CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

Unit 2: ISSUE, FORFEITURE & REISSUE OF SHARES

“Stop being afraid of what could go wrong and focus on what could go right”

SHARE

Meaning Total capital of the company is divided into a number of small indivisible units
of a fixed amount and each such unit is called a share.
“Share” is the basic unit which the Capital of a Company is divided.
Example: A company with a total Capital of ₹ 1 crore is divided into 1 Lakh units
of ₹ 100 each. Each unit of ₹ 100 is called a Share of the Company.

KINDS OF SHARES RECOGNISED IN THE COMPANIES ACT, 2013

The Share Capital of a Company limited by Shares can only be of two kinds-
1. Equity Share Capital – (a) with Voting rights, or (b) with differential rights as to dividend,
voting or otherwise in accordance with the prescribed Rules
2. Preference Share Capital, i.e. Priority for Dividend at Fixed Rate + Priority for repayment
of Capital.

DIFFERENT TYPES OF PREFERENCE SHARE CAPITAL

1. Cumulative and Non-Cumulative Preference Shares
Cumulative Preference Shares Non-Cumulative Preference shares
a) Dividend is at fixed rate/fixed amount, but Dividend is at a fixed rate/fixed amount,
keeps on accumulating until it is fully paid but does not accumulate for future years.
b) Dividend is payable even out of future If no dividend is declared in a year due to
profits, if current year’s profits are any reason, the right to receive such
insufficient for that purpose. dividend for that year expires
c) Arrears of fixed Cumulative dividend are There is no contingent liability
shown in the Balance sheet as a Contingent
Liability.
Note: Cumulative Preference shareholders will get voting rights if dividend remains in arrear
for not less than 2 years.

2. Redeemable and Irredeemable Preference Shares

Redeemable Preference Shares Irredeemable Preference Shares
a) These are issued on the condition that the These are Preference shares, which are
company will repay the same after a fixed redeemable only at the time of winding up
period or even at company’s discretion. of the company.
This repayment is called Redemption.
b) Companies can issue only this category of No Company limited by shares shall issue
preference shares. Also, the redemption • Irredeemable Preference Shares, or
period shall be a maximum of 20 years. • Preference Shares redeemable after
Exception: Infrastructure Projects the expiry of 20 years from the date of
issue

Page 11B.1
 CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

3. Participating and Non-Participating Preference Shares

Participating Preference Shares Non-Participating Preference Shares
a) In addition to a fixed dividend, the holders Here, only a fixed rate of dividend is paid
of these Shares have the right to every year, without any additional rights
participate in the surplus profits, if any, in surplus profits.
after the Equity Shareholders have been
dividend at a stipulated rate.
b) In the event of winding-up of the Company, In case of winding-up of the Company, the
the holders have the right to receive a pre- holders of these Shares are not entitled to
determined proportion of surplus, after the any additional rights in the surplus on
Equity Shareholders have been paid off winding-up.
towards their Capital.

4. Convertible and Non-Convertible Preference Shares

Convertible Preference Shares Non-Convertible Preference Shares
a) These Shares give the right to the holder There is no right to the holder, to get his
to get them converted into Equity Shares holding converted into Equity Shares.
at their option, and according to the terms
and conditions of their issue.
Unless otherwise stated, Preference Share are –
(a) Cumulative, (b) Redeemable, (c) Non-Participating, and (d) Non-Convertible.

PREFERENCE SHARES AND EQUITY SHARES

BASIS PREFERENCE SHARES EQUITY SHARES

Definition Shares that carry a Preferential Shares that are not Preference Shares
Right as to payment of (a) Dividend, are called Equity Shares.
and (b) Repayment of Capital.
Return Fixed Rate Based on profits available for
distribution.
Dividend Priority over Equity Dividend, i.e. After Payment of Preference Dividend.
paid first.
Repayment Paid before repayment of Equity Paid after entire Preference Capital is
of Capital Capital. repaid.
Arrears of Generally accumulates unless No accumulation of Unpaid Dividend.
Dividend specifically said to be non- No Profits means no Dividend.
cumulative.
Redemption Redeemable as per terms of issue Not Redeemable till winding-up. Even
and provisions of Act. in winding-up, will be repaid after
Preference Shares.
Voting Generally restricted. Carries right Unrestricted, i.e. Holders can vote at
Rights to vote on all matters if dividend any matters at any Meeting, or the
remains unpaid for the prescribed Shares may be issued with varying
period. voting rights.
Control/ No right to take part in Equity Shareholders are the real
Management Management. owners, hence have a right to control
the Management of Company.

Page 11B.2
 CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

DIFFERENT TYPES OF SHARE CAPITAL

ITEM EXPLANATION
• It is the amount of Share Capital which can be raised by the Company.
• The Authorised Share Capital is also known as the “Registered Capital” or
Authorised “Nominal Capital” and is given in the Memorandum of Association.
Share • Authorised Capital is shown in the Balance Sheet at Nominal Value (Face
Capital Value).
• Example: Authorised Capital=10,000 Shares of ₹ 100 each, Total=₹ 10,00,000
• It represents that part of Authorised Share Capital which has been given
or issued or offered to Shareholders.
• Issued Capital includes Shares issued for- (i) Cash, and (ii) Consideration
other than cash, to Promoters and Others.
Issued • Issued Share Capital is shown in the Balance Sheet at Nominal Value (Face
Share Value).
Capital • Example: Issued Capital= 9,000 Shares of ₹ 100, each, Total= ₹ 9,00,000 .
Note: The remaining portion of Authorised Capital, which is not issued for
cash or other consideration is called as Unissued Capital. It is not shown in
the Balance Sheet.
• Subscribed Capital is the part of Issued Capital which has been subscribed
(i.e. applied for) by the public/ Shareholders, and allotted by the Company.
Subscribed • Example: Out of 9,000 Shares issued; 8,500 Shares are subscribed by
Share public.
Capital Note: The remaining portion of Issued Capital, which is not subscribed, is not
shown in the Balance Sheet.
• Companies generally receive the Issue Price of Shares in installments, e.g.
Application stage, Allotment stage, First Call, Second Call, etc.
• The portion of the Face Value of Shares which a Company has demanded
Called up or called from Shareholders is known as “Called-Up Capital”.
Share • The Balance portion which the Company has decided to call / demand in
capital future is called as Uncalled Capital.
• Example: Out of ₹ 100 per Share, the Company has called up ₹ 70 per
Share. In such case, the Uncalled Capital is ₹ 30 per Share.
• It is that portion of called up capital which has been actually paid by
shareholders.
Paid-Up • The unpaid portion is called “Unpaid Calls” or “Calls in Arrears”.
Capital • So, Paid Up Capital = Called Up Capital Less Call in Arrears.
• Example: If out of ₹ 70 per Share Called up, only ₹ 60 has been paid by
some shareholders, remaining ₹ 10 per Share constitutes Calls in Arrears.
• Company may decide by passing a resolution, that a certain portion of its
Subscribed Uncalled Capital shall be called up only in the event of winding-
up / liquidation of the Company.
Reserve
• That portion is called Reserve Capital. It is not shown in the Balance Sheet.
Capital
• Reserve Capital is different from Capital reserve, Capital reserves (created
out of capital profits) are part of ‘Reserves and Surplus’ and refer to those
reserves which are not available for declaration of dividend.

Page 11B.3
 CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

DISCLOSURE REQUIREMENTS – SHARE CAPITAL OF A COMPANY

Share Capital should be disclosed in a Company's Balance Sheet as under:

Particulars Amount
Authorised: …. …. Shares of ₹ ... each
Issued:… ... Shares of ₹ ... each
Subscribed: …...... Shares of ₹ .. each
(Various classes of capital should be distinguished while stating the above
particulars)
Called up & Paid Up: … … Shares of ₹ ... each
[ of the above Shares …. Shares are allotted as fully paid up for consideration
other than cash, Shares are allotted as fully paid up by way of Bonus Shares]
Less: Call unpaid:
Add: Forfeited Shares (amount originally paid up)

PROCEDURE FOR ISSUE OF ISSUE OF SHARES FOR CASH

(a)Public Company shall issue a Prospectus, i.e. invitation to general public, to subscribe for
Shares.
(b)Prospectus shall comply with the provisions of Companies Act, and SEBI Guidelines.
(c) Private Companies do not issue Prospectus. They depend upon "Private Placement" of Shares.

(a)On the basis of Prospectus, Applications are deposited in a Scheduled Bank by the interested
parties along with the amount payable at the time of application.
(b)Minimum Application Money is as specified in the Companies Act and as per SEBI Guidelines.
[Note: Companies Act is applicable for all Companies, while SEBI Guidelines is applicable only
for Listed Companies.]

(a)After the last date for filing applications (i.e. Closing Date), the Company decides about
Allotment of Shares in consultation with SEBI and Stock Exchange concerned.
(b)Allotment is the acceptance of a Company to give Shares to the Investor in response to an
offer for purchase of Shares made by him for a consideration. Allotment can be done only when
Minimum Subscription has been received by the Company.
(c)Successful Applicants become Shareholders of the Company and are required to pay the next
installment which is known as "Allotment Money". Unsuccessful Applicants get back their
money.

(a)In case of delay in refunding the excess money, the Company is liable to pay interest on the
amount of refund. The Company calls up the balance amount from the Shareholders, called
"Calls".
(b)Call refers to the demand for Share Money other than those by way of application and
allotment.
(c) The issue price of shares is generally received by the company in instalments and these are
known as:
First instalment: - Application Money Second Instalment: - Allotment Money
Third Instalment: - First Call Money Fourth Instalment: - Second Call Money and so on.
Last Instalment: - Final Call Money

Page 11B.4
 CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

PROVISIONS RELATING TO MINIMUM SUBSCRIPTION

1. Meaning: Minimum Subscription is the minimum amount stated in the Prospectus, which
must be raised by the issue of Share Capital to start with.
2. If the Company does not receive the Minimum Subscription of 90% of the issue, the entire
subscription shall be refunded to the applicants within prescribed time period (15 days of
closure of issue in case of non-underwritten issue & 70 days in case of underwritten issue)
3. As per Section 39 of the Companies Act 2013, application money must be atleast 5% of the
face value of shares. However, as per SEBI Regulations, minimum application money shall
not be less than 25% of the issue price.
4. According to Section 24 of the Companies Act, 2013 matters related to issue and transfer
of securities will be administered by the SEBI and not by the Company Law Board.

ISSUE OF SHARES AT PREMIUM (SEC. 52)

1. Meaning: Premium refers to the excess of the Share Issue Price over its Face Value / Par
Value. A Company can issue Shares at a premium, i.e. at a price above its Face Value.
Example: If Share of Face Value ₹ 100 is issued at price of ₹ 120, there is premium of ₹ 20
2. Cash or Kind: Shares can be issued at a premium which may be received in Cash or in Kind.
Sec.52 of the Act uses the words "at a premium, whether for cash or otherwise".
3. Securities Premium Account: The aggregate amount / value of the premiums received
should be transferred to Securities Premium Account.
4. Application of Securities Premium: Securities Premium Account can be used only for —
(a) Issuing Fully Paid Bonus Shares to Members.
(b) Writing—off the Preliminary Expenses of the Company.
(c) Writing off the — (i) Expenses Incurred, or (ii) Commission Paid, or (iii) Discount
Allowed, on the Issue of Securities or Debentures of the Company.
(d) Providing for the premium payable on redemption of Redeemable Preference Shares
or Debentures of the Company.
(e) For the purchase of own shares or other securities.

Page 11B.5
 CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

Note: Certain class of Companies as prescribed u/s 133 of Companies Act, 2013, whose
financial statements comply with Accounting Standards prescribed for them, can’t apply for
(b) and (d) above.
5. Accounting Treatment:
(a) The amount of Premium is generally called with the amount due on allotment,
sometimes with the Application Money and rarely with the Call Money.
(b) The Premium Amount is credited to the "Securities Premium Account". This Account is
shown on the Liabilities Side of the Company's Balance Sheet under the heading
"Reserves and Surplus".

PROVISIONS REGARDING THE ISSUE OF SHARES AT DISCOUNT (SEC. 53)

According to Section 53 of the Companies Act, 2013, a Company cannot issue shares at a
discount except in case of issue of sweat equity shares (issued to employees and directors).
Thus, any issue of shares at discount shall be void.

JOURNAL ENTRIES RELATING TO ISSUE OF SHARES

TRANSACTION JOURNAL ENTRY

Receipt of Bank A/c (Amount actually received) Dr.
1. Application To Share Application A/c (Amount actually received)
Money
Share Application A/c Dr.
Full/Under To Share Capital A/c [Shares allotted x Application Money]
2a. To Securities Premium A/c* (Share allotted x Premium / share)
Subscription
*(If Premium Amount is collected at the time of Application itself)
Share Application A/c Dr. (Amount received)
To Share Capital A/c [Shares allotted x Application Money]
To Securities Premium A/c* (Share allotted x Premium /share)
Over To Share Allotment A/c (Adjusted with Allotment)
2b.
subscription To Share Calls -in -Advance A/c (Adjusted with Calls)
To Bank A/c (Refund)
*(If Premium Amount is collected at the time of Application itself)
Share Allotment A/c Dr.
Allotment To Share Capital A/c [Shares allotted x Allotment money due]
3. To Securities Premium A/c* (Share allotted x Premium / share)
money due
*(If the Premium Amount is at the time of Allotment)

Receipt of Bank A/c (Amount received) Dr.

4. To Share Allotment A/c
Allotment
Call Money Share ... (First or Second or Final)... Call A/c Dr.
5. To Share Capital A/c [Shares allotted x Call Money due]
due
Receipt of Bank A/c (Amount received) Dr.
6. To Share ...... Call A/c
Call
Note: If question specifically asks preparation of Cash Book, then all the entries relating to
Cash/Bank Account are not passed in journal and to be shown in Cash Book only.

Page 11B.6
 CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

CALLS IN ARREARS

1. Meaning: Calls in Arrears is the money remaining unpaid by the shareholder on the calls
raised by the Company in respect of the shares held by him.
2. Disclosure: Calls in Arrears always have a Debit Balance and are shown as a deduction
from called up capital to arrive at paid up value of the Share Capital on Liabilities Side of
the Balance Sheet.
3. Interest: The Company can recover interest on the amount of calls in arrears from the date
it became due till the when the call is received at the rate of 10% p.a. (Table F).
4. Waiver of Interest: The Directors may also be empowered to waive the Interest on Calls in
Arrears, subject to certain conditions laid down in the Articles.

CALLS IN ADVANCE

1. Meaning: Calls in Advance is the surplus money received by Company from the allottees,
i.e. its Shareholders.
2. Calls in Advance: A Company, if permitted by its Articles, may accept from members either
whole or part of amount remaining unpaid on any shares held by him as Calls in Advance.
3. No Voting Rights: The Member shall not be entitled to any voting rights on Calls in Advance,
until the same becomes presently payable and duly appropriated. Shareholders are not
entitled for any dividend on calls in advance.
4. Disclosure: Calls in Advance will always have Credit Balance and will be shown under the
Liabilities Side (Other Current Liabilities). It is not added to the amount of Paid -Up Capital.
5. Interest: The Company is liable to pay interest on the amount of Calls in Advance from the
date of receipt till the when the Call is due for payment, at the rate of 12% p.a. (Table F)

JOURNAL ENTRIES
CALLS IN ARREARS
1. Transfer of non - Calls in Arrears A/c Dr.
receipt of Share To Share Allotment / Share ...... Call A/c
Allotment/ Call (This Journal Entry is optional. The amount may also be left in
Money the Share Allotment/Share …..Calls A/c)
2. Receipt of Calls in Bank A/c Dr.
Arrears To Calls in Arrears A/c
(If this account was opened)
3. Interest on Calls in Shareholders' A/c Dr.
Arrears To Interest on Calls in Arrears A/c
4. Receipt of Interest Bank A/c Dr.
on Calls in Arrears To Shareholders' A/c
CALLS IN ADVANCE
1. Receipt of Calls in Bank A/c Dr.
Advance To Calls in Advance A/c
2. Adjusting Calls in Calls in Advance A/c Dr.
Advance To Particular Call A/c
3. Interest on Calls in Interest on Calls in Advance A/c Dr.
Advance To Shareholders' A/c
4. Payment of Interest Shareholders' A/c Dr.
on Calls in Advance To Bank A/c

Page 11B.7
 CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

OVER SUBSCRIPTION & PRO RATA ALLOTMENT

Over subscription is the application money received for more than the number of shares
offered to the public by a company. It usually occurs in the case of good issues and depends
on many other factors like investors’ confidence in the company, general economic conditions,
pricing of the issue etc.
Under pro-rata allotment, the excess application money received is adjusted against the
amount due on allotment or calls. Surplus money after making adjustment against future
calls is returned to the applicants.
For example:
A company offers to the public 1,00,000 shares for subscription. The company receives
applications for 1,20,000 shares. If the shares are to be allotted on pro-rata basis, applicants
for 1,20,000 shares are to be allotted 1,00,000 shares, i.e., on the 1,20,000:1,00,000 or 6:5 ratio.
Any applicant who has applied for 6 shares will be allotted 5 shares.
JOURNAL ENTRIES
TRANSACTION JOURNAL ENTRY
Receipt of Bank A/c (Amount actually received) Dr.
1. Application To Share Application A/c (Amount actually received)
Money
Share Application A/c Dr. (Amount received)
To Share Capital A/c [Shares allotted x Application Money]
To Securities Premium A/c* (Share allotted x Premium /share)
2 Oversubscription To Share Allotment A/c (Adjusted with Allotment)
To Share Calls in Advance A/c (Adjusted with Calls)
To Bank A/c (Refund)
*(If Premium Amount is collected at time of Application itself)

FORFEITURE OF SHARES

1. Meaning: Forfeit = Taking away of property, on breach (non fulfilment) of a condition.

Forfeiture of Shares refers to the action taken by the Company, to cancel the Shares.
2. Situation: When Shareholders fail to pay Allotment or Call Money due, the Directors may
forfeit the Shares in the bonafide interests of Company & in accordance with the Articles
of Association. Proper Notice should be sent to defaulting Shareholder before forfeiture.
3. Effect: When Shares are forfeited, the title of such Shareholder is extinguished, but amount
paid by him till such forfeiture, is not refunded to him. The Shareholder has no further claim
on the Company. The amount received is transferred to "Shares Forfeited A/c".
4. Treatment: Till Forfeited Shares are re -issued, the amount is shown as an addition to Share
Capital, on the Liabilities Side of the Balance Sheet.
Note: - Forfeiture for non-payment of calls, premium, or the unpaid portion of the face value
of the shares is one of the many causes for which a share may be forfeited. But fully paid-up
shares may be forfeited for realization of debts of the shareholder if the Articles specially
provide it.

RE-ISSUE OF FORFEITED SHARES

Shares forfeited is reissued by the Company, subject to the following considerations -
1. Sale, not Allotment: Reissue of Forfeited Shares is not an allotment, it is only a Sale. So,
the Company need not file a Return of Allotment with the Registrar of Companies.

Page 11B.8
CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

2. Auction Sale: After forfeiture, the Forfeited Shares vest in the Company in the Company,
for the purpose of sale. The Company is under an obligation to dispose it off, generally by
auction.
3. Price: Forfeited Shares can be reissued at any price, such that the total amount received
(from Original Allottee and Subsequent Purchaser) for these Shares is not less than the
amount in arrears on those Shares.
4. Loss on Reissue: Loss on Reissue shall be debited to "Forfeited Shares" A/c. Condition for
Reissue: Loss on Reissue of Forfeited Shares should not exceed the Forfeited Amount, i.e.
amount paid by Original Allottee, excluding premium, if any.)
5. Surplus: Surplus arising on Reissue of Forfeited Shares (i.e. Forfeited Amount > Loss on
Reissue), should be transferred to Capital Reserve A/c. In case only portion of Shares are
reissue, amount of profit attributable to such Re-issued Shares should only be transferred
to Capital Reserve A/c.
6. Reissue at Premium: When Forfeited Shares are reissued at a price higher than its Face
Value, the excess amount should be credited to Securities Premium A/c.

JOURNAL ENTRIES
TRANSACTION JOURNAL ENTRY
FORFEITURE OF SHARES
Share Capital A/c (to the extent called) Dr.
Forfeiture of To Shares Forfeited A/c (to the extent amount received)
1. Shares Issued To Calls in Arrears (to the extent amount called up & unpaid)
at Par (or alternatively Share Allotment A/c or Share ...... Call A/c)

Forfeiture of Share Capital A/c (to the extent called - excluding Premium) Dr.
Shares Issued To Shares Forfeited A/c (to the extent amount received)
2. at Premium - To Calls in Arrears (to the extent amount called up & unpaid)
premium fully (or alternatively Share Allotment A/c or Share ...... Call A/c)
collected
Share Capital A/c (to the extent called excluding Premium) Dr.
Forfeiture of
Securities Premium A/c (Premium amount on Shares forfeited) Dr.
Shares Issued
To Shares Forfeited A/c (to the extent amount received)
3. at Premium -
To Calls in Arrears (to the extent amount called up and unpaid
premium not
(or alternatively Share Allotment A/c or Share ...... Call A/c)
fully collected
Note: When Shares are originally issued at a Premium, and the Premium has been
collected in full, the Securities Premium A/c should not be reversed.

RE -ISSUE OF SHARES FORFEITED

Bank A/c (Shares Reissued x Reissue Price) Dr.
Re -issue of Shares Forfeited A/c (to the extent discount given) Dr.
1.
Forfeited Shares To Share Capital A/c (Shares Reissued x Paid up Value)

Transfer of Shares Forfeited A/c Dr.

Share Forfeited To Capital Reserve A/c
2. A/c Balance on
Reissued
Shares

Page 11B.9
 CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

SHARES ISSUED FOR CONSIDERATION OTHER THAN CASH

1. Meaning: A Company can issue shares for valuable Consideration other than Cash. Shares
may be issued to (a) Vendors towards payment of Purchase Consideration, (b) Promoters
towards reimbursement of Preliminary Expenses incurred by them for incorporation, (c)
Underwriters towards payment of Underwriting Commission, etc.
2. Disclosure: Shares issued for Consideration other than Cash shall be separately disclosed
in the Balance Sheet of Company, as required by Part I of Schedule III.
Within specified time of allotment, the company must produce before the Registrar a
written contract of sale of service in respect of which shares have been allotted.

JOURNAL ENTRIES
1. Recording Machinery / Assets A/c (in case of assets purchased) Dr.
Purchase of To Liabilities A/c
Machinery, Assets To Vendor's A/c
etc. (Difference if any to be tfd. to Goodwill/Capital Reserve A/c)
2. Allotment of Vendor's A/c Dr.
Shares to the To Share Capital (Nominal Value of Shares issued)
Vendor To Securities Premium (if issued at Premium)

A.
Example:
X Ltd. purchased Machinery from Y Ltd. ₹ 2,20,000. Shares Issued (Face Value ₹10 each)
a) At Par
b) At 10% Premium

Page 11B.10
CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

B1.
Example:
X Ltd. purchased business of Y Ltd. which includes Assets ₹ 5,00,000 & Liabilities ₹ 1,40,000.
Shares Issued (Face Value ₹10 each)
a) At Par
b) At 20% Premium

B2.
Example:
X Ltd. purchased business of Y Ltd. for ₹ 3,90,000 which includes Assets ₹ 5,00,000 &
Liabilities ₹ 1,40,000.
Shares Issued (Face Value ₹10 each)
a) At Par
b) At 30% Premium

Page 11B.11
 CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

ASSIGNMENT QUESTIONS
Question 1 Pg no._____
A company invited applications for 20,000 equity shares of ₹50 each at 10 premium payable
on application ₹20, on Allotment ₹ 30 (including 10 premium), on first and final call ₹ 10.
Applications are received for 20,000 shares and all the applicants are allotted the number of
shares they have applied for and installment money was duly received by the company.
Case 1: Show Journal entries in the books of the company.
Case 2: Prepare cash book & journalise remaining transactions in the books of the company.

Question 2 (RTP Nov 2018) / (RTP Nov 2019) / (RTP Nov 2021) (Similar) Pg no._____
On 1st April, 2020, Pehal Ltd. issued 64,500 shares of ₹ 100 each payable as follows:
₹ 30 on application, ₹ 30 on allotment, ₹ 20 on 1st October, 2020; & ₹ 20 on 1st February, 2021.
By 20th May, 60,000 shares were applied for and all applications were accepted. Allotment
was made on 1st June. All sums due on allotment were received on 15th July; those on 1st call
were received on 20th October.
You are required to prepare the Journal entries to record the transactions when accounts
were closed on 31st March, 2021.

Question 3 (ICAI Study Material) / (RTP May 2018) / (RTP May 2021) (Similar) Pg no._____
Rashmi Limited issued at par 1,00,000 Equity shares of ₹ 10 each payable ₹ 2.50 on application;
₹ 3 on allotment; ₹ 2 on first call and balance on the final call. All the shares were fully
subscribed. Mr. Nair who held 10,000 shares paid full remaining amount on first call itself.
The final call which was made after 3 months from first call was fully paid except a
shareholder having 1,000 shares who paid his due amount after 2 months along with interest
on calls in arrears. Company also paid interest on calls in advance to Mr. Nair. Give journal
entries to record these transactions.

Question 4 (RTP May 2019) / (RTP Nov 2020) / (RTP Nov 2023) (Similar) Pg no._____
Konica Limited registered with an authorised equity capital of ₹ 2,00,000 divided into 2,000
shares of ₹ 100 each, issued for subscription of 1,000 shares payable at ₹ 25 per share on
application, ₹ 30 per share on allotment, ₹ 20 per share on first call and the balance as and
when required. Application money on 1,000 shares was duly received and allotment was made
to them. The allotment amount was received in full, but when the first call was made, one
shareholder failed to pay the amount on 100 shares held by him and another shareholder with
50 shares, paid the entire amount on his shares. The company did not make any other call.
Give the necessary journal entries in the books of the company to record these transactions.

Question 5 (ICAI Study Material) Pg no._____

Pant Ltd. invited applications for 50,000 equity shares at ₹50 each, which are payable as on
application ₹20, on allotment ₹10 and on first and final call ₹20. The company received
applications for 60,000 shares. The directors accepted application for 50,000 shares and
rejected the rest. Show Journal entries if company refunded the application money to rejected
applicants and allotment money was received for 45,000 shares.

Question 6 (ICAI Study Material) Pg no._____

A company had an authorised capital of ₹10,00,000 divided into 1,00,000 equity shares of ₹10
each. It decided to issue 60,000 shares for subscription and received applications for 70,000
shares. It allotted 60,000 shares and rejected remaining applications. Upto 31-3-2023, it has

Page 11B.12
 CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

demanded or called ₹9 per share. All shareholders have duly paid the amount called, except
one shareholder, holding 5,000 shares who has paid only ₹7 per share. Prepare a balance
sheet assuming there are no other details.

Question 7 (ICAI Study Material) Pg no._____

JHP Limited is a company with an authorised share capital of ₹1,00,00,000 in equity shares of
₹10 each, of which 6,00,000 shares had been issued and fully paid on 30th June, 2022. The
company proposed to make a further issue of 1,00,000 of these ₹10 shares at a price of ₹14
each, the arrangements for payment being:
a) ₹ 2 per share payable on application, to be received by 1st July, 2022;
b) Allotment to be made on 10th July, 2022 and a further ₹ 5 per share (including the premium)
to be payable;
c) The final call for the balance to be made, and the money received by 30th April, 2023.
Applications were received for 3,55,000 shares and were dealt with as follows:
(i) Applicants for 5,000 shares received allotment in full;
(ii) Applicants for 30,000 shares received an allotment of one share for every two applied
for; no money was returned to these applicants, the surplus on application being used to
reduce the amount due on allotment;
(iii) Applicants for 3,20,000 shares received an allotment of one share for every four applied
for; the money due on allotment was retained by the company, the excess being returned
to applicants; and
(iv) the money due on final call was received on the due date.
You are required to record these transactions (including cash items) in the Journal of JHP
Limited.

Question 8 Pg no._____
Pass Journal Entries in the following situations (each situation is independent of the other) –
1. 300 Equity Shares of ₹ 10 each, originally issued at par, fully called -up, forfeited for non-
payment of Final Call of ₹ 4 each. These were re -issued as fully paid at ₹ 5 per Share.
2. 200 Equity Shares of ₹ 10 each, originally issued at par, ₹ 8 called up, forfeited for non-
payment of First Call of ₹ 2 each. 150 shares were reissued at ₹ 5 per Share, ₹ 8 called up.
3. 300 Equity Shares of ₹ 10 each, originally issued at 30% premium. ₹ 8 called -up, forfeited
for non-payment of First Call of ₹ 2 each. The Shareholder had already paid application and
allotment money incl. premium. Subsequently 100 Shares out of these Forfeited Shares
were re -issued at ₹ 6 per Share, as fully paid up.
4. 300 Equity Shares of ₹ 10 each, originally issued at 30% premium. ₹ 8 called up, forfeited
for non-payment of 1st Call of ₹ 3 each and ₹ 5 on allotment (including premium).
The Shareholder had paid application money ₹ 3 per Share. Later, 200 Shares out of these
Forfeited Shares were re -issued at ₹ 12 per share, fully paid -up.
5. 360 shares forfeited of ₹ 10 each, ₹ 8 called-up, issued at a premium of ₹ 2 per share to
Rakesh for non-payment of allotment money of ₹ 5 per share (including premium). Out of
these, 320 shares were re-issued to Rohit at ₹ 8 for ₹ 10 per share fully paid up.

Question 9 (RTP May 2022) Pg no._____

Delta Ltd. forfeited 600 shares of ₹ 10 each issued at a premium of 10% to W for nonpayment
of first and final call money of ₹ 3 (including ₹ 1 premium). At different intervals of time out
of these 400 shares were re-issued to Z, credited as fully paid for ₹ 9 per share and 100
shares were re-issued to X as ₹ 10 paid up for ₹ 11 per share.
Record the journal entries for forfeiture and reissue of shares.

Page 11B.13
 CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

Question 10 (ICAI Study Material) Pg no._____

Beautiful Co. Ltd issued 30,000 equity shares of ₹10 each payable as ₹3 per share on
Application, ₹5 per share (including ₹2 as premium) on Allotment and ₹4 per share on Call.
All the shares were subscribed. Money due on all shares was fully received except from Ram,
holding 500 shares, who failed to pay the Allotment and Call money and Shyam, holding 1,000
shares, who failed to pay the Call Money. All those 1,500 shares were forfeited. Of the shares
forfeited, 1,250 shares (including whole of Ram’s shares) were subsequently re-issued to
Jadu as fully paid up at a discount of ₹ 2 per share.
Pass the necessary entries in the Journal of the company to record the forfeiture and re-
issue of the share. Also prepare the Balance Sheet of the company.

Question 11 (ICAI Study Material) Pg no._____

Mr. Shami has applied for 1,000 shares of Company XYZ Ltd. paying application money @ ₹ 2
per share but has been allotted only 600 shares. The shares have a face value of ₹10 and a
premium of ₹ 2 per share, which are payable as: on Allotment- ₹ 5 (including premium) and
on final call ₹ 5.
Pass journal entry if Mr. Shami doesn't pay allotment money and final call and his shares are
forfeited.

Question 12 (ICAI Study Material) Pg no._____

X Co. Ltd. was incorporated with an authorized share capital of 90,000 equity shares of ₹ 10
each. The company purchased land and buildings from Y Co. Ltd for ₹ 4,00,000 payable in fully
paid-up shares of the company. The balance of the shares were issued to the public, which
were fully subscribed and paid for.
You are required to pass Journal Entries and to prepare the Balance Sheet.

Question 13 Pg no._____
Calculate the Dividend amount
Called up Capital ₹ 10,00,000 Calls in Arrears ₹ 10,000
Calls in Advance ₹ 50,000 Dividend rate 10%

Page 11B.14
 CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

PRACTICE QUESTIONS

MULTIPLE CHOICE QUESTIONS

1) The excess price received over the par value of shares, should be credited to __________.
(a) Calls-in-advance account
(b) Share capital account
(c) Securities premium account

2) The Securities Premium amount may be utilized by a company for __________.

(a) Writing off any loss on sale of fixed asset
(b) Writing off any loss of revenue nature
(c) Writing off the expenses/discount on the issue of debentures

3) When shares are forfeited, the share capital account is debited with ________ and the share
forfeiture account is credited with __________.
(a) Paid-up capital of shares forfeited; Called up capital of shares forfeited
(b) Called up capital of shares forfeited; Calls in arrear of shares forfeited
(c) Called up capital of shares forfeited; Amount received on shares forfeited

4) T Ltd. proposed to issue 6,000 equity shares of ₹100 each at a premium of 40%. The
minimum amount of application money to be collected per share as per the Companies
Act, 2013
(a) ₹5.00
(b) ₹6.00
(c) ₹7.00

5) Dividends are usually paid as a percentage of ______.

(a) Authorized share capital
(b) Net profit
(c) Paid-up capital

6) As per the SEBI guidelines, on issue of shares, the application money should not be less
than
(a) 2.5% of the nominal value of shares
(b) 2.5% of the issue price of shares
(c) 25.0% of the issue price of shares

7) G Ltd. acquired assets worth ₹7,50,000 from H Ltd. by issue of shares of ₹100 at a premium
of 25%. The number of shares to be issued by G Ltd. to settle purchase consideration = ?
(a) 6,000 shares
(b) 7,500 shares
(c) 9,375 shares

8) Securities Premium is presented as a part of

(a) Reserves & Surplus
(b) Share Capital
(c) Liabilities

Page 11B.15
 CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

9) Schedule III of Companies Act 2013 prescribes the format for

(a) Financial statements
(b) Directors’ Report
(c) Auditors' Report

10) Dividend on _____________ shares have to be paid before dividend on ___________shares.

(a) Equity, Preference
(b) Preference, Equity
(c) Convertible, Non-Cumulative

11) Preference shares are ______________ unless expressly stated otherwise.

(a) Non-participating
(b) Convertible
(c) Interest-bearing

ANSWERS MCQs
1. (c) 2. (c) 3. (c) 4. (a) 5. (c) 6. (c) 7. (a)
8. (a) 9.(a) 10.(b) 11.(a)

TRUE / FALSE

State with reasons whether the following statement is true or false:

1) Liability of a holder of shares is limited to the face value of shares acquired by them.
2) Authorised capital appears in the balance sheet at face value.
3) The rate of dividend on preference shares may vary from year to year.
4) A company may issue shares at a discount to the public in general.
5) Sweat equity shares are those which are issued to employees & directors at a discount.
6) As per Table F, rate of interest on calls in arrears is 12%.
7) As per Table F, rate of interest on calls in advance is 10%.
8) Non-participating preference shareholders enjoy voting rights. (Dec 2021)
9) Forfeited shares are available to the company for the purpose of resale.
10) Loss on reissue should exceed the forfeited amount.
11) When shares are forfeited, the share capital account is debited with called up capital of
shares forfeited and the share forfeiture account is credited with calls in arrear of shares
forfeited.
12) The amount of calls in arrear is deducted from paid up capital to arrive at Called up capital.
13) Dividends are usually paid as a percentage of Authorized share capital.
14) A company cannot issue redeemable preference shares for a period exceeding 10 years
15) Re-issue of forfeited shares is allotment of shares but not a sale. (May 2018)/(Jan 2021)
16) Since company has existence independent of its members, it continues to be in existence
despite the death, insolvency or change of members. (Nov 2019)
17) In the balance sheet of X Limited, preliminary expenses amounting to ₹ 5 lakhs and
securities premium account of ₹ 35 lakhs are appearing; The accountant can use the
balance in securities premium account to write off preliminary expenses. (Nov 2020)
18) A Company is not allowed to issue shares at a discount to the public in general.(July 2021)
19) A person holding preference shares of a company cannot hold equity shares of the same
company. (July 2021)
20) Interest on calls in arrears is payable by company to shareholders.

Page 11B.16
CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

Solution
1) False: Liability of the holder of shares is limited to the issue price of shares acquired by
them.
2) True: Authorised capital is the amount of capital mentioned in ‘capital clause’ of the
‘Memorandum of Association’. Authorised capital is considered only as presentation and
not considered in total of balance sheet.
3) False: Rate of preference dividend is always fixed.
4) False: According to Section 53 of the Companies Act, 2013, a Company cannot issue shares
at a discount except in the case of issue of sweat equity shares (issued to employees and
directors). Thus any issue of shares at discount shall be void.
5) True: According to Section 53 of the Companies Act, 2013, a Company cannot issue shares
at a discount except in the case of issue of sweat equity shares (issued to employees and
directors).
6) False: As per table F, rate of interest on calls in arrears is 10%.
7) False: As per Table F, rate of interest on calls in advance is 12%.
8) False: A share on which only a fixed rate of dividend is paid every year, without any
accompanying additional rights in profits and in the surplus on winding-up, is called 'Non-
participating Preference Shares. Non-participating preference shareholders do not enjoy
voting rights.
9) True: Reissue of forfeited shares is not allotment of shares but only a sale.
10) False: Loss on re-issue should not exceed the forfeited amount.
11) False: When shares are forfeited, the share capital account is debited with called up
capital of shares forfeited, and the share forfeiture account is credited with amount
received towards nominal value on shares forfeited.
12) False: The amount of calls in arrear is deducted from Called up capital to arrive at Paid
up capital.
13) False: Dividends are usually paid as a percentage of Paid up share capital
14) False: A company cannot issue redeemable preference shares for a period exceeding 20
years
15) False: A forfeited share is merely a share available to the company for sale and remains
vested in the company for that purpose only. Reissue of forfeited shares is not allotment
of shares but only a sale as they have already been allotted earlier.
16) True: Company has existence independent of its members. The Company goes on forever
and continues to exist, till it is wound up and dissolved. As per Perpetual Existence
company has existence independent of its members, it continues to be in existence
despite the death, insolvency or change of members.
17) True: According to Section 52 of the Companies Act, 2013, Securities Premium Account
may be used by the company to write off preliminary expenses of the company. Thus, the
accountant can use the balance in securities premium account to write off the preliminary
expenses amounting ₹ 5 lakhs.
18) True: According to Section 53 of the Companies Act, 2013, a Company cannot issue shares
at a discount except in the case of issue of sweat equity shares (issued to employees and
directors).
19) False: Preference share holder can hold both Equity shares and Preference shares of the
company. Any person can hold both kinds of shares.
20) False: Interest on calls in arrears is payable by shareholders to company

Page 11B.17
 CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

HOMEWORK QUESTIONS

Question 1 (ICAI Study Material) Pg no._____

A company invited applications for 10,000 equity shares of ₹50 each payable on application
₹15, on Allotment ₹ 20, on first and final call ₹15. Applications are received for 10,000 shares
and all the applicants are allotted the number of shares they have applied for and installment
money was duly received by the company. Show Journal entries in the books of the company.

Question 2 (ICAI Study Material) / (RTP May 2022) (Similar) Pg no._____

On 1st April, 2022, A Ltd. issued 43,000 shares of ₹ 100 each payable as follows:
₹ 20 on application; ₹ 30 on allotment;
₹ 25 on 1st October, 2022; and ₹ 25 on 1st February, 2023.
By 20th May, 40,000 shares were applied for & all applications were accepted. Allotment was
made on 1st June. All sums due on allotment were received on 15th July; those on 1st call were
received on 20th October. Journalize transactions when accounts were closed on 31st Mar,2023

Question 3 (ICAI Study Material) Pg no._____

On 1st October, 2023 Pioneer Equipment Limited received applications for 2,50,000 Equity
Shares of ₹ 100 each to be issued at a premium of 25 per cent payable as:
On Application ₹ 25 On Allotment ₹75 (including premium)
Balance Amount on Shares as and when required.
The shares were allotted by the Company on October 20, 2023 and the allotment money was
duly received on October 31, 2023. Record journal entries in the books of the company to
record the transactions in connection with the issue of shares.

Question 4 (ICAI Study Material) Pg no._____

The Delhi Artware Ltd. issued 50,000 equity shares of ₹ 100 each and 1,00,000 preference
shares of ₹ 100 each. The Share Capital was to be collected as under:
Equity Shares Preference Shares
On Application 25 20
On Allotment 20 30
First Call 30 20
Final Call 25 30
All these shares were subscribed. Final call was received on 42,000 equity shares and 88,000
preference shares. Prepare the cash book and journalise the remaining transactions in the
books of the company.

Question 5 (ICAI Study Material) Pg no._____

Shreyas Ltd. did not receive the first call on 10,000 equity shares @ ₹ 3 per share which was
due on 1.7.2022. This amount was received on 1.4.2023. Open Calls in arrears account and
journalise the entries in the books of the company on 1.7.2022 and 1.4.2023.

Question 6 (ICAI Study Material) Pg no._____

X Ltd. invited applications for 10 lakhs shares of ₹ 100 each payable as follows:
₹
On Application 20
On Allotment (on 1st May, 2022) 30
On First Call (on 1st Oct., 2022) 30
On Final Call (on 1st Feb., 2023) 20

Page 11B.18
 CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

All the shares were applied for and allotted. A shareholder holding 20,000 shares paid the
whole of the amount due along with allotment. Journalise the transactions, assuming all sums
due were received. Interest was paid to the shareholder concerned on 1st February, 2023

Question 7 (ICAI Study Material) Pg no._____

A limited Company, with an authorized capital of ₹ 20,00,000 divided into shares of ₹ 100 each,
issued for subscription 10,000 shares payable at ₹ 25 per share on application, ₹ 30 per share
on allotment, ₹20 per share on first call three months after allotment and the balance as and
when required.
The subscription list closed on January 31, 2023 when application money on 10,000 shares
was duly received and allotment was made on March 1, 2023. All amounts due were received
within one month of the date they were called.
The allotment amount was received in full but, when the first call was made, one shareholder
failed to pay the amount on 1,000 shares held by him and another shareholder with 500 shares
paid the entire amount on his shares.
Give journal entries in the books of the Company to record these share capital transactions.

Question 8 (CA Foundation June 2022) (15 Marks) Pg no._____

A Limited issued 20,000 Equity shares of, 10 each at a premium of 10%, payable ₹ 2 on
application; ₹ 4 on allotment (including premium); ₹ 2 on first call and balance on the final
call. All the shares were fully subscribed. Mr. M who held 2000 shares paid full remaining
amount on first call itself. The final call which was made after 4 months from the first call
was fully paid except a shareholder having 200 shares and one another shareholder having
100 shares. They paid their due amount after 3 months and 4 months respectively along with
interest on calls in arrears, Company also paid interest on calls in advance to Mr. M. The
Company maintains Calls in Arrear and Calls in Advance A/c. Give journal entries to record
these transactions. Show workings of Interest calculation. (Ignore dates).

Question 9 (CA Foundation May 2018) (10 Marks)/(RTP May 2020)/(May 2023)(Sim.) Pg no._____
Piyush Limited is a company with an authorized share capital of ₹ 2,00,00,000 in equity shares
of ₹ 10 each, of which 15,00,000 shares had been issued and fully paid on 30th June, 2020. The
company proposed to make a further issue of 1,30,000 shares of ₹ 10 each at a price of ₹ 12
each, the arrangements for payment being:
(i) ₹ 2 per share payable on application, to be received by 1st July, 2020;
(ii) Allotment to be made on 10th July, 2020 and a further ₹ 5 per share (including the
premium) to be payable;
(iii) The final call for the balance to be made, and the money received by 30th April, 2021.
Applications were received for 4,20,000 shares and were dealt with as follows:
(1) Applicants for 20,000 shares received allotment in full;
(2) Applicants for 1,00,000 shares received an allotment of one share for every two applied
for; no money was returned to these applicants, the surplus on application being used to
reduce the amount due on allotment;
(3) Applicants for 3,00,000 shares received an allotment of one share for every five shares
applied for; the money due on allotment was retained by the company, the excess being
returned to applicants; and
(4) The money due on final call was received on the due date.
You are required to record these transactions (including cash items) in the journal of Piyush
limited.

Page 11B.19
 CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

Question 10 (CA Foundation Jan 2021) (15 Marks) Pg no._____

A Limited is a company with' an authorised share capital of ₹ 1,00,00,000 in equity shares of
₹ 10 each, of which 6,00,000 shares had been issued and fully paid up on 31st March, 2020.
The company proposes to make a further issue of 1,35,000 of these ₹ 10 shares at a price of
₹ 14 each, the arrangement of payment being:
(i) ₹ 2 per share payable on application, to be received by 31st May, 2020;
(ii) Allotment to be made on 10th June, 2020 and a further ₹ 5 per share (including the
premium to be payable);
(iii) The final call for the balance to be made, and the money received by 31st December, 2020.
Applications were received for 5,60,000 shares and dealt with as follows:
(1) Applicants for 10,000 shares received allotment in full;
(2) Applicants for 50,000 shares received allotment of 1 share for every 2 applied for; no
money was returned to these applicants, the surplus on application being used to reduce
the amount due on allotment;
(3) Applicants for 5,00,000 shares 'received an allotment of 1 share for every 5 shares applied
for; the money due on allotment was retained by the company, the excess being returned
to the applicants; and
(4) The money due on final call was received on the due date.
You are required to record these transactions (including bank transactions) in the Journal
Book of A Limited.

Question 11 (ICAI Study Material) Pg no._____

A Ltd forfeited 30,000 equity shares of ₹10 fully called-up, held by Mr. X for non-payment of
final call @ ₹4 each. However, he paid application money @ ₹2 per share & allotment money
@ ₹4 per share. These shares were originally issued at par. Give Journal Entry for forfeiture.

Question 12 (ICAI Study Material) Pg no._____

X Ltd forfeited 20,000 equity shares of ₹ 10 each, ₹ 8 called-up, for non-payment of first call
money @ ₹ 2 each. Application money @ ₹ 2 per share and allotment money @ ₹ 4 per share
have already been received by the company. Give Journal Entry for the forfeiture (assume
that all money due is transferred to Calls-in-Arrears A/c.

Question 13 (ICAI Study Material) Pg no._____

X Ltd. forfeited 5,000 equity shares of ₹100 each fully called-up which were issued at a
premium of 20%. Amount payable on shares were: on application ₹20; on allotment ₹50
(including premium) on First and Final call ₹50. Only application money was paid by the
shareholders in respect of these shares. Pass Journal Entries for the forfeiture.

Question 14 (ICAI Study Material) Pg no._____

A Ltd forfeited 100 equity shares of ₹10 fully called upon. The shareholder failed to pay the
first call money of ₹4 per share and the second and final Call Money of ₹4 per share. Give
journal entry to show the effect of this transaction.

Question 15 (ICAI Study Mat.)/ (RTP May 2018)/(May 2019)/(Nov 2019)/(May 2021) (Sim.) Pg no._____
Mr. Long who was the holder of 2,000 preference shares of ₹ 100 each, on which ₹ 75 per
share has been called up could not pay his dues on Allotment and First call each at ₹ 25 per
share. The Directors forfeited the above shares and reissued 1,500 of such shares to Mr. Short
at ₹ 65 per share paid-up as ₹75 per share. Give journal entries to record the above forfeiture
and re-issue in the books of the company.

Page 11B.20
 CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

Question 16 (RTP Nov 2018) Pg no._____

Mr. P who was the holder of 2,500 preference shares of ₹ 100 each, on which ₹ 70 per share
has been called up could not pay his dues on Allotment and First call each at ₹ 20 per share.
The Directors forfeited the above shares and reissued 2,000 of such shares to Mr. Q at ₹ 60
per share paid-up as ₹ 70 per share.
You are required to prepare the Journal Entries to record the above forfeiture and re-issue
in the books of the company.

Question 17 (CA Foundation Nov 2018) (10 Marks) / (RTP May 2023) Pg no._____
Give necessary journal entries for the forfeiture & reissue of shares:
(i) X Ltd. forfeited 300 shares of ₹ 10 each fully called up, held by Ramesh for non payment
of allotment money of ₹ 3 per share & final call of ₹ 4 per share. He paid the application
money of ₹ 3 per share. These shares were issued to Suresh for ₹ 8 per share.
(ii) X Ltd. forfeited 200 shares of ₹ 10 each (₹ 7 called up) on which Naresh had paid
application and allotment money of ₹ 5 per share. Out of these 150 shares were reissued
to Mahesh as fully paid for ₹ 6 per share.

Question 18 (RTP Nov 2021) Pg no._____

Mr. Samphat who was the holder of 12,000 preference shares of ₹ 100 each, on which ₹ 60
per share has been called up could not pay his dues on Allotment and First call each at ₹ 20
per share. The Directors forfeited the above shares and reissued 10,000 of such shares to Mr.
Sushil at ₹ 50 per share paid-up as ₹60 per share.
You are required to prepare journal entries to record the above forfeiture and re-issue in the
books of the company.

Question 19 (ICAI Study Material) Pg no._____

A holds 2,000 shares of ₹10 each on which he has paid ₹2 as application money. B holds 4,000
shares of ₹10 each on which he has paid ₹ 2 per share as application money and ₹ 3 per share
as allotment money. C holds 3,000 shares of ₹10 each and has paid ₹2 on application, ₹ 3 on
allotment and ₹3 for the first call. They all fail to pay their arrears on the second and final call
and the directors, therefore, forfeited their shares. The shares are re-issued subsequently
for ₹12 per share fully paid-up. Journalise the transactions relating to the forfeiture and re-
issue.

Question 20 (ICAI Study Material) Pg no._____

B Ltd. issued 20,000 equity shares of ₹100 each at a premium of ₹20 per share payable as
follows: on application ₹50; on allotment ₹50 (including premium); on final call ₹20.
Applications were received for 24,000 shares. Letters of regret were issued to applicants for
4,000 shares and shares were allotted to all the other applicants. Mr. A, the holder of 150
shares, failed to pay the allotment and call money, the shares were forfeited. Show the
Journal Entries and Cash Book in the books of B Ltd.

Question 21 (CA Foundation Nov 2019) (15 Marks) Pg no._____

B Limited issued 50,000 equity shares of ₹ 10 each payable as ₹ 3 per share on applications,
₹ 5 per share (including ₹ 2 as premium) on allotment and ₹ 4 per share on call. All these
shares were subscribed.
Money due on all shares was fully received except from X, holding 1000 shares who failed to
pay the allotment and call money and Y, holding 2000 shares, failed to pay the call money. All

Page 11B.21
 CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

these 3,000 shares were forfeited. Out of forfeited shares, 2,500 shares (including whole of
X’s shares) were subsequently re-issued to Z as fully paid up at a discount of ₹ 2 per share.
Pass necessary journal entries in the books of B limited. Also prepare Balance Sheet and
notes to accounts of the company.

Question 22 (CA Foundation Dec 2021) (15 Marks) Pg no._____

Fashion Garments Ltd invited applications for issuing 10,000 Equity Shares of ₹ 10 each. The
amount was payable as follows:
(i) On Application ₹ 1 per share
(ii) On Allotment ₹ 2 per share
(iii) On First call ₹ 3 per share
(iv) On Second and final Call ₹ 4 per share
The issue was fully subscribed. Ram to whom 100 shares were allotted, failed to pay the
allotment money and his shares were forfeited immediately after the allotment. Shyam to
whom 150 shares were allotted, failed to pay the first call. His shares were also forfeited after
the first call. Afterwards the second and final call was made. Mohan to whom 50 shares were
allotted failed to pay the second and final call. His shares were also forfeited. Al the forfeited
shares were re-issued at ₹ 9 per share fully paid-up.
Pass necessary Journal entries in the books of Fashion Garments Ltd.

Question 23 (CA Foundation Dec 2022) (15 Marks) Pg no._____

PQR Limited issued 2,00,000 equity shares of, 10 each payable as ₹ 3 per share on application
& ₹ 5 per share (including ₹ 2 as premium) on allotment and ₹ 4 per share on call. All these
shares were subscribed. Money due on all shares was fully received except from Mr. J,
holding 5,000 shares who failed to pay ·the allotment and call money and Mr. K, holding 10,000
shares, who failed to pay the call money. All these 15,000 shares were forfeited. Out of the
forfeited shares, 10,000 shares (including whole of J's shares) were subsequently re-issued
to Mr. L as fully paid up at a discount of ₹ 1 per share.
Pass necessary journal entries in the books of PQR Limited. Also prepare Balance Sheet and
notes to accounts of the company.

Question 24 (CA Foundation Nov 2020) (10 Marks) Pg no._____

ABC Limited issued 20,000 equity shares of ₹ 10 each payable as:
₹ 2 per share on application
₹ 3 per share on allotment
₹ 4 per share on first call
₹ 1 per share on final call
All the shares were subscribed. Money due on all shares was fully received except for Mr.
Bird, holding 300 shares, who failed to pay first call and final call money. All these 300 shares
were forfeited. The forfeited shares of Mr. Bird were subsequently re-issued to Mr. John.as
fully paid up at a discount of ₹ 2 per share.
Pass the necessary Journal Entries to record the above transactions in the books of ABC
Limited.

Question 25 (CA Foundation May 2019) (10 Marks)/(RTP May 2020)/(RTP Nov 2022) Pg no._____
Bhagwati Ltd. invited applications for issuing 2,00,000 equity shares of ₹ 10 each. The
amounts were payable as follows:
On application - ₹ 3 per share
On allotment - ₹ 5 per share
On first and final call - ₹ 2 per share

Page 11B.22
 CA NITIN GOEL ISSUE, FORFEITURE & RE-ISSUE OF SHARES

Applications were received for 3,00,000 shares and pro-rata allotment was made to all the
applicants. Money overpaid on application was adjusted towards allotment money. B, who
was allotted 3,000 shares, failed to pay the first and final call money. His shares were
forfeited. Out of the forfeited shares, 2,500 shares were reissued as fully paid-up @ ₹ 6 per
share. Pass necessary Journal entries to record the above transactions in the books of
Bhagwati Ltd.

Question 26 (CA Foundation July 2021) (15 Marks) Pg no._____

X Limited invited applications for issuing 75,000 equity shares of ₹ 10 each at a premium of ₹
5 per share. The total amount was payable as follows: -
₹ 9 per share (including premium) on application and allotment
- Balance on the First and Final Call
Applications for 3,00,000 equity shares were received. Applications for 2,00,000 equity shares
were rejected and money refunded. Shares were allotted on pro-rata basis to the remaining
applicants. The first and final call was made. The amount was duly received except on 1,500
shares applied by Mr. Raj. His shares were forfeited. The forfeited shares were re-issued at
a discount of ₹ 4/- per share.
Pass necessary journal entries· for the above transactions in the books of X Limited.

Question 27 (MTP November 2021)/(June 2023) Pg no._____

Hemant applies for 2,000 shares of ₹ 10 each at a premium of ₹ 2.50 per share. He was allotted
1,000 shares. After having paid ₹ 3 per share on application, he did not pay the allotment
money of ₹ 4.50 per share (including premium) and on his subsequent failure to pay the first
call of ₹ 2 per share, his shares were forfeited. These shares were reissued at ₹ 8 per share,
his shares were forfeited.
At the time of re-issue of forfeited shares of Mr. Hament, final call money amount all other
shareholders were duly called up.
You are required to pass journal entries to record forfeiture and reissue of shares.

Question 28 (CA Foundation June 2023) (15 Marks) Pg no._____

BP Limited issued a prospectus inviting applications for 1,20,000 equity shares of ₹ 10 each at
a premium of ₹ 2 per share payable as follows:
On Application - ₹ 3 per share
On Allotment - ₹ 5 per share (including premium)
On First and Final Call - ₹ 4 per share
Applications were received for 3,60,000 equity shares. Applications for 80,000 shares were
rejected and the money refunded. Shares allotted to remaining applications as follows:
Category No. of shares Applied No. of shares Allotted
I 1,60,000 80,000
II 1,20,000 40,000
Excess money received with applications was adjusted towards sums due on Allotment and
the balance amount returned to the applicants. All calls were made duly received except the
final call by a shareholder belonging to Category I who has applied for 680 shares. His
shares were forfeited. The forfeited shares were reissued at ₹ 13 per share fully paid-up.
Pass necessary journal entries for the above transactions in the books of BP Ltd, Open call
in arrears account whenever required.

Page 11B.23