at discount, are reissued at par or premium,
discount on issue of shares account will not be rerecorded.
7. If the forfeited shares were previously issued at premium and premium has been received
fully, share premium will not be recorded again on the reissue of shares.
If the premium has not been collected earlier, share premium will be recorded on reissue
to the extent it is available. This availability depends on the amount collected earlier and
reissue price.

Example 1: Forfeiture & Reissue
Sanjay Mills Limited issued 1,50,000 shares of 10 each at par payable as under:
On application 2 per share
On allotment 5 per share
On first and final call 3 per share.
Only 1,20,000 shares were subscribed and allotted call money on 2,000 shares was not received.
These shares were forfeited. Out of forfeited shares 1,200 shares were reissued to Mr. X @ 8 per
share. Later, 200 shares were reissued to Mr. Y at their paid up value and still later the remaining
600 shares were reissued to Mr. Z @ 11 per share.
Pass journal entries for the above mentioned transactions in the books of Sanjay Mills
Limited.

Solution:
Sanjay Mills Limited
Date Particulars L.F.
Bank Account Dr. 2,40,000
To Share Application Account 2,40,000
(Application money received on 1,20,000 shares @ 2
each)
Share Application Account Dr. 2,40,000
To Share Capital Account 2,40,000
(Being transfer of application money to share capital
account)
Share Allotment Account Dr. 6,00,000
To Share Capital Account 6,00,000
(Allotment money due on 1,20,000 shares @ 5 per share)
Bank Account Dr. 6,00,000
To Share Allotment Account 6,00,000
(Allotment money received on 1,20,000 shares)
Share First Final Call Account Dr. 3,60,000
To Share Capital Account 3,60,000
(First and final call money due on 1,20,000 shares @ 3 Contd...
per share)
Bank Account Dr. 3,54,000
To Share First & Final Call Account 3,54,000
56 LOVELY PROFESSIONAL UNIVERSITY
(Being receipt of first and final call money on 1,18,000
shares)
Share Capital Account Dr. 20,000
To Forfeited Shares Account 14,000
To Shares First and Final Call Account 6,000
(Being forfeiture of 2,000 shares for non-payment of first
& final call of 3 per share)
Bank Account Dr. 9,600
Forfeited Shares Account Dr. 2,400
To Share Capital Account 12,000
(Being reissue of 1200 shares @ 8 per shares and loss of
2 per share transferred to forfeited shares account)
Forfeited Shares Account Dr. 6,000
To Capital Reserve Account 6,000
(Profit on the reissue of 1200 shares transferred from
forfeited shares account to capital reserve account)
Bank Account Dr. 2,000 2,000
To Share Capital Account
(Being reissue of 200 shares at par)
Forfeited Shares Account Dr. 1,400 1,400
To Capital Reserve Account
(Profit on reissue of 200 shares transferred to capital
reserve)
Bank Account Dr. 6,600
To Share Capital Account 6,000
To Share Premium Account 600
(Reissue of 600 shares to Mr. Z @ 11 per share)
Forfeited Shares Account Dr. 4,200
To Capital Reserve Account 4,200
(Profit on reissue of the remaining shares transferred to
capital reserve)