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Slide 2 TOPIC :- FORFEITURE AND REISSUE OF SHARES Slide 3 Forfeiture of shares means cancelling the share for non payment of calls due, if any shareholder does not pay the amount of a call the company may exercise the power to forfeit those shares. Slide 4 FORFEITURE OF SHARES WHICH ARE ISSUED AT PAR In this case share capital account is debited with the called-up value of forfeited shares.unpaid calls are credited with due amount which is not paid by shareholders and forfeited shares account is credited by the amount paid by shareholder. Journal entries of forfeited shares which are issued at par as below. Share capital a/c Dr.(with called-up amount) To Share Forfeited a/c (with amount already received) To unpaid calls a/c (with amount due but not paid) Slide 5 When premium amount has not been received: The amount of the premium credited to the security premium account but not received is debited for the premium in respect of the forfeiture shares. Journal entry in that case be. Share capital a/c-------------Dr(amount called-up less premium) Securities premium a/c-----Dr(premium amount called-up but not received) To share forfeited a/c(amount received so far) To unpaid calls a/c (amount not received) Slide 6 FORFEITURE OF SHARES WHICH ARE ISSUED AT PREMIUM In this case two conditions arises that is the premium amount has been received or not. A) When Premium amount has been received: The amount received towards premium account will not be cancelled that is will not be debited at the time of forfeiture of shares. The journal entry in that case be. Share capital a/c-----Dr(amount called-up less premium) To share forfeited a/c(amount received so far) To unpaid calls a/c (amount not received) Slide 7 FORFEITURE OF SHARES WHICH ARE ISSUED AT DISCOUNT When shares issued at a discount are forfeited the discount on issue of shares account is credited with the discount allowed on the issue of the shares. The journal entries in that case as below. Share capital a/c------------Dr(called-up amount) To discount on issue of shares a/c(original discount) To forfeited a/c(Amount actually received) To unpaid calls a/c (Amount not received) Slide 8 REISSUE OF FORFEITED SHARES Forfeited shares can be issued at any rate of discount the only condition is that the amount of discount allowed on the reissue of forfeited shares must not exceeds the amount forfeited on such shares. The journal entry in that case is Bank a/c------------------Dr(with the amount received on reissue) Share forfeited a/c-------Dr(discount allowed on reissue) To Share capital a/c(with the amount credited as paid up) Slide 9 If the forfeited shares are reissued at a price higher than that of paid up value the excess of reissue price over paid up value should be credited to the security premium account. The journal entry in that case as below. Bank a/c------------Dr To share capital a/c To security premium a/c Slide 10 TRANSFER OF BALANCE IN THE FORFEITED SHARES ACCOUNT If after reissue of all the shares there is still a balance left in forfeited shares account such balance is capital profit and therefore it is transferred to the capital reserve account. The journal entry in that case as below. Share forfeited a/c--------------Dr To Capital Reserve a/c Slide 11 HOME ASSIGNMENT What do you mean by forfeiture of shares What are journal entries relating to forfeited of share which are actually issued at par, Premium and Discount Questions from previous question papers which are related to this topic Questions relating to reissues of shares from T.S Grawal refresher of accountancy Slide 12 THANK YOU