Question

Lily Ltd. forfeited 2,000 equity shares of ₹ 10 each for non-payment of first and final call of ₹ 2 per share. 750 of the forfeited shares were reissued to Ashok for ₹ 10,000 as fully paid-up. The remaining shares were reissued to Sudha at ₹ 9 per share fully paid-up. Pass necessary journal entries for the above transactions in the books of Lily Ltd.

Hint:

When forfeited shares are re-issued, any discount is debited to Share Forfeiture A/c. If re-issued at premium, Securities Premium is credited. The remaining balance in Share Forfeiture A/c after all re-issues is transferred to Capital Reserve.

Answer 1

In the Books of Lily Ltd.

Journal Entries

Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
	Equity Share Capital A/c Dr. (2,000 × ₹10)     To Share Forfeiture A/c     To Calls-in-Arrears A/c (First & Final Call) (Being 2,000 shares forfeited for non-payment of first & final call of ₹2 per share)		20,000	16,000 4,000
	Bank A/c (Ashok) Dr. Share Forfeiture A/c Dr.     To Equity Share Capital A/c (750 × ₹10)     To Securities Premium A/c (Being 750 forfeited shares re-issued to Ashok as fully paid-up)		10,000 2,000	7,500 4,500
	Bank A/c (Sudha) Dr. Share Forfeiture A/c Dr.     To Equity Share Capital A/c (1,250 × ₹10) (Being 1,250 forfeited shares re-issued to Sudha at ₹9 per share fully paid-up)		11,250 1,250	12,500
	Share Forfeiture A/c Dr.     To Capital Reserve A/c (Being profit on re-issue transferred to Capital Reserve)		12,750	12,750

Working Notes

1. Share Money Details

Face Value per Share = ₹10 First & Final Call = ₹2 Amount received per share before forfeiture: \[ 10 - 2 = 8 \] Total amount received: \[ 2,000 \times 8 = 16,000 \] ---

2. Forfeiture Entry

\[ 2,000 \times 10 = 20,000 \] Calls-in-arrears: \[ 2,000 \times 2 = 4,000 \] Share Forfeiture credited = ₹16,000 ---

3. Re-issue to Ashok (750 shares)

Amount received: \[ ₹10,000 \] Face value: \[ 750 \times 10 = 7,500 \] Balance treated as premium: \[ 10,000 - 7,500 = 2,500 \] Share Forfeiture adjusted: \[ 2,000 \] ---

4. Re-issue to Sudha (1,250 shares)

Amount received: \[ 1,250 \times 9 = 11,250 \] Face value: \[ 1,250 \times 10 = 12,500 \] Discount on re-issue: \[ 12,500 - 11,250 = 1,250 \] Share Forfeiture available: \[ \frac{1,250}{2,000} \times 16,000 = 10,000 \] ---

5. Share Forfeiture Account

Particulars	Amount (₹)	Particulars	Amount (₹)
To Ashok (Re-issue)	2,000	By Balance b/d	16,000
To Sudha (Re-issue)	1,250
To Capital Reserve	12,750
Total	16,000	Total	16,000

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6. Capital Reserve Calculation

\[ 16,000 - 2,000 - 1,250 = 12,750 \] Transferred to Capital Reserve = ₹12,750