Question

If a share of 100 on which 80 was called up and 70 paid up was forfeited, state the amount with which the share capital account will be debited:

• A. 100
• B. 80
• C. 70
• D. 10

Answer 1

The Correct Option is B

To solve this problem, we need to understand the concept of share forfeiture in accountancy. When a share is forfeited, the share capital account is debited with the amount that has been called up on that share. Here, we have the following information:

• Total value of the share: 100
• Amount called up: 80
• Amount paid up: 70

Since the called-up amount (80) is what the company expected to receive from the shareholder, it is this amount that is debited to the share capital account when the share is forfeited, irrespective of how much has actually been paid up.

Therefore, the share capital account will be debited with 80.

Answer 2

When a share is forfeited, the Share Capital Account is debited with the amount of called-up capital, not the paid-up capital.

• The face value of the share is 100.
• The called-up capital is 80 (i.e., 80 was called up).
• The paid-up capital is 70 (i.e., 70 was paid).

The amount debited to the Share Capital Account will be the called-up capital, which is 80. The difference between the called-up capital and the paid-up capital (i.e., 80 - 70 = 10) is transferred to the Share Forfeited Account.

Therefore, the Share Capital Account will be debited with 80.

Thus, the correct answer is (B): 80.