A company forfeited 200 shares of ₹ 100 each, ₹ 70 called-up per share, on which the shareholder paid ₹ 50 per share. These shares were re-issued at ₹ 80 fully paid-up per share. The share forfeited account will be debited in the reissue entry with:

Question

Accepted Answer

The correct option is 2:
The Share Forfeited Account is debited in the re-issue journal entry to record the loss or discount allowed when selling the forfeited shares. According to company accounting rules, this discount on re-issue is calculated as the difference between the fully paid-up value and the actual re-issue price, and it can never exceed the amount originally forfeited on those shares. In this scenario, the shares are being re-issued at ₹80 and considered fully paid-up, meaning the paid-up value is ₹100. The loss or discount per share is therefore ₹100 (Fully Paid-up Value) - ₹80 (Re-issue Price) = ₹20. The total amount debited to the Share Forfeited Account is the total discount: 200 shares \* ₹20/share, which equals ₹4,000. This debit ensures the Share Capital Account is credited with the full ₹100 per share, balancing the re-issue transaction.

The incorrect option is 1: ₹ 6,000
This figure is incorrect because it does not represent any component of the mandatory re-issue journal entry. The actual loss or discount debited is ₹4,000. The remaining balance in the Share Forfeited Account that is transferred to Capital Reserve is ₹6,000 (₹10,000 forfeited - ₹4,000 loss). It is crucial to remember that the amount debited to the account is the actual loss, not the balance transferred to the Capital Reserve.

The incorrect option is 3: ₹ 10,000
This amount represents the total money originally paid by the shareholder and subsequently forfeited by the company (200 shares \* ₹50 paid per share). In share re-issue accounting, ₹10,000 is the *maximum* permissible discount the company could have offered on these shares. Since the actual loss was only ₹4,000, the Share Forfeited Account is debited only for the actual loss, not the full forfeited amount.

The incorrect option is 4: ₹ 16,000
This amount is the correct total cash received by the company upon the re-issue (200 shares \* ₹80 re-issue price). In the journal entry, this amount is debited to the **Bank Account**. The Share Forfeited Account is a separate debit that only records the discount or loss on re-issue. Confusing the cash proceeds with the discount amount is a common mistake that leads to this incorrect option.