Forfeiture Reissue and Transfer of Shares (Partial Called Up)

 

Shares forfeiture

Company forfeitures call in arrears shares after proper notification.

Then, the company reissues these forfeited shares.

Reissue may be at par, discount or premium.

At the time of reissue, we should adjust share forfeiture debit amount and credit amount.

At the last, there may be credit balance of share forfeiture.

This share forfeiture amount is transferred to capital reserve.

 

Forfeiture Reissue and Transfer of Shares (Partial Called Up) Capital

When a company does not call demand amount on call, it is known as partially called up.

Generally, it may be on first and final call.

We should deduct uncalled (not called) amount from capital.

  

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

PROBLEM: 16A                  [partial called-up]

CK Company Ltd forfeited 400 shares of $/₹/Rs 100 each, Rs 80 per share being called up, which were issued at a discount of Rs 10 per share for non-payment of first call of Rs 30 per share. Of these forfeited shares, 300 shares were reissued subsequently by the company at Rs 50 per share with discount as Rs 80 paid up per share.

Required: Journal entries for forfeiture, reissue, transfer

[Answer: Arrears on first call = Rs 12,000; Share forfeiture = Rs 16,000;

Capital reserve = Rs 6,000]

SOLUTION

Given and working note:

Shares  Issued	Issued Price	Installation		Arrears and Advance		Share Applied	Shares Allotted
	100–10D	App + Allot	40 [50C–10D]	.
		First call	30	–400
		final call	20 not called

 

Journal Entries

In the book of CK Company Ltd

Date	Particulars		LF	Amount Dr	Amount Cr
	Shares forfeiture
	Equity shares capital A/c   [400 shares x Rs 80]	Dr		32,000
	To Calls in arrears (on first call)				12,000
	To Calls in arrears (on final call not called up)				Nil
	To Share discount account				4,000
	To Share forfeiture account (paid or b/f)				16,000
	(Being: 400 shares of Rs 100 each, Rs 80 called-up
	forfeited for non-payment)

The called up value of one share = Rs 100 – Rs 20 not called up = Rs 80

 

300 shares reissued out of 400 forfeited shares at Rs 80 called up

Journal Entries

In the book of CK Company Ltd

Date	Particulars		LF	Amount	Amount
	Reissued
	Bank account          [300 shares x Rs 50]	Dr		15,000
	Discount on shares account [300 shares x Rs 10]	Dr		6,000
	Share forfeiture account             [b/f]	Dr		6,000
	To Equity shares capital A/c [300 x Rs 80]				24,000
	(Being: 300 shares of Rs 100 each, called-up Rs 80
	reissued @ Rs 50 with discount
	Transfer
	Share forfeiture account	Dr		6,000*
	To Capital reserve account				6,000
	(Being: balance share forfeiture amount transferred to
	capital reserve)

 

Given and working note:

Share forfeiture Cr	= capital profit	12,000	On 400 shares, SF	= 16,000
Share forfeiture Dr	= capital loss	6,000	On 300 shares, SF	= 12,000 x 300 ÷ 400
Share forfeiture Cr	= capital reserve	6,000*		= 12,000

 

 

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Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

PROBLEM: 16B                  [partial called-up]

PR Company Ltd forfeited 200 shares of $/₹/Rs 10 each but Rs 7 per share being called up, which were issued at 20% premium for non-payment of allotment Rs 5 per share including premium.

These forfeited shares were reissued subsequently by the company at Rs 9 per share with premium as Rs 7 paid up per share.

Required: Journal entries for forfeiture, reissue, transfer

[Answer: Arrears on allotment = Rs 1,000; Share forfeiture = Rs 800;

Capital reserve = Rs 800]

SOLUTION

Given and working note:

Shares  Issued	Issued Price	Installation		Arrears and Advance		Share Applied	Shares Allotted
	10 + 2P	Application	4 = ?	.
		Allotment	5 (3C + 2P)	–200
		First and final call	3 not called

 

Journal Entries

In the book of PR Company Ltd

Date	Particulars		LF	Amount Dr	Amount Cr
	Shares forfeiture
	Equity shares capital A/c   [200 shares × Rs 7]	Dr		1,400
	Share premium account  [200 shares × Rs 2]	Dr		400
	To Calls in arrears (on allotment)				1,000
	To Calls in arrears (on final call not called up)				Nil
	To Share forfeiture account (paid or b/f)				800
	(Being: 200 shares of Rs 10 each, Rs 7 called-up
	forfeited for non-payment)

The called up value of one share = Rs 10 – Rs 3 not called up = Rs 7

 

200 forfeited shares reissued at Rs 9 with premium but Rs 7 called up

Journal Entries

In the book of PR Company Ltd

Date	Particulars		LF	Amount Dr	Amount Cr
	Reissued
	Bank account          [200 shares × Rs 9]	Dr		1,800
	Share forfeiture account             [b/f]	Dr		Nil
	To Equity shares capital account  [200 × Rs 7]				1,400
	To Share premium account  [200 × Rs 2]				400
	(Being: 200 shares of Rs 10 each, called-up Rs 7
	reissued @ Rs 9 with premium)
	Transfer
	Share forfeiture account	Dr		800*
	To Capital reserve account				800
	(Being: balance share forfeiture amount transferred to
	capital reserve)

 

 

Share forfeiture Cr	= capital profit	800
Share forfeiture Dr	= capital loss	Nil
Share forfeiture Cr	= capital reserve	800*

 

 

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PROBLEMS  AND  ANSWERS  OF  SHARE  FORFEITURE  PARTIAL  CALLED  UP

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

PROBLEM: 16A

JK Company Ltd forfeited 700 shares of $/₹/Rs 100 each, Rs 70 per share being called up for nonpayment of first call of Rs 20 per share. Shares were issued at 10% premium.

Required: Journal entries for forfeiture, reissue, transfer

(a) Entire forfeited shares reissued at Rs 60 per share without premium as Rs 70 paid up per share

(b) 300 shares were reissued at Rs 60 per share excluding premium as Rs 70 paid up per share

[Answer: Share forfeiture = Rs 35,000; Capital reserve = (a) Rs 28,000; (b) Rs 12,000]

 

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