SUBECT: ACCOUNTANCY

CLASS: XII(SESSION 2020-21)

UNIT 3 – ACCOUNTING FOR COMPANIES
Ch.- 8 Accounting for Share Capital
Handout -3

Collaborating Technique
 Explanatory
 Group discussion

Recapulitation
 Entries related with goodwill at the time of retirement or death of a partner and
calculation of deceased partner’s share of profit

FORFEITURE OF SHARES
A company may forfeit or cancel the shares if any shareholder failed to pay the amount called from him, if its
AOA allows forfeiture, after giving due notice to the defaulting shareholder.

On forfeiture, the shares are cancelled and to that extent Share Capital is reduced. However, whatever amount
had been paid by shareholder earlier, company needs not to pay back, that amount to be kept in a separate
account named as ‘Share Forfeiture’ account and will be utilized to provide discount on reissue of such forfeited
shares.

Till the time forfeited shares are reissued, balance of Share Forfeiture Account is added to the Subscribed
capital under the head Share Capital in the Balance Sheet of the company.

Accounting entry for forfeiture of shares will vary according to the situation:-

FORFEITURE OF SHARES

Originally Issued at Par Originally issued at Premium

Premium received in full premium is not received at all

or received partly

Share Capital …………………….. Dr. ( called up F.V.)

Share Capital ………….. Dr. ( called up F.V.)
Security Premium Reserve … Dr. ( unpaid premium)
To Share Forfeiture (Paid up F.V.)
To Share Forfeiture (Paid up F.V.)
To Calls in arrears (unpaid amount)
To Calls in arrears (unpaid amount including
unpaid premium)
 App 3 Allot 2 1st call 3 2nd call 2 Called up Paid up Calls in
F.V. F.V. arrers
A paid paid paid failed 10 8 2
B Paid paid failed ------ 8 5 3
C paid fail Fail ------ 8 3 5
D paid fail ------ 5 3 2

App 3 Allot 3+2P 1st call = 2nd call 2 Called up Paid up Calls in
2+3P F,V F.V. arrears
including P
unpaid
E paid paid Paid failed 10 8 2
F Paid paid Failed failed 10 6 7
G paid paid Failed ------- 8 6 5
H paid failed Failed --------- 8 3 10

A. Share Capital …….. Dr. 1000

To Share Forfeiture 800
To calls in arrears 200
B. Share Capital …….. Dr. 800
To Share Forfeiture 500
To calls in arrears 300
C. Share Capital …….. Dr. 800
To Share Forfeiture 300
To calls in arrears 500
D. Share Capital …….. Dr. 500
To Share Forfeiture 300
To calls in arrears 200
E. Share Capital …….. Dr. 1000
To Share Forfeiture 800
To calls in arrears 200
F. Share Capital …………..….. Dr. 1,000
Security Premium Reserve …. Dr 300
To Share Forfeiture 600
To calls in arrears 700
G. Share Capital …………..….. Dr. 800
Security Premium Reserve …. Dr 300
To Share Forfeiture 600
To calls in arrears 500
H. Share Capital …………..….. Dr. 800
Security Premium Reserve …. Dr 500
To Share Forfeiture 300
To calls in arrears 1000